Checkup 2

Question 1

difference between the value of a nation’s exports and the value of its imports

Answer 1

balance of trade

Question 2

imports > exports

Answer 2

trade deficit

Question 3

exports > imports

Answer 3

trade surplus

Question 4

ability to produce goods more inexpensively than other nations

Answer 4

competitiveness

Question 5

growth based on a trade surplus

Answer 5

export-led growth

Question 6

price of one’s currency in terms of another

Answer 6

exchange rate

Question 7

firm with global operations

Answer 7

multinational corporation

Question 8

record of all transactions between a nation’s residents and those of all foreign nations

Answer 8

balance of payments

Question 9

primary short-run determinant of exchange rates

Answer 9

interest rates

Question 10

Since 1976 the United States has been running a trade __________________, and today it has a larger national ______________ than any other nation.

Answer 10

deficit; debt

Question 11

The factor(s) determining whether a nation runs a trade surplus or a trade deficit is/are ___________________ and ____________________.

Answer 11

its competitiveness; the relative state of its economy

Question 12

________________________ is dependent upon productivity.

Answer 12

Competitiveness

Question 13

An increase in the trade deficit ______________ the income of the average worker.

Answer 13

reduces

Question 14

Domestic production _____________ during a trade deficit.

Answer 14

decreases

Question 15

Free trade allows more people to enjoy economic _____________ and ___________________________; the laws of _____________________________________ to control the international market; _____________________________ to produce competitive and profitable goods; all ___________________ to benefit from high-quality, low-priced goods

Answer 15

freedom and prosperity; supply and demand; businesses and nations; consumers

Question 16

Although free trade is preferable, governments impose trade restrictions because ___________________ interests such as low inflation, high growth, and low unemployment are important to them.

Answer 16

domestic

Question 17

International finance is more complicated than domestic finance because ____________________________________________________.

Answer 17

it involves the exchange of one currency for another

Question 18

A ______________________________ is fixed in relation to the price of a precious metal.

Answer 18

gold standard

Question 19

A _______________________ is based entirely on the currency market.

Answer 19

flexible exchange rate

Question 20

A ___________________________________ is always established by a government.

Answer 20

fixed exchange rate

Question 21

A ____________________________________ is sometimes controlled by the government and sometimes allowed to fluctuate.

Answer 21

partially flexible exchange rate

Question 22

A ________________________ was established by the Bretton Woods system.

Answer 22

fixed exchange rate

Question 23

A fixed exchange rate was established by what system?

Answer 23

Bretton Woods system

Question 24

The ___________ of everything in an economy is dependent on the value of its currency.

Answer 24

price

Question 25

When the value of a currency decreases rapidly, prices _________, property values ______________, the value of savings ____________, but wages ____________ increase.

Answer 25

increase; decreases; decreases; do not

Question 26

The value of a nation’s ________________ and its monetary and fiscal policies affect other nations.

Answer 26

currency

Question 27

Because a nation’s monetary and fiscal policies influence __________ rates, income, and price levels, they ultimately affect exchange rates.

Answer 27

interest

Question 28

Any _____________ in price or in income decreases the value of a nation’s currency.

Answer 28

increase

Question 29

Payments coming into a nation are ______________, and those going out of a nation are called __________________.

Answer 29

credits; debits

Question 30

On a balance of payments account, incoming payments are indicated by a _, and outgoing payments are indicated by a _.

Answer 30

+; -

Question 31

The combined value of all transactions listed on a blanace of payments account must equal __________.

Answer 31

zero

Question 32

The three major categories of a balance of payments are the _______________ account, the ___________ account, and the ________________________ account.

Answer 32

capital; current; official transactions

Question 33

No ___________________ organization has the power to set economic policies by taxation, redistribution of income, imposition of regulations, or enforcement of property rights.

Answer 33

international

Question 34

Adherence to international economic policies is purely _________________.

Answer 34

voluntary

Question 35

__________________ tradition is the only force used to enforce international rules.

Answer 35

Moral

Question 36

A _________, or _________________ is often a major influence on the economy of a small nation.

Answer 36

global, multinational corporation