Quiz 6 Flashcards
(15 cards)
The U.S. has an absolute advantage in both the production of software and the production of computers when compared to Mexico. But the U.S. has a comparative advantage in the production of software. What should the U.S. produce?
Software - and let Mexico produce computers
The creation of a quota on Canadian softwood lumber sold in the U.S. may affect prices and quantities of Canadian softwood lumber sold in the U.S. and the prices and quantities of American softwood lumber sold in the U.S. Assuming that the quota is set at a level lower than the current level of imports, the resulting equilibrium price paid by consumers in the imported Canadian softwood lumber market will ______________.
rise
Now suppose trade is opened between the two countries. What will the equilibrium price be in the world market for computers?
$3000
If there is no trade between the U.S. and Japan, what is the equilibrium price in the computer market in Japan?
$1000
The table below presents the demand and supply curves for microcomputers in Japan and the U.S.
If there is no trade between the U.S. and Japan, what is the equilibrium price in the computer market in the U.S.?
$5000
Why were the temporary tax changes, discussed above in section 15.2.5, not successful?
Temporary tax changes affect only current but not future income
Expansionary fiscal policy will cause which of the following?
A rise in interest rates
If total spending increases, tax receipts will ______________. If income tax rates increase, tax receipts will ______________, and total spending will ______________.
increase; increase; decrease
What will be the effect on the economy if the fiscal policy of reducing transfer payments is selected?
A decrease in disposable income and total spending
If an economy appears to be growing rapidly and inflation appears to be becoming a serious problem, which of the following fiscal policies would be appropriate?
A decrease in government spending
Banks will hold substantial excess reserves when which of the following is true?
Loans to customers look unusually risky or if interest rates are low
The quantity theory of money supports which of the following conclusions?
A decrease in the money supply will cause prices to fall in the long run.
Assume that the economy is currently producing a level of real GDP above the full employment level of real GDP, and the government lowers taxes as part of a new economic policy. Which of the following monetary policies should the Federal Reserve undertake if it wants to encourage the economy to go to a full-employment level of output?
Raise the federal funds rate target
When the federal reserve announces that it is increasing the federal funds rate, it is actually going to ___________.
sell bonds on the open market until the federal funds rate rises to the new target
The most commonly used monetary policy instrument is ________
the federal funds rate and open market operations
