TF

Question 1

A country has a comparative advantage over another only if it is able to produce all products more cheaply

Answer 1

False: if it is able to produce some products comparatively cheaper

Question 2

David Ricardo first introduced the theory of comparative advantage

Answer 2

True

Question 3

If a country is able to produce all products more cheaply than any other country, then there is no advantage in trade

Answer 3

false: it is comparative cost that determines the advantage to trade.

Question 4

If a country wishes to specialize its production, it will also want to engage in trade.

Answer 4

true

Question 5

The terms of trade relate to the laws and conditions that govern trade.

Answer 5

False: they relate to the comparative prices of exports and Imports

Question 6

If the prices of a country’s exports decrease and the prices of imports increase, the the terms of trade will move in its favour

Answer 6

False: depends on the relative change in each

Question 7

If a country’s trading possibilities curve lies to the right of it’s production possibilities curve, there are no gains from trade

Answer 7

False: it would be able tp obtain more by trading

Question 8

Protectionism is the economic policy of protecting domestic producers by putting restrictions on exports

Answer 8

False: protectionism is aimed at imports

Question 9

A tariff is a tax on exports; a quota is a tax on imports

Answer 9

False: a tariff is a tax on imports and a quota is a limit on imports

Question 10

Domestic producers gain and domestic consumers lose as a result of the imposition of tariffs or quotas.

Answer 10

True

Question 11

If the Panamanian balboa is worth $.20 Canadian, then $1 Canadian is worth 4 balboas

Answer 11

False: it is worth 5 balboas

Question 12

The purchasing power parity theory suggests that exchange rates adjust so as to equate the purchasing power of each currency.

Answer 12

True

Question 13

A major source of demand for the Canadian dollar in the international money markets is the desire of foreigners to buy Canadian exports

Answer 13

True

Question 14

A resident in Canada receiving a British pension will have a demand for the British pound

Answer 14

False: A demand for Canadian dollars

Question 15

An increase in Canadian interest rates will lead to an appreciation of the Canadian dollar

Answer 15

True

Question 16

When the Canadian dollar depreciates, the effective price of Canadian exports increases and, as a result, total exports are likely to fall.

Answer 16

False: the effective price decreases and exports will increase

Question 17

If the Canadian dollar appreciates, cross-border shopping by Canadians will increase

Answer 17

True

Question 18

If Canada were on a fixed exchange-rate system, an increase in the demand for the Canadian dollar would result in the dollar being undervalued

Answer 18

True

Question 19

A fixed exchange rate above the market value will lead to an outflow of foreign currencies

Answer 19

true

Question 20

An increase in imports will have a negative effect on the current account balance

Answer 20

true

Question 21

The most common way for government to fund expansionary fiscal policy is by borrowing from the general public

Answer 21

true

Question 22

Monetary policy cannot be used effectively when a country had a fixed exchange rate

Answer 22

true

Question 23

Expansionary fiscal policy may crowd out both private investment and export spending

Answer 23

True

Question 24

Aggregate demand policies are effective in curing the problems of stagflation

Answer 24

false: stagflation can only be cured by changes in aggregate supply

Question 25

The Phillips curve is based on the relationship between tax rates and the amount of tax revenue

Answer 25

False it is based on the relationship between unemployment and inflation rates

Question 26

One of the major criticisms of the supply side emphasis not ax cuts as a way to stimulate the economy is that such cuts affect aggregate demand more than they do aggregate supply

Answer 26

true

Question 27

The gaffer curve relates income levels with unemployment

Answer 27

false: it relates tax rates with tax revenyues

Question 28

The rise of supply side economics is rooted in the stagflation of the 1970s

Answer 28

true

Question 29

The Canadian dollar has not fallen below $0.8 US for over twenty years

Answer 29

false: it went as low as 64 cents during the 20 year period

Question 30

Deflation means thats the rate of inflation is falling

Answer 30

false: it means that the average price level is falling

Question 31

say's law suggests that supply creates its own demand

Answer 31

true

Question 32

according to neoclassical theory, the aggregate supply curve is horizontal at the prevailing price level

Answer 32

false,they felt it was vertical at the full-employment GDP level

Question 33

according to neoclassical theory, an increase in the level of saving will cause the rate of interest to fall

Answer 33

true

Question 34

according to keynesian theory, a change in aggregate demand might have a little or no effect on the price level

Answer 34

true

Question 35

neoclassical economics believe that market economies can achieve full employment through self- adjustment

Answer 35

true

Question 36

aggregate demand policies are effective in curing the problems of stagflation

Answer 36

false, they are ineffective in curing stagflation

Question 37

the Phillips curve is based on the stable relationship between tax rates and the amount of tax revenue

Answer 37

false, it is based on the relationship between inflation and unemplyment

Question 38

one of the major criticisms of the supply- side emphasis on using tax cuts to stimulate the economy is such cuts affect aggregate demand than aggregate supply

Answer 38

true

Question 39

sub-prime mortgages and derivatives are associated with stagflation

Answer 39

false, they are associated with the financial crisis of 2008-10..

Question 40

the external value of the Canadian dollar has been remarkably stable for several decades

Answer 40

false, it has varied considerably in the last twenty years