Macroeconomics Instructor: Jen Dinsmore Hanson Homework Assignment Chapter 8 Multiple Choice Questions 1. Between 2005 and 2007 our trade averaged ___________ each year. A. 400 billion B. -700 billion C. 250 billion D. -500 billion 2. If U.S. imports of goods and services exceed exports A. GDP in the United States will be less than the sum of consumption, investment, and government purchases. B. GDP in the United States will exceed the sum of consumption, investment and government purchases. C. net exports for the United States are positive. D. None of the choices are true. 3. Statement I: Most economists support the concept of free trade. Statement II: The NAFTA and GATT agreements placed substantial barriers in the way of free trade. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 4. Adam Smith believed that A. people should never buy anything if they can make it themselves. B. what makes sense in the conduct of a private family's economic endeavors also makes sense in those of a nation. C. trading with other nations promotes full employment. D. a nation will gain if its citizens trade among themselves, but it will probably lose if it trades with other nations. 5. If yesterday the dollar traded for 100 Japanese yen and today 101 yen for the dollar, we would say A. that the dollar rose in value relative to the yen. B. that the yen fell in value relative to the dollar. C. both of the choices.

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6. The world's largest exporter is A. The United States. B. Japan. C. Germany. D. the United Kingdom. E. China. 7. If more foreign tourists visited the United States, this would A. lower our merchandise trade imbalance. B. lower our overall trade imbalance. C. raise our merchandise trade imbalance. D. raise our overall trade imbalance. 8. Statement I: In 2009 the United States had a negative merchandise balance of trade over $708 billion. Statement II: In 2009 the United States had a positive services balance of trade over $118 billion. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 9. The trading bloc that has eliminated all internal tariffs is A. the European Union. B. NAFTA. C. Mercosur. D. the World Trade Organization. 10. Which of the following were prominent among the protesters at the WTO meetings since 1999? A. Labor union members concerned that free trade undermined worker rights to organize. B. Environmentalists concerned that corporations would locate in countries that had very lax environmental standards. C. Human rights advocates concerned that free trade condoned sweatshop working conditions. D. All of the answers are true. 11. Hourly wages in Mexico are ____________ those paid in the United States for comparable work. A. equal to B. one half C. one quarter D. one eighth

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12. Statement I: Canada is our most important trading partner. Statement II: In 1999, 11 EU countries formed the European Monetary Union. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 13. Statement I: GATT regulates world trade. Statement II: The basis for international trade is that a nation stands to gain more if it can sell more to other nations than it buys from them. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 14. Statement I: Adam Smith believed that people should never buy anything if they can make it themselves. Statement II: The basis for international trade is that if a nation can import a particular good or service at a lower cost than if it were produced domestically, it should trade for that good. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 15. Two characteristics of a modern economy are A. barter and self-sufficiency. B. specialization and exchange. C. a low standard of living a high poverty rate. D. self-sufficient workers and very little international trade. 16. Statement I: A society in which everyone is self-sufficient will generally have a higher standard of living than one in which everyone specializes in a particular type of work. Statement II: People can specialize only if there is a well-developed system of exchange. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 17. Which was NOT an argument of the protesters against the IMF, WTO, and the World Bank? A. We are exploiting factory workers in poor countries. B. Our subsidized grain exports sold below cost in poor countries, driving local farmers out of business. C. Globalization is hurting the American standard of living. D. Globalization is lowering American wages and exporting high paying jobs.

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18. The main criticism Joseph Stiglitz levels at the IMF is that A. it provides too many loans that are not repaid. B. it no longer promotes economic growth, but rather contraction. C. it does not provide enough loans. D. it does not sufficiently promote the market system. 19. Which statement is TRUE, according to economist Joseph Stiglitz? A. IMF policies are sensitive to the human suffering its policies could create. B. The IMF takes a "hands off" approach as to how a country uses the money it is lent. C. The IMF was founded on the belief that there was a need for international pressure for countries to have expansionary economic policies. D. The IMF was founded on the belief that there was a need for international pressure for countries to cut deficits, raise taxes and interest rates. 20. Statement I: U.S. self-sufficiency in food production and its huge manufacturing base were important factors in winning World War I and II. Statement II: The relatively small U.S. export-import sector of its economy began to grow significantly in the 1970s. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 21. Statement I: We could not have a modern, highly productive economy without specialization and trade. Statement II: In modern economies, virtually everyone is a jack-of-all-trades. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 22. The basis for international trade is A. that a nation can import a particular good or service at a lower cost than if it were produced domestically. B. Specialization. C. both countries can gain from trade. D. All of the choices are true. 23. Net exports A. are the smallest component of GDP. B. equal exports minus imports. C. have been negative in the United States since the mid-1970s. D. All of the choices are true of net exports.

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24. Adam Smith believed all of the following EXCEPT A. never attempt to make at home what it will cost more to make than to buy. B. what makes sense in the conduct of a private family's economic endeavors also makes sense in those of a nation. C. a nation will gain if its citizens trade among themselves, but it will probably lose if it trades with other nations. D. specialization and exchange benefited both individuals and nations. 25. What was the most important advantage to the EU countries that adopted the EURO as their official currency? A. Introduction of the euro increased exports to outside countries. B. Introduction of the euro has eased trade and commerce among the nations that adopted the euro. C. Introduction of the euro increased the disposal income of member countries population. D. The euro immediately replaced the dollar in international trade. 26. Since the GATT agreement in 1947, the world has experienced A. virtually no unfair trading practices among nations. B. the complete elimination of tariffs and other trade barriers among nations. C. a reduction of trade barriers among nations in the WTO. D. all of the choices are true. 27. Statement I: The population and GDP of the European Union is greater than that of the United States. Statement II: The European Union has NOT attained as high of a degree of economic integration as NAFTA. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 28. The U.S. negative balance of trade was almost ________ in 2008. A. $200 billion B. $400 billion C. $600 billion D. $800 billion 29. Before the ________ the American export-import sector was relatively small. A. 1920s B. 1960s C. 1970s D. 1990s

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30. Net exports are positive when A. a nation's exports of goods and services exceed its imports. B. a nation's imports of goods and services exceed its exports. C. a nation's exports of goods exceeds its imports. D. a nation's exports of services exceeds its imports. 31. Statement I: The United States has a much more self-sufficient economy than those of Western Europe. Statement II: The European Union, as a free trade association, can trace its origins back to the 1950s. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 32. Which is the most accurate statement? A. The WTO was set up a few years after World War II. B. GATT negotiations addressed intellectual property rights for the first time in the 1990s. C. GATT was set up in the 1990s. D. GATT negotiations have no affect on the trade of agricultural commodities. 33. Statement I: Since the end of World War II in 1945, the world has seen trade barriers fall significantly. Statement II: The United States ran a trade surplus in merchandise for most of the 20th century. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 34. Each of the following is a characteristic of the European Union EXCEPT that A. workers from any EU country could seek work in any other member country. B. the euro replaced the domestic currencies (eg. francs, marks, lira) in almost half of the member countries. C. its population and GDP are much smaller than those of the United States. D. freight is able to move anywhere within the EU without checkpoint delays and paperwork. 35. Statement I: College sweatshirts are usually made in sweatshop factories in low-wage countries. Statement II: Critics of the IMF argue that it champions market supremacy with ideological fervor. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false.

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36. Which of the following were prominent among the protesters at the WTO meeting in Seattle in late 1999? A. International bankers that free trade undermined underdeveloped nation's ability to pay back loans. B. Environmentalists concerned that corporations would locate in countries that had very lax environmental standards. C. Multinational corporations concerned that free trade condoned sweatshop working conditions. D. All of the choices were prominent in the Seattle protest. 37. Statement I: China and South Korea are the world's largest exporters. Statement II: International trade is more important to the U.S. economy than it is to smaller industrial countries such as the Netherlands. A. Statement I is true and statement II is false B. Statement II is true and statement I is false C. Both statements are true D. Both statements are false 38. Statement I: The International Monetary Fund (IMF) was set up to promote free trade, free market style economies around the world. Statement II: The World Bank was created in 1944 for the purpose of making long-term, lowinterest loans to developing countries, mainly to build highways, bridges, dams, power generators, and water supply systems. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 39. Statement I: The WTO regulates world trade. Statement II: The basis for international trade is that all nations stand to gain through specialization and exchange with other nations. A. Statement I is true and statement II is false. B. Statement II is true and statement I is false. C. Both statements are true. D. Both statements are false. 40. Which is the most accurate statement? A. Because the American economy is much larger than any other country, we can continue running larger and larger trade deficits for as long as we like. B. Included among the protesters at WTO meetings are environmentalists, organized labor, and human rights advocates. C. Since the passage of NAFTA our trade deficits with Mexico and Canada have significantly decreased. D. Even the protestors at WTO meetings are in favor of globalization.

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41. Which of the following groups would like to see a rise in the value of the dollar vs. the euro? A. Americans planning a European vacation. B. Exporters of American made tractors and combines. C. Foreign exchange speculators. D. Europeans planning an American vacation. 42. Which of the following working conditions are common at sweatshops? A. No information about hazardous chemicals workers are using. B. A lack of guards on sewing and cutting machines. C. Restricted bathroom break times. D. Blocked aisles and fire exits. E. All of the answers are correct. 43. The agreement between the U.S., the Dominican Republic and five small Central American countries that will eventually eliminate tariffs among all seven nations is called A. NAFTA. B. CAFTA. C. Mercosur. D. GATT. 44. All of the following are an example of "off-shoring" EXCEPT A. Accounting work that is sent over the Internet by the Miller Brewing Company in Milwaukee to Ireland. B. An X-ray read by an Indian physician sent over the Internet from Durango, Colorado. C. Briefs for law firms typed by people in China. D. Wal-Mart hires a local janitorial firm to clean their stores at night. 45. After World World II, the United States produced about ______ percent of the world's oil, much of which we exported. A. 40 B. 50 C. 60 D. 70 46. In 2009, ___________ exceeded Germany in value of exports becoming the world's largest exporter. A. China B. Japan C. Canada D. Germany

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47. The most important economic concept to consider when deciding whether to build your own deck or hire it done is A. law of supply B. specialization C. opportunity cost D. law of increasing cost 48. Between 1990 and 2007 our trade deficit A. fell substantially. B. remained about the same. C. rose about 40 percent. D. almost doubled. E. more than quadrupled. 49. Volkswagen's New Beetle is made in A. Germany. B. The U.S. C. Canada. D. Mexico. 50. Between 2007 and 2009 our trade deficit A. fell substantially. B. remained about the same. C. rose about 40 percent. D. almost doubled. E. more than quadrupled.

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