Fundamentals Of Economics 6th Edition William Boyes, Michael Melvin - Solutions

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II U.S. Tariffs Against Chinese Solar Panels In May 2012, the Obama administration imposed stiff tariffs on solar panel imports from China. Local firms had appealed to the U.S. Commerce Department, which ruled that Chinese companies were dumping the solar panels in U.S. markets below cost. Chinese
IChina’s Currency Manipulation Senator Sherrod Brown (D-Ohio) says his Currency Exchange Rate Oversight Reform Act of 2011, which has already passed the Senate, “would ensure a fair and level playing field for American manufacturers.” Under the bill, the U.S. Treasury Department would be
20. The greater the amount of short-term money invested in a country, the (greater, less) potential for a crisis if investors lose confidence in the country.
19. List four factors that may serve as indicators of potential financial crises.
18. A speculative attack cannot occur in countries with exchangerates.
17. Each of the recent international financial crises has involved exchangerates.
16. The gap between rich countries and globalized developing countries has (shrunk, widened).
15. Globalizing countries find that income inequality(does, does not) increase as the pace of globalization increases.
14. The increased globalization of the world’s econo mies has been associated with economic(growth, stagnation)and (growth,reduction)ofpoverty in most countries.
13. List the four Asian tigers that opened their econo mies in the 1960s and 1970s and experienced rapid growth and dramatic increases in their living standards.
12. International organizations such as the WTO are funded by ,notcorporations.
11. List three arguments in favor of globalization.
10. List three arguments against globalization.
9. The role of the istoprovidea venue for negotiating international trade agreements and to enforce international trade rules.
8. The comesundercriticismfor funding resource extraction projects and dams, which critics say benefit the corporations that do the work while also destroying the environment.
7. Critics view international organizations such as , , and asundemocraticorganizations that have usurped economic decision-making powers that rightly belong to local authorities.
6. (Rising,Constant,Falling) trans portation costs increase the pace of globalization.
5. playsanimportantroleindeter mining the pace of globalization.
4. List the four broad categories used by Foreign Policy magazine to measure the degree of globalization in individual nations.
3. Barriers to immigration (increase, decrease) globalization.
2. World trade as a fraction of world GDP is (largerthan,smallerthan, about the same as) it was at the end of the 19th century.
1. True or false? The growth of international trade is a new phenomenon .
10. Which of the following statements is an accurate characterization of the relationship between financial crises and globalization?&a. A country with a globalized economy is more vulnerable to financial crises than a country with a closed economy.&b.The greater the amount of short-term money
9. Which of the following is an indicator of a potential financial crisis?&a. floating exchange rates&b.falling international reserves&c. transparency in government activities&d.a high level of long-term international investment&e. bank loans as a small percentage of GDP
8. A speculative attack&a. cannot occur if central banks maintain a fixed exchange rate.&b.cannot occur if exchange rates are allowed to float.&c. is more likely to occur if the domestic currency is appreciating in value.&d. can force a central bank to revalue its currency.&e. can be precipitated
7. Which of the following was characteristic of the Asian tigers after they globalized in the 1960s and 1970s?&a. They experienced annual growth rates of 1.4 percent.&b.Environmental standards declined.&c. Unemployment rose as workers lost their jobs because lower-cost imports displaced domestic
6. The World Bank tracked the performance of coun tries that had undergone varying degrees of globali zation since the 1960s. Which of the following was not a conclusion of the study?&a. The process of globalization widened the gap between rich countries and poor countries.&b.The growth rates of
5. Which of the following is true?&a. Some individuals and firms are harmed by free trade agreements.&b.There is widespread evidence of a “race to the bottom” by which multinational firms move production to countries with lax environmen tal standards.&c. Multinational companies usually locate
4. Which of the following is an argument in favor of globalization?&a. There is evidence of a “race to the bottom” in labor standards as multinational firms search the world for the lowest labor costs.&b.Multinational firms produce goods for international markets at the expense of local
3. Which of the following is an argument against globalization?&a. Poor countries compete for multinational firms by allowing lax environmental standards.&b.Multinational firms tend to pay higher wages than local firms.&c. The benefits of globalization to all consumers greatly outweigh the loss of
2. Which of the following would be a sign of decreased globalization?&a. Norway, Denmark, and the United Kingdom decide to adopt the euro as their common currency.&b.Out of concern for safety, businesses conduct teleconferences in place of face-to-face meetings.&c. Global foreign direct investment
1. Which of the following has not been a factor in the increased pace of globalization since the 1950s?&a. increased governmental barriers to immigration&b.reduced costs of international communications&c. formation of the European Union&d.reduced costs for information processing&e. the desire to
16. Read the following excerpt from the World Economic Forum’s report, “Global Risks 2012.”“Two dominant issues of concern emerged from the Arab Spring, the ‘Occupy’ movements world wide and recent similar incidents of civil discontent:the growing frustration among citizens with the
15. If you worked for a major international bank, fore casting the likelihood of a financial crisis, what key variables would you want to monitor for the countries you are studying? Why would you want to monitor these variables?
14. Using a supply and demand diagram, explain how speculative attacks occur in the foreign exchange market.
13. Using a supply and demand diagram, explain how central banks maintain a fixed exchange rate. What can cause an end to the fixed exchange rate regime?
12. What role did globalization play in the financial crisis of 2007–2008?
11. There were several major international financial crises in the 1990s. What role did globalization play in these crises?
10. How can globalization reduce poverty? What does the evidence suggest about globalization and poverty?
9. Suppose we find that multinational firms are paying much lower wages in some poor countries than they would have to pay in the United States. Would this be sufficient evidence that these firms are exploiting the workers in the poor countries? Why or why not?
8. What is the WTO? Where is it located, and what does it do?
7. What are the major arguments in favor of globalization?
6. What are the major arguments against globalization?
5. If you wanted to compare countries on the basis of how globalized they are, how could you construct some numerical measures that would allow a cross country comparison?
4. Why has the pace of globalization quickened since the 1950s?
3. Write a script for two speakers arguing about glob alization and its effects. Give each speaker a name and then write a script for a debate between the two.The debate should be no longer than two pages, double-spaced. Each speaker should make a few key points, and the other speaker should offer
2. Comment on the following statement: “Globaliza tion is an event of the 1980s and 1990s. Prior to this time, we never had to worry about globalization and its effects.”
Let’s lookmorecloselyat theeffectsof tariffsand quotasonapparelpurchasedbydifferentincomegroups.Assumingthat20percentof thepriceofclothingisdue totariffsandquotas, calculate thedollarcostof tariffs andquotason familiesmaking the following incomes.Thencalculate the percentageof its income that
IITaxEffectsof ImportRestrictions AccordingtoNewsweek:Lower-incomefamiliesarehithardestbytraderestrictions, becausetheyspendafargreatershareoftheirearningsat thestore. Inarecentyear, forexample,householdsearn ingmorethan$50,000laidout3.3percentoftheirdispos
4. Insteadofpayingthe6,039workerseach$100,000 peryeartostayhomeandwatchTV, istheresome thingelsethat theUnitedStatescoulddotohelp thesepeoplethatwouldcostonlyasmallfractionof thealmost$3billionayearcurrentlyspentontrade
3. IfU.S.consumerstookthemoneytheywouldsaveif theUnitedStatesremovedtraderestrictionsonfood andbeveragesandinsteadspent itbuyingother things,doyouthinkthatthisspendingwouldcreate other jobs?
2. Somepeoplewhoworkinthefoodandbeverage industrymaymakealotofmoney,but theydon’t averagealmost$500,000peryear!Howmuch moneywouldU.S.consumerssaveif theUnited Statesgotridof thetraderestrictionsandpaidthe 6,039peopleinthefoodandbeverageindustry protectedbytraderestrictionseach$100,000per
1. Thetraderestrictionsonfoodandbeveragessave about6,039jobsperyear.Howmuchdoes itcost U.S.consumerseveryyearforeachjobsaved?
Oneareaof theU.S. economy thathasbeenprotected frominternationalcompetitionisthefoodandbeverage industry.AccordingtoastudybytheInstituteforInter nationalEconomicsinWashington,DC, thecosttoU.S.consumers of this protection is about $2,947,000,000 peryear thatU.S. consumershavepaidinhigherprices
8. What typeofexchangeratesystemdoestheUnited Statesuse?ExercisesandApplications ISavingJobsbyRestrictingImports:IsItWorththeCost?
7. Tariffsandquotas (raise, lower)thepricesofgoodsandservicesfordomesticconsu mers,and (increase,decrease) the quantityofgoodsandservicesconsumedbydomes ticconsumers.
6. Tariffsare onimportsorexports.IntheUnitedStates, tariffson(imports,exports)areillegalundertheConstitution.
5. Traderestrictionsusually (create more,redistribute)domesticjobswithintheeconomy.
4. Theargument thatnewindustriesshould receivetemporaryprotectionisknownasthe argument.
3. Governmentscangeneraterevenuesbyrestricting tradethrough ; this isacommon tacticin (industrial,developing)countries.
2. Name the comparative advantage theory that matches each of the following explanations of com parative advantage.a. Differences in labor productivity among countries:b.Theadvantagethatcomestoacountrythatisthe first todevelopandproducea product:c. Therelativeamountsofskilledandunskilled labor
1. Thefollowing table shows the output per worker per dayineithermangoesorpapayasinSamoaandinFiji.Samoa Fiji Mangoes(intons)Papayas (in tons)6 12 26a. The country that has an absolute advantage in producing mangoes is .b. The country that has an absolute advantage in producing papayas is .c. The
10. The exchange rate system used by Austria, Belgium, France, Germany, Greece, Italy and other countries that use the euro is called a&a. pegged exchange rate within horizontal bands.&b.currency board.&c. conventional peg&d.floating.&e. no separate legal tender.Practice Questions and Problems
9. The exchange rate system whereby the central bank fixes the exchange rate against a major currency or some basket of currencies is called a&a. currency board.&b.conventional peg.&c. free floating exchange rate.&d.floating exchange rate.&e. pegged exchange rate within horizontal bands.
8. Some arguments for trade restrictions have eco nomic validity. Which of the following arguments has no economic validity?&a. the infant industry argument&b.the national defense argument&c. the government revenue creation from tariffs argument&d.the creation of domestic jobs argument&e. All of
7. Using trade restrictions to save domestic jobs&a. usually forces consumers to pay higher prices.&b.usually redistributes jobs from other industries to the protected industry.&c. may provoke other countries to restrict U.S.exports.&d.does all of the above.&e. does only b and c.
6. The basic objective of commercial policy is to&a. promotefree andunrestricted international trade.&b.protect domestic consumers from dangerous, low-quality imports.&c. protect domestic producers from foreign competition.&d.protect foreign producers from domestic consumers.&e. promote the
5. The product life cycle explanation of comparative advantages stresses&a. differences in labor productivity among countries.&b.the advantage that comes to a country that is the first to develop and produce a product.&c. the relative amounts of skilled and unskilled labor in a
4. The factor abundance explanation of comparative advantage stresses&a. differences in labor productivity among countries.&b.the advantage that comes to a country that is the first to develop and produce a product.&c. the relative amounts of skilled and unskilled labor in a country.&d.differences
3. The productivity differences explanation of com parative advantage stresses&a. differences in labor productivity among countries.&b.the advantage that comes to a country that is the first to develop and produce a product.&c. the relative amounts of skilled and unskilled labor in a
2. A nation has a comparative advantage in producing a good when&a. it can produce a good for a lower input cost than other nations can.&b.the opportunity cost of producing a good, in terms of the forgone output of other goods, is lower than that of other nations.&c. it can produce a good for a
1. A nation has an absolute advantage in producing a good when&a. it can produce a good for a lower input cost than other nations can.&b.the opportunity cost of producing a good, in terms of the forgone output of other goods, is lower than that of other nations.&c. it can produce a good for a
14. What kinds of exchange rate arrangements do the countries of the world use? What is the most popu lar exchange rate arrangement for the major indus trial countries?
13. Suppose the world price of kiwi fruit is $20 per case and the U.S. equilibrium price with no international trade is$30 per case. If the U.S. government had previously banned the import of kiwi fruit but then imposed a tariff of $5 per case and allowed kiwi imports, what would happen to the
12. How would the effects of international trade on the domestic orange market change if the world price of oranges were above the domestic equilibrium price?Draw a graph to help explain your answer.
11. Draw a graph of the U.S. automobile market in which the domestic equilibrium price without trade is Pd and the equilibrium quantity is Qd. Use this graph to illus trate and explain the effects of a tariff if the United States were an auto importer with free trade. Then use the graphtoillustrate
10. Tariffs and quotas both raise the price of foreign goods to domestic consumers. What is the difference between the effects of a tariff and the effects of a quota on the following?a. the domestic governmentb. foreign producersc. domestic producers
9. For each of the goals listed in exercise 8, discuss what the appropriate commercial policy is likely to be (in terms of tariffs, quotas, subsidies, and so on).
8. What are the potential benefits and costs of a com mercial policy designed to pursue each of the fol lowing goals?a. save domestic jobsb. create a level playing fieldc. increase government revenued. provide a strong national defensee. protect an infant industryf. stimulate exports of an industry
7. Which of the theories of comparative advantage could explain why the United States exports com puters to Japan at the same time that it imports them from Japan? Explain.
6. How would each of the following theories of comparative advantage explain the fact that the United States exports computers?a. productivity differencesb. factor abundancec. human skillsd. product life cyclee. preferences
5. Which country has the comparative advantage in computer production?
2. Which country has the absolute advantage in beef production?
1. Why must voluntary trade between two countries be mutually beneficial?Use the following table to do exercises 2–5.Output per Worker per Day in Beef or Computers Canada (units)Japan (units)Beef Computers 12 410 8
Government policies that hold down interest rates have adverse effects on economic growth in developing coun tries. Although low interest rates are intended to make it cheaper for local businesses to invest in new capital goods, they have the effect of drying up the supply of savings since savers
13. The size of a country’s labor force is determined by the andthe ofthe population in the labor force.
12. The long-run growth of the economy rests on growth in productive resources such as , ,, and ,andon advances in .
11. Economic growth shifts the aggregate(demand, supply) curve to the (right, left).
10. All other things being equal, a country that does not enforce private property rights will have a (higher, lower)rateofeconomic growth than a country that does enforce private property rights.
Use the government’s budget constraint to explain how these measures will affect inflation.
I War on Inflation The leader of a developing nation has declared war on inflation by issuing a series of belt-tightening measures.Capital gains taxes will be enforced, lending and deposit rates at banks will be raised, and government spending will be slashed.
17. isthenation’srealGDPdividedby its stock of labor and capital.18. In the United States, labor receives about 70 percent of national income, and capital receives about 30 percent. If total factor productivity increases by 1 percent, labor increases by 1 percent, and capital increases by 3
16. Productivity is the ratio of to the amount of .
15. What are two factors that cause developing countries to lag behind in the development and implementation of new technology?
8. When the inflation rate is unexpectedly high, unemployment .
6. Unexpected inflation can affect the employment rate in the following three ways:
5. If people’s expectations about inflation do not change, the short-run effect of disinflation is rising .
4. List the two assumptions underlying the short-run Phillips curve.
3. The downward slope of the short-run Phillips curve is caused by shifts in , with remainingconstant.
2. The Phillips curve tradeoff between inflation and unemployment (does,doesnot)persist over the long run.

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Fundamentals Of Economics 6th Edition William Boyes, Michael Melvin - Solutions

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