Exploring Macroeconomics 7th Edition Robert L. Sexton - Solutions

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Assume that a product sells for $100 in the United States.a. If the exchange rate between British pounds and U.S. dollars is $2 per pound, what would the price of the product be in the United Kingdom?b. If the exchange rate between Mexican pesos and U.S. dollars is 125 pesos per dollar, what would
Indicate whether each of the following represents a credit or debit on the U.S. financial account.a. A French bank purchases $100,000 worth of U.S. Treasury notes.b. The central bank in the United States purchases 1 million euros in the currency market.c. A U.S. resident buys stock on the Japanese
A change in the euro-dollar exchange rate from $1 per euro to $2 per euro would ___________________ the U.S. price of German goods, thereby ___________________ the number of German goods that would be demanded in the United States.
Because the United States gains claims over foreign buyers by obtaining foreign currency in exchange for the dollars needed to buy U.S. exports, all exports of U.S. goods abroad are considered a(n)___________________ or ___________________ item in the U.S. balance of payments.
Which of the following statements is true?a. Exchange rates never changed under fixed exchange rate systems.b. Changing from fixed to flexible exchange rates does not impact a country’s domestic macroeconomic policies.c. It is not possible to insure against adverse currency fluctuations.d.
Which of the following statements is true?a. World trade has expanded under flexible exchange rates.b. An increased exchange value of the U.S. dollar would tend to reduce American net exports.c. Under fixed exchange rates, rates change less frequently but by larger amounts than under flexible
Which of the following statements is true?a. The world has always been on a flexible exchange rate system.b. Governments do not intervene in international currency markets under a flexible exchange rate system.c. Currently, exchange rates do not change very frequently.d. Changing exchange rates can
If a dollar is cheaper in terms of a foreign currency than the equilibrium exchange rate, a _____________________ exists at the current exchange rate that will put _____________________ pressure on the exchange value of a dollar.a. surplus of dollars; downwardb. surplus of dollars; upwardc.
What would an increase in U.S. inflation relative to Europe do to the supply and demand for euros and to the equilibrium exchange value (price) of euros in terms of U.S. dollars?
What would happen to the exchange value of euros in terms of U.S. dollars if incomes rose in both Europe and the United States?
Why does the demand for foreign currencies shift in the same direction as domestic income? What happens to the exchange value of those foreign currencies in terms of U.S. dollars?
In foreign exchange markets, the effect of an increase in the demand for dollars on the value of the dollar is the same as that ofa. an increase in the supply of foreign currencies.b. a decrease in the supply of foreign currencies.c. a decrease in the demand for dollars.d. none of the above.
A depreciation in the U.S. dollar woulda. discourage foreigners from making investments in the United States.b. discourage foreign consumers from buying U.S. goods.c. reduce the number of dollars it would take to buy a Swiss franc.d. encourage foreigners to buy more U.S. goods.
Suppose that the dollar rises from 100 to 125 yen. As a result,a. exports to Japan will likely increase.b. Japanese tourists will be more likely to visit the United States.c. U.S. businesses will be less likely to use Japanese shipping lines to transport their products.d. U.S. consumers will be
If fewer British tourists visit the Grand Canyon, what is the effect in the exchange market?a. It will increase the supply of British pounds.b. It will decrease the supply of British pounds.c. It will increase the demand for British pounds.d. It will decrease the demand for British pounds.
If the United States experiences a sharp increase in exports, what will happen to demand for the U.S. dollar?a. It will decrease.b. It will increase.c. It will be unchanged.d. It will change at the same rate as the supply of dollars will change.e. There is not enough information to make a
If the dollar appreciates relative to other currencies, which of the following is true?a. It takes more of the other currency to buy a dollar.b. It takes less of the other currency to buy a dollar.c. No change occurs in the currency needed to buy a dollar.d. Not enough information is available to
Which of the following is most likely to favor the appreciation of the American dollar?a. A German professor on vacation in Iowab. An American professor on an extended vacation in Parisc. An American farmer who relies on exportsd. Disney World
How will each of the following events affect the foreign exchange market?a. A merican travel to Europe increases.b. Japanese investors purchase U.S. stock.c. U.S. real interest rates abruptly increase relative to world interest rates.d. O ther countries become less politically and economically
As euros get cheaper relative to U.S. dollars, why does the quantity of euros demanded by Americans increase?Why doesn’t the demand for euros increase as a result?
When a U.S. dollar buys relatively more British pounds, why does the cost of imports from England fall in the United States?
A depreciation in the U.S. dollar woulda. discourage foreigners from making investments in the United States.b. discourage foreign consumers from buying U.S. goods.c. reduce the number of dollars it would take to buy a Swiss franc.d. encourage foreigners to buy more U.S. goods.
Suppose that the dollar rises from 100 to 125 yen. As a result,a. exports to Japan will likely increase.b. Japanese tourists will be more likely to visit the United States.c. U.S. businesses will be less likely to use Japanese shipping lines to transport their products.d. U.S. consumers will be
If the dollar appreciates relative to other currencies, which of the following is true?a. It takes more of the other currency to buy a dollar.b. It takes less of the other currency to buy a dollar.c. No change occurs in the currency needed to buy a dollar.d. Not enough information is available to
If the exchange rate between the dollar and the euro changes from $1 5 1 euro to $2 5 1 euro, then European goods will becomea. less expensive for Americans, and imports of European goods to the United States will rise.b. less expensive for Americans, and imports of European goods to the United
If the price in dollars of Mexican pesos changes from $0.10 per peso to $0.14 per peso, the peso hasa. appreciated.b. depreciated.c. devalued.d. stayed at the same exchange rate.
With no errors or omissions in the recorded balance-of-payments accounts, what should the statistical discrepancy equal?
What would have to be true for the United States to have a balance-of-trade surplus and a current account deficit?
What would have to be true for the United States to have a balance-of-trade deficit and a balance-of-payments surplus?
How is it that our imports provide foreigners with the means to buy U.S. exports?
Why must British purchasers of U.S. goods and services first exchange pounds for dollars?
What is the balance of payments?
If the value of a nation’s merchandise exports exceeds merchandise imports, then the nation is running aa. balance-of-payments deficit.b. balance-of-payments surplus.c. merchandise trade deficit.d. merchandise trade surplus.
Which of the following will enter as a credit in the U.S. balance-of-payments financial account?a. The purchase of a Japanese automobile by a U.S. consumerb. The sale of Japanese electronics to an Americanc. The sale of an American baseball team to a Japanese industrialistd. The purchase of a
If consumers in Europe and Asia develop strong preferences for U.S. goods, the U.S. current account willa. not be affected because purchases of U.S. goods by foreigners are recorded in the financial account.b. not be affected because purchases of U.S. goods based on mere preferences are recorded
What is the difference between the balance of merchandise trade and the balance of payments?a. Only the value of goods imported and exported is included in the balance of merchandise trade, while the balance of payments includes the value of all payments to and from foreigners.b. The value of goods
Which of the following would be recorded as a credit in the U.S. balance-of-payments accounts?a. The purchase of a German business by a U.S. investorb. The import of Honda trucks by a U.S. automobile distributorc. European travel expenditures of an American college studentd. The purchase of a U.S.
What is the balance of trade?
What are the three main components of the balance of payments?
What is the balance of payments?
Go through your local newspaper and locate four news items regarding the global economy. Identify the significance of each of these news items to the U.S. economy and whether they are likely to affect international trade.
Would you be in favor of freer trade or against it in the following circumstances?a. The move to freer trade is in another country, and you are an exporter to that country.b. The move to freer trade is in your country, and you compete with imports from other countries.c. The move to freer trade is
Why does rent seeking imply that the traditional measure of deadweight loss from tariffs and quotas will likely understate the true deadweight loss to society?
If imposing tariffs and quotas harms consumers, why don’t consumers vigorously oppose the implementation of these protectionist policies?
Explain why imposing a tariff causes a net welfare loss to the domestic economy.
Using the accompanying graphs, illustrate the effects of opening up the domestic market to international trade on the domestic price, the domestic quantity purchased, the domestic quantity produced, imports or exports, consumer surplus, producer surplus, and the total welfare gain from trade. Price
Use the accompanying graphs to illustrate the effects of imposing a tariff on imports on the domestic price, the domestic quantity purchased, the domestic quantity produced, the level of imports, consumer surplus, producer surplus, the tariff revenue generated, and the total welfare effect from the
To protect its domestic apple industry, Botswana has for many years prevented international trade in apples. The following graph represents the Botswana domestic market for apples. PBT is the current price and PAT is the world price.a. If the government allows world trade in apples, what will
Assume that Freeland could produce 8 units of X and no Y, 16 units of Y and no X, or any linear combination in between, and Braveburg could produce 32 units of X and no Y, 48 units of Y and no X, or any linear combination in between.a. What is the opportunity cost of producing X in Freeland? In
If country A is the lowest opportunity cost producer of X and country B is the lowest opportunity cost producer of Y, what happens to their absolute and comparative advantages if country A suddenly becomes three times more productive at producing both X and Y than it was before?
The North American Free Trade Agreement is an agreement among the United States, Canada, and Mexico to reduce trade barriers and promote the free flow of goods and services across borders. Many U.S. labor groups were opposed to NAFTA.Can you explain why? Can you predict how NAFTA might alter the
Evaluate the following statement: “The United States has an absolute advantage in growing wheat. Therefore, it must have a comparative advantage in growing wheat.”
Evaluate the following statement: “Small, developing economies must first become self-sufficient before benefiting from international trade.”
Suppose the United States can produce cars at an opportunity cost of two computers for each car it produces. Suppose Mexico can produce cars at an opportunity cost of eight computers for each car it produces. Indicate how both countries can gain from free trade.
The following table represents the production possibilities in two countries:Which country has a comparative advantage at producing Good X? How can you tell?Which country has a comparative advantage at producing Good Y? Country A Good X Good Y Good X 0 4 8 12 16 26 2680 32 24 4 18 16 8 12 12 6 16 0
Bud and Larry have been shipwrecked on a deserted island. Their economic activity consists of either gathering berries or fishing. We know that Bud can catch four fish in 1 hour or harvest two buckets of berries. In the same time Larry can catch two fish or harvest two buckets of berries.a. Fill in
Gains from trade in terms of world output are ___________________ by export subsidies.
With subsidies, a nation’s taxpayers end up subsidizing the output of producers who, relative to producers in other countries, are ___________________.
Governments sometimes try to encourage exports by ___________________ producers.
If a foreign country is found guilty of dumping, the United States can impose ___________________ tariffs.
Dumping occurs when a foreign country sells its products at prices ___________________ their costs or ___________________ the prices they are sold at in the domestic market.
Tariffs and import quotas are rather suspect and exist because of producers’ lobbying efforts to gain profits from government protection, which is called ___________________.
An import ___________________ gives producers from another country a maximum number of units of the good in question that can be imported within any given time span.
If a nation’s own resources are depletable, tariff-imposed reliance on domestic supplies will ___________________ depletion of domestic reserves.
If new tariffs lead to restrictions on imports, ___________________ dollars will be flowing overseas in payment for imports, which means that foreigners will have ___________________ dollars available to buy U.S.exports.
Tariffs lead to ___________________ output and employment and reduced unemployment in domestic industries where tariffs are imposed.
One argument for tariffs is that tariff protection is necessary ___________________ to allow a new industry to more quickly reach a scale of operation at which economies of scale and production efficiencies can be realized.
Import tariffs benefit domestic ___________________ and ___________________ but harm domestic ___________________.
If import tariffs are imposed, at the new price the domestic quantity demanded is ___________________, and the quantity supplied domestically is ___________________, ___________________ the quantity of imported goods.
With import tariffs, the domestic price of goods is ___________________ than the world price.
Tariffs bring about ___________________ prices and revenues to domestic producers, ___________________ sales and revenues to foreign producers, and ___________________ prices to domestic consumers.
A(n) ___________________ is a tax on imported goods.
When a country does not produce a good relatively as well as other countries do, international trade redistributes income from domestic ___________________ to domestic ___________________ and causes a net ___________________ in domestic wealth.
When a country does not produce a good relatively as well as other countries do, international trade will ___________________ the domestic price to the world price, with the difference between what is domestically supplied and what is domestically demanded supplied by ___________________.
When the domestic economy has a comparative advantage in a good, allowing international trade redistributes income from domestic ___________________ to domestic ___________________, but ___________________ surplus increases more than ___________________ surplus decreases.
When the domestic economy has a comparative advantage in a good because it can produce it at a lower relative price than the rest of the world can, international trade ___________________ the domestic market price to the world price, benefiting domestic ___________________ but harming domestic
Once the equilibrium output is reached at the equilibrium price, the sum of ___________________ and ___________________ is maximized.
We can better analyze the impact of trade with the tools of _________________ and _________________ surplus.
The difference between the most a consumer would be willing to pay for a quantity of a good and what a consumer actually has to pay is called ___________________ surplus.
If Techland can produce more of both grain and computers than Grainsville, Techland has a(n)___________________ advantage in both products.
Trade has evolved in large part because different geographic areas have ___________________ resources and therefore ___________________ production possibilities.
What is important for mutually beneficial specialization and trade is ___________________ advantage, not ___________________ advantage.
A person, a region, or a country has a comparative advantage over another person, region, or country in producing a particular good or service if it produces a good or service at a lower ___________________ than others do.
The theory that explains how trade can be beneficial to both parties centers on the concept of ___________________.
___________________ trade implies that both participants in an exchange of goods and services anticipate an improvement in their economic welfare.
In the global economy, one country’s exports are another country’s ___________________.
In a typical year, about ___________________ percent of the world’s output is traded in international markets.
Why does subsidizing exports by industries without a comparative advantage tend to harm the domestic economy, on net?
Why is the domestic argument for import quotas weaker than the case for tariffs?
Why is the national security argument for tariffs questionable?
How do import tariffs increase employment in “protected” industries but at the expense of a likely decrease in employment overall?
Why do tariffs increase domestic producer surplus but decrease domestic consumer surplus?
Which of the following is (are) true?a. An import quota raises the domestic price, while a tariff does not.b. A tariff reduces the quantity of imports, while an import quota does not.c. A tariff raises revenue for the government.d. An import quota benefits the foreign producer who is lucky enough
Import quotas and tariffsa. reduce the quantity of imports.b. raise the domestic price of the good.c. decrease the welfare of domestic consumers.d. increase the welfare of domestic producers.e. lead to deadweight loss.f. do all of the above.
Introducing a tariff on vitamin E woulda. reduce imports of vitamin E.b. increase U.S. consumption of domestically produced vitamin E.c. decrease total U.S. consumption of vitamin E.d. do all of the above.e. do none of the above.
After the United States introduces a tariff in the market for steel, the price of steel in the United States willa. decrease.b. increase.c. remain the same.d. change in an indeterminate manner.
The infant-industry argument for protectionism claims that an industry must be protected in the early stages of its development so thata. firms will be protected from subsidized foreign competition.b. domestic producers can attain the economies of scale to allow them to compete in world markets.c.
What is the economic impact of subsidies?
What are the effects of an import quota?
What are the effects of a tariff?

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