Deck 15: Exchange Rates and the Open Economy

Question 1

The fall in Canada's average tariff rate is due in part to the establishment of the

A) General Agreement on Tariffs and Trade.
B) General Agreement on Exports and Imports.
C) World Bank.
D) International Monetary Fund.
E) Organization for Economic Cooperation and Development.

Answer 1

General Agreement on Tariffs and Trade.

Question 2

In some recent years in Canada,exports and imports have each amounted to ________ of Canadian GDP.

A) over 100%
B) over 80%,but less than 100%
C) over 60%,but less than 80%
D) over 50%,but less than 60%
E) over 40%,but less than 50%

Answer 2

over 40%,but less than 50%

Question 3

The theory that Canada's economic development was driven by natural resource exports is called the

A) export thesis.
B) natural resource thesis.
C) fur and fish thesis.
D) fish and forest thesis.
E) staples thesis.

Answer 3

staples thesis.

Question 4

In the mid-1940s,the United States and the United Kingdom were of roughly equal importance as trading partners of Canada.Since then,the share of Canadian exports going to the United States has ________ and the share going to the United Kingdom has ________.

A) risen to 100%;fall to zero
B) risen to about 80%;fallen to about 20%
C) risen to about 80%;fallen to about 3%
D) fallen to about 20%;risen to about 80%
E) fallen to about 3%;risen to about 80%

Question 5

Canada's average tariff rate peaked at ________ in 1888 but dropped below ________ by 1996.

A) 100%;80%
B) 85%;40%
C) 67%;20%
D) 22%;1%
E) 8%;2%

Question 6

From the time of Confederation in 1867 until World War Two,Canada's two major trading partners were the

A) United Kingdom and France.
B) United Kingdom and the United States.
C) United States and France.
D) United States and Japan.
E) United States and China.

Question 7

Imports from China accounted for only 1% of Canada's imports in 1989 but ________ of Canada's imports by 2011.

A) 2.5%
B) 4.5%
C) 11%
D) 15.5%
E) 33%

Question 8

Starting after World War Two,Canada's share of trade with ________ began to rise dramatically,while its share of trade with ________ began to decline dramatically.

A) France;the United Kingdom
B) the United Kingdom;France
C) the United States;the United Kingdom
D) the United Kingdom;the United States
E) China;the United States

Question 9

In the early stages of its development,Canada relied upon ________ as an important source of government revenue.

A) tariffs
B) income taxes
C) sales taxes
D) payroll taxes
E) property taxes

Question 10

The world price is the price at which

A) the supply of domestic goods and services equals the demand for goods and services on international markets.
B) the demand for domestic goods and services equals the supply of goods and services on international markets.
C) consumption goods and services trade for production goods and services on international markets.
D) a good or service is traded on international markets.
E) a good or service is traded on domestic markets.

Question 11

A country that trades with other countries is called a(n)__________ economy.

A) structural
B) nominal
C) centrally planned
D) open
E) closed

Question 12

Today,Canada's four leading trading partners are the

A) United States,Mexico,Brazil,and the United Kingdom.
B) United States,Australia,New Zealand,and the United Kingdom.
C) United States,France,Germany,and Italy.
D) United States,China,Mexico,and the United Kingdom.
E) United States,Russia,Cuba,and China.

Question 13

The G7 country with the highest ratio of trade to GDP is

A) Canada.
B) Germany.
C) Japan.
D) Italy.
E) the United States.

Question 14

A country that does not trade with other countries is called a(n)_________ economy.

A) structural
B) nominal
C) centrally planned
D) open
E) closed

Question 15

The staples thesis maintains that Canada's economic development was driven by

A) natural resource exports.
B) natural resource imports.
C) automotive exports and imports.
D) information and computer technology imports.
E) exports of industrial goods.

Question 16

Compared to the other G7 countries,Canada has a ratio of trade to GDP that is

A) higher than any other G7 country.
B) higher than average for G7 countries.
C) exactly equal to the average for G7 countries.
D) lower than average for G7 countries.
E) equal to zero.

Question 17

The major development in Canada's trade pattern in the last several years has been the rise of ________ as a source of imports.

A) the United States
B) the United Kingdom
C) Mexico
D) Brazil
E) China

Question 18

A closed economy is one that

A) relies on a market system to allocate scarce resources.
B) relies on central planning to allocate scarce resources.
C) has a flexible exchange rate.
D) trades with other countries.
E) does not trade with other countries.

Question 19

Canada's top three export categories in 2008-2010 were

A) agricultural and fishing products,energy products,and forestry products.
B) agricultural and fishing products,energy products,and industrial goods and materials.
C) agricultural and fishing products,forestry products,and industrial goods and materials.
D) energy products,forestry products,and automotive products.
E) energy products,machinery and equipment,and industrial goods and materials.

Question 20

An open economy is one that

A) relies on a market system to allocate scarce resources.
B) relies on central planning to allocate scarce resources.
C) has a flexible exchange rate.
D) trades with other countries.
E) does not trade with other countries.

Question 21

The losers from trade are the _________ and the _________.

A) consumers of imported goods;producers of exported goods
B) consumers of imported goods;producers of imported goods
C) consumers of imported goods;consumers of exported goods
D) consumers of exported goods;producers of exported goods
E) consumers of exported goods;producers of imported goods

Question 22

If a tariff is placed on a good,the domestic price of the good ________,domestic production of the good ________,and domestic consumption of the good ________.

A) increases;increases;increases
B) increases;increases;decreases
C) increases;decreases;decreases
D) decreases;decreases;decreases
E) decreases;increases;increases

Question 23

A tax imposed on an imported good is called a

A) tariff.
B) quota.
C) protection tax.
D) capital inflow.
E) capital outflow.

Question 24

If a tariff is placed on a good,then imports of the good _________,domestic production of the good ________,and domestic consumption of the good _________.

A) increase;increases;increases
B) increase;increases;decreases
C) increase;decreases;decreases
D) decrease;decreases;decreases
E) decrease;increases;decreases

Question 25

Producers of exported goods are _________ as a result of trade and consumers of imported goods are _________ as a result of trade.

A) winners;losers
B) winners;winners
C) losers;winners
D) losers;losers
E) unaffected;unaffected

Question 26

A tariff is a

A) legal limit on the quantity of a good that may be imported.
B) legal limit on the price of a good that may be imported.
C) tax imposed on an imported good.
D) tax imposed on an exported good.
E) menu cost.

Question 27

If a tariff is placed on a good,domestic producers of the good are _________,domestic consumers of the good are _________,and the government _________ tax revenue.

A) better off;better off;gains
B) better off;better off;loses
C) better off;worse off;gains
D) worse off;worse off;gains
E) worse off;better off;gains

Question 28

A legal limit on the quantity of a good that may be imported is called a

A) tariff.
B) quota.
C) protection limit.
D) capital inflow limit.
E) capital outflow limit.

Question 29

Producers of imported goods are ________ as a result of trade and producers of exported goods are _________ as a result of trade.

A) winners;losers
B) winners;winners
C) losers;winners
D) losers;losers
E) unaffected;unaffected

Question 30

If the world price is greater than the domestic price of a commodity in a closed economy,when that economy begins to trade,the economy will _________ the commodity.

A) stop consuming
B) stop producing
C) be self-sufficient in
D) become a net importer of
E) become a net exporter of

Question 31

Consumers of imported goods are ________ as a result of trade and producers of exported goods are _________ as a result of trade.

A) winners;losers
B) winners;winners
C) losers;winners
D) losers;losers
E) unaffected;unaffected

Question 32

The workings of the free market ensure that goods will be produced where the opportunity cost is the __________ and traded to countries that ___________ have a comparative advantage in the good.

A) highest;do
B) highest;do not
C) highest;may or may not
D) lowest;do
E) lowest;do not

Question 33

Consumers of imported goods are _________ as a result of trade and consumers of exported goods are _________ as a result of trade.

A) winners;losers
B) winners;winners
C) losers;winners
D) losers;losers
E) unaffected;unaffected

Question 34

Under free trade,countries will __________ goods for which their closed-economy domestic price exceeds the world price and __________ goods for which their closed-economy domestic price is less than the world price.

A) export;import
B) export;export
C) import;export
D) import;import
E) export;not consume

Question 35

Why do politicians so often resist free trade and "globalization"?

A) Free trade does not benefit the economy as a whole.
B) Specific groups may not benefit from free trade.
C) Free trade does not benefit the global economy.
D) Free trade usually hurts the consumers.
E) Free trade usually leads to overproduction of resources.

Question 36

The price at which a good or service is traded on international markets is called the _________ price.

A) supply
B) demand
C) relative
D) world
E) production

Question 37

If the world price is less than the domestic price of a commodity in a closed economy,when that economy begins to trade,the economy will __________ the commodity.

A) stop consuming
B) stop producing
C) be self-sufficient in
D) become a net importer of
E) become a net exporter of

Question 38

The winners from trade are the __________ and the __________.

A) consumers of imported goods;producers of exported goods
B) consumers of imported goods;producers of imported goods
C) consumers of imported goods;consumers of exported goods
D) consumers of exported goods;producers of exported goods
E) consumers of exported goods;producers of imported goods

Question 39

A quota is a

A) legal limit on the quantity of a good that may be imported.
B) legal limit on the price of a good that may be imported.
C) tax imposed on an imported good.
D) tax imposed on an exported good.
E) menu cost.

Question 40

If trade is unrestricted,countries will __________ goods in which they have a comparative advantage and __________ goods in which they do not have a comparative advantage.

A) export;import
B) export;export
C) import;export
D) import;import
E) export;not consume

Question 41

The demand for shoes in a country is given by D = 60 - 0.5P,where P is the price of a pair of shoes.Supply by domestic producers is given by S = 20 + 0.5P.The world price of a pair of shoes equals $30 and this economy is open to trade.If a tariff of $4 per pair is placed on shoe imports,the quantity of shoes demanded domestically will change from ________ pairs with trade,but no tariff,to ________ pairs with trade and a tariff.

A) 40;43
B) 40;45
C) 43;40
D) 45;40
E) 45;43

Question 42

The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100 and this economy is open to trade.If a tariff of $50 per unit is placed on DVD player imports,the quantity of DVD players demanded domestically will change from _________ with no tariff to __________ with the tariff.

A) 260;270
B) 260;280
C) 280;270
D) 280;260
E) 270;260

Question 43

If a quota is placed on a good,the domestic price of the good ________,domestic production of the good ________,and domestic consumption of the good ________.

A) increases;increases;increases
B) increases;increases;decreases
C) increases;decreases;decreases
D) decreases;decreases;decreases
E) decreases;increases;increases

Question 44

The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100 and this economy is open to trade.If a tariff of $50 per unit is placed on DVD player imports,the quantity of DVD players produced domestically will change from _________ with no tariff to _________ with the tariff.

A) 180;220
B) 180;260
C) 220;180
D) 220;260
E) 260;180

Question 45

The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100.In equilibrium,when this economy is closed to trade,the quantity of DVD players demanded domestically equals _________,and when this economy opens to trade,the quantity of DVD players demanded domestically equals __________.

A) 180;260
B) 180;280
C) 260;180
D) 260;280
E) 280;260

Question 46

The demand for shoes in a country is given by D = 60 - 0.5P,where P is the price of a pair of shoes.Supply by domestic producers is given by S = 20 + 0.5P.The world price of a pair of shoes equals $30.In equilibrium,when this economy is closed to trade,domestic shoe production equals ________,and when this economy opens to trade,domestic shoe production equals ________.

A) 40;35
B) 40;45
C) 35;40
D) 45;40
E) 45;35

Question 47

The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30.In equilibrium,when this economy is closed to trade,the quantity of jeans demanded domestically equals __________,and when this economy opens to trade,the quantity of jeans demanded domestically equals __________.

A) 32;36
B) 32;52
C) 52;82
D) 52;32
E) 32;82

Question 48

The demand for shoes in a country is given by D = 60 - 0.5P,where P is the price of a pair of shoes.Supply by domestic producers is given by S = 20 + 0.5P.The world price of a pair of shoes equals $30 and this economy is open to trade.If a quota of 6 pairs is placed on shoe imports,the quantity of shoes produced domestically will change from __________ pairs with no quota to _________ pairs with the quota.

A) 35;40
B) 35;37
C) 40;35
D) 40;37
E) 37;40

Question 49

The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30 and this economy is open to trade.If a tariff of $10 per pair is placed on jeans imports,the quantity of jeans produced domestically will change from __________ pairs with no tariff to __________ pairs with the tariff.

A) 52;32
B) 32;52
C) 52;36
D) 36;52
E) 32;36

Question 50

The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100.In equilibrium,when this economy is closed to trade,domestic DVD player production equals __________,and when this economy opens to trade,domestic DVD player production equals _________.

A) 180;260
B) 180;280
C) 260;180
D) 260;280
E) 280;260

Question 51

The demand for shoes in a country is given by D = 60 - 0.5P,where P is the price of a pair of shoes.Supply by domestic producers is given by S = 20 + 0.5P.The world price of a pair of shoes equals $30 and this economy is open to trade.If a tariff of $4 per pair is placed on shoe imports,the quantity of shoes produced domestically will change from ________ pairs with no tariff to ________ pairs with the tariff.

A) 35;40
B) 35;37
C) 40;35
D) 40;37
E) 37;40

Question 52

If a quota is placed on a good,then imports of the good _________,domestic production of the good _________,and domestic consumption of the good _________.

A) increase;increases;increases
B) increase;increases;decreases
C) increase;decreases;decreases
D) decrease;decreases;decreases
E) decrease;increases;decreases

Question 53

The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30 and this economy is open to trade.If a quota of 40 pairs is placed on jeans imports,the quantity of jeans produced domestically will change from _______ pairs with no quota to _______ pairs with the quota.

A) 52;32
B) 32;52
C) 52;36
D) 36;52
E) 32;36

Question 54

The demand for shoes in a country is given by D = 60 - 0.5P,where P is the price of a pair of shoes.Supply by domestic producers is given by S = 20 + 0.5P.The world price of a pair of shoes equals $30.In equilibrium,when this economy is closed to trade,the quantity of shoes demanded domestically equals _________,and when this economy opens to trade,the quantity of shoes demanded domestically equals _________.

A) 40;35
B) 40;45
C) 35;40
D) 45;40
E) 45;35

Question 55

When a tariff is imposed on a good,the difference between the world price and the domestic price goes to _________,but when a quota limits the importation of the good,the difference between the world price and the domestic price goes to ________.

A) the government;private individuals or firms
B) the government;the government
C) the government;the market
D) private individuals or firms;the government
E) private individuals or firms;private individuals or firms

Question 56

The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30 and this economy is open to trade.If a quota of 40 pairs is placed on jeans imports,the quantity of jeans demanded domestically will change from ________ pairs with no quota to _______ pairs with the quota.

A) 52;82
B) 52;76
C) 82;76
D) 82;52
E) 82;36

Question 57

The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30 and this economy is open to trade.If a tariff of $10 per pair is placed on jeans imports,the quantity of jeans demanded domestically will change from ___________ pairs with no tariff to _________ pairs with the tariff.

A) 52;82
B) 52;76
C) 82;76
D) 82;52
E) 82;36

Question 58

If a quota is placed on a good,domestic producers of the good are ________ and domestic consumers of the good are _________.

A) better off;better off
B) better off;not affected
C) better off;worse off
D) worse off;worse off
E) worse off;better off

Question 59

The demand for jeans in a country is given by D = 100 - 0.6P,where P is the price of a pair of jeans.Supply by domestic producers is given by S = 20 + 0.4P.The world price of a pair of jeans equals $30.In equilibrium,when this economy is closed to trade,domestic jeans production equals _________,and when this economy opens to trade,domestic jeans production equals __________.

A) 32;36
B) 32;52
C) 52;82
D) 52;32
E) 32;82

Question 60

The demand for shoes in a country is given by D = 60 - 0.5P,where P is the price of a pair of shoes.Supply by domestic producers is given by S = 20 + 0.5P.The world price of a pair of shoes equals $30 and this economy is open to trade.If a quota of 6 pair of shoes is placed on shoe imports,the quantity of shoes demanded domestically will change from ________ pairs with no quota to _________ pairs with the quota.

A) 40;43
B) 40;45
C) 43;40
D) 45;40
E) 45;43

Question 61

The demand for soybeans in a country is given by D = 5 - 0.2P,where P is the price of a bushel of soybeans.Supply by domestic producers is given by S = 1 + 0.8P.Both demand (D)and supply (S)of soybeans are measured in millions of bushels.If the world price of soybeans equals $2 and this economy is open to trade,then this country will

A) export 1 million bushels of soybeans.
B) export 2 million bushels of soybeans.
C) neither import nor export soybeans.
D) import 1 million bushels of soybeans.
E) import 2 million bushels of soybeans.

Question 62

The demand for laser printers in a country is given by D = 10,000 - 2P,where P is the price of a laser printer.Supply by domestic producers is given by S = 2,000 + 8P.If the world price of a laser printer equals $800 and this economy is open to trade,then this country will

A) export 2,000 laser printers.
B) export 3,000 laser printers.
C) neither import nor export laser printers.
D) import 2,000 laser printers.
E) import 3,000 laser printers.

Question 63

If the economy in the diagram above is open to trade,the world price of oil is $20 per barrel,and a $5 per-barrel tariff is levied per barrel of oil imported,then domestic production of oil equals _______ million barrels and domestic consumption of oil equals _______ million barrels.

A) 9;12
B) 12;12
C) 12;16
D) 16;9
E) 9;16

Question 64

If the economy in the diagram above is open to trade and the world price of oil is $25 per barrel,then domestic consumption will be ________ million barrels,of which ________ million barrels will be imported.

A) 9;11
B) 9;14
C) 9;16
D) 16;9
E) 16;7

Question 65

If the economy in the diagram above is open to trade and the world price of oil is $20 per barrel,then this economy will __________ million barrels of oil.

A) import 7
B) import 9
C) import 11
D) import 18
E) export 7

Question 66

If the economy in the diagram above is open to trade and the world price of oil is $25 per barrel,then this economy will _________ million barrels of oil.

A) export 6
B) export 8
C) export 10
D) import 10
E) import 6

Question 67

If the economy in the diagram above is open to trade and the world price of oil is $25 per barrel,then domestic production will be _________ million barrels,of which _________ million barrels will be exported.

A) 8;6
B) 6;11
C) 14;8
D) 14;6
E) 14;11

Question 68

If the economy in the diagram above is open to trade and the world price of oil is $25 per barrel,then domestic production of oil equals ________ million barrels and domestic consumption of oil equals _______ million barrels.

A) 8;11
B) 11;11
C) 14;8
D) 8;14
E) 14;11

Question 69

The demand for laser printers in a country is given by D = 10,000 - 2P,where P is the price of a laser printer.Supply by domestic producers is given by S = 2,000 + 8P.If the world price of a laser printer equals $500 and this economy is open to trade,then this country will

A) export 2,000 laser printers.
B) export 3,000 laser printers.
C) neither import nor export laser printers.
D) import 2,000 laser printers.
E) import 3,000 laser printers.

Question 70

If the economy in the diagram above is open to trade and the world price of oil is $30 per barrel,then this economy will ________ million barrels of oil.

A) export 6
B) export 8
C) export 10
D) import 10
E) import 6

Question 71

The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100 and this economy is open to trade.If a quota of 50 units is placed on DVD player imports,the quantity of DVD players demanded domestically will change from _______ with no quota to _______ with the quota.

A) 260;270
B) 260;280
C) 280;270
D) 280;260
E) 270;260

Question 72

The demand for soybeans in a country is given by D = 5 - 0.2P,where P is the price of a bushel of soybeans.Supply by domestic producers is given by S = 1 + 0.8P.Both demand (D)and supply (S)of soybeans are measured in millions of bushels.If the world price of soybeans equals $4 and this economy is open to trade,then this country will

A) export 1 million bushels of soybeans.
B) export 2 million bushels of soybeans.
C) neither import nor export soybeans.
D) import 1 million bushels of soybeans.
E) import 2 million bushels of soybeans.

Question 73

If the economy represented in the diagram above is open to trade and the world price of oil is $30 per barrel,then domestic production of oil equals ________ million barrels and domestic consumption of oil equals ________ million barrels.

A) 6;11
B) 11;11
C) 11;16
D) 12;12
E) 6;16

Question 74

If the economy in the diagram above is open to trade and the world price of oil is $20 per barrel,then domestic production of oil equals _________ million barrels and domestic consumption of oil equals ________ million barrels.

A) 7;12
B) 12;12
C) 12;18
D) 18;7
E) 7;18

Question 75

The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100 and this economy is open to trade.If a quota of 50 units is placed on DVD player imports,the quantity of DVD players produced domestically will change from ________ with no quota to ________ with the quota.

A) 180;220
B) 180;260
C) 260;220
D) 260;180
E) 260;170

Question 76

The demand for soybeans in a country is given by D = 5 - 0.2P,where P is the price of a bushel of soybeans.Supply by domestic producers is given by S = 1 + 0.8P.Both demand (D)and supply (S)of soybeans are measured in millions of bushels.If the world price of soybeans equals $5 and this economy is open to trade,then this country will

A) export 1 million bushels of soybeans.
B) export 2 million bushels of soybeans.
C) neither import nor export soybeans.
D) import 1 million bushels of soybeans.
E) import 2 million bushels of soybeans.

Question 77

The demand for laser printers in a country is given by D = 10,000 - 2P,where P is the price of a laser printer.Supply by domestic producers is given by S = 2,000 + 8P.If the world price of a laser printer equals $1,000 and this economy is open to trade,then this country will

A) export 2,000 laser printers.
B) export 3,000 laser printers.
C) neither import nor export laser printers.
D) import 2,000 laser printers.
E) import 3,000 laser printers.

Question 78

If the economy in the diagram above is open to trade,the world price of oil is $20 per barrel,and the government places a $5 per-barrel tariff on oil imports,then this economy will ________ million barrels of oil.

A) import 7
B) import 9
C) import 16
D) export 9
E) export 7

Question 79

If the economy in the diagram above is open to trade and the world price of oil is $30 per barrel,then domestic production of oil equals ________ million barrels and domestic consumption of oil equals ________ million barrels.

A) 6;11
B) 11;11
C) 11;16
D) 16;6
E) 6;16

Question 80

If the economy in the diagram above is open to trade,the world price of oil is $20 per barrel and the government places a $5 per-barrel tariff on oil imports,then the government will collect $________ million in oil tariff revenues.

A) 35
B) 45
C) 50
D) 60
E) 80