Practice_Ch5_ - Chapter 5 Practice Test The United States...

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Chapter 5 Practice Test The United States in the Global Economy 1. True or false: Illegal immigration of workers is an example of an international resource flow. a. True b. False Answer: a Feedback: Worker immigration, whether legal or illegal, represents a flow of labor resources into the country. 2. Answer the next question on the basis of the following production possibilities tables for countries Alpha and Beta: A l p h a B e t a P r o d u c t i o n P o s s i b i l i t i e s P r o d u c t i o n P o s s i b i l i t i e s P r o d u c t A B C D P r o d u c t A B C D X 3 2 1 0 X 6 4 2 0 Y 0 4 8 1 2 Y 0 4 8 1 2 Refer to the tables. The range of the terms of trade that would be acceptable to both countries is: a. between 1 unit of X for 1 unit of Y and 1 unit of X for 2 units of Y b. between 4 units of X for 1 unit of Y and 2 units of X for 1 unit of Y c. between 1 unit of X for 2 units of Y and 1 unit of X for 4 units of Y d. between 2 units of X for 1 unit of Y and 1 unit of X for 1 units of Y Answer: c Feedback: In Alpha, the opportunity cost of X is 4 units of Y (increasing X production from 0 to 1 causes Y production to fall from 12 to 8). In Beta, the opportunity cost of X is only 2 units of Y (increasing X production from 0 to 2 causes Y production to fall from 12 to 8, so an increase in X by only 1 unit would cause Y production to fall by 2.) Any exchange rate between these two extremes of 1 X for 4 Y or 1 X for 2 Y would be acceptable to both countries. 3. The United States: a. leads the world in the percentage of its GDP that is traded b. leads the world in the dollar volume of exports and imports c. exports more than it imports d. is importing a smaller percentage of its GDP now compared with 40 years ago Answer: b Feedback: U.S. imports exceed exports and the volume of trade has been increasing as a percentage of GDP. While the U.S. dollar volume of trade is higher than for any other country, U.S. trade as a percentage of its GDP is lower than in many other countries. 4. Which of the following best illustrates an international resource flow? a. A U.S. firm builds an auto production facility in Canada b. A Canadian firm buys U.S. Treasury bonds with its excess cash c. A U.S. firm purchases the right to distribute and market a new anti-cancer drug developed in India d. A U.S. trucking company picks up and delivers goods produced in a Mexican maquiladora production facility Answer: a Feedback: The creation of the auto facility represents a flow of physical capital into Canada.
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5. True or false: Great Britain and Denmark are members of the Euro Zone. a. True b. False Answer: b Feedback: Neither of these countries is a member of the Euro Zone. 6. Answer the next question(s) on the basis of the following table that indicates the dollar price of luta, the currency used in the hypothetical economy of Luteland: Quantity of Dollar Quantity of luta demanded price of luta supplied (billions) luta (billions) 800 $10 550 600 8 600 400 6 650 200 2 700 Refer to the above table. The equilibrium exchange rate in this market is:
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Practice_Ch5_ - Chapter 5 Practice Test The United States...

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