Midterm+2+++aswers

Midterm+2+++aswers - UCI GlobalEconomy Midterm2 Summer2011...

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UCI  Global Economy  Midterm 2 Summer 2011 Name___________________________________                  ID___________________________________   MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question. (3 pts each) 1) 
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Examples  of  comparati ve  advantage  show how  trade  between  two  countries  can make  each  better off.  Compared  to their  pre - trade  positions,  trade  makes  both  countries  better off  because in  each  country  
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1) 
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_______  A) 
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total  consumption of goods is greater.  B) 
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total  employment is greater.  C) 
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wages are  higher.   D) 
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total welfare is  greater.     Figure 8 - 1 Figure 8 - 1 shows the U.S. demand and supply for leather footwear.   2) 
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Refer to  Figure 8 - 1.  Under  autarky,  the  equilibriu m price is  ________ , the  consumer  surplus is  ________  and the  producer  surplus is  ________
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2)  ____ ___  $ 3 0 ;   c o n s u m e r   s u r p l u s   =  ar ea  R pr od uc er  su rp lu = ar ea  + + + + $3 0;  co nsumer surplus  =  area  R ; producer surplus  = area  S   +  
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$24; consumer  surplus  =  area  R   +   S ; producer surplus  =  area  D) 
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$30; consumer  surplus  =  area  R   +   S   +   V ; producer surplus  =  area  T   +   W +     3) 
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Refer to  Figure 8 - 1.  Suppose  the  governme nt allows  imports of  leather  footwear  into the  United  States.  What  happens  to the  market  price and  what is  the  quantity  of  imports? 
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3)  ____ ___  T h e   p r i c e   f a l l s   t o  $ 24  an im po rts  eq ua Q - Q un its Th pri ce equals $24 and  imports equal  Q units. 
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The price  equals $24 and imports equals  Q 2   -   Q 0  units.  D) 
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The price falls  to $24 and imports equal  Q 2   -   Q units.    4) 
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The  balance of  payments  includes  all of the  following  accounts  except 
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4)  ____ ___ 
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the financial  account. 
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B)  the  nati account. 
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the capital  account. 
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D)  the  curr   5) 
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How does  a decrease  in value  of a  country's  currency  relative to  other  currencies  affect its  balance of  trade? 
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5)  ____ ___  A   d e c r e a s e   i n   v a l u e   o f   a   c o u n t r y ' s   c u r r e n c y   rel ati ve  to  ot he cu rr en ci es  rai se im po rts re du ce ex po rts an re du ce th ba la nc of  tra de de cr ea se  in  value of a country's  currency relative to  other currencies  reduces imports, raises  exports, and reduces  the balance of trade. 
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A decrease in  value of a  country's currency relative to other currencies raises imports, reduces exports, and increases the balance of trade.  D) 
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Midterm+2+++aswers - UCI GlobalEconomy Midterm2 Summer2011...

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