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has a comparative advantage in the production
After a tariff is imposed on imported cars,
would you expect consumers to buy more or
fewer imported cars, all other things remaining
the same? Explain your answer.
If the pound appreciates relative to the U.S. dollar, the dollar must depreciate relative to the
pound. Do you agree or disagree? Explain your
What do critics of the low-foreign-wages argument for trade restrictions say?
If the value of U.S. exports is $103 billion and
the value of U.S. imports is $210 million, what
does the balance of trade equal?
State the national-defense argument for trade
Describe a culture that would foster economic
development. Describe a culture that would
hinder economic development.
Is a fast-growing population necessarily an
obstacle to economic development? Explain
your answer. Doing the Math
Do the calculations necessary to solve the following
1. If the price of an Irish sweater is €30 and the
dollar-euro exchange rate is $1 = €0.70, what
does the sweater cost in dollars?
2. If the price of a U.S. car is $20,000 and the
dollar-yen exchange rate is $1 = ¥129, what does
the car cost in yen?
3. If the United States can produce either 20 units
of clothing and 40 units of food or 60 units of
clothing and 0 units of food, what is the opportunity cost of producing 1 unit of food? 4. If Brazil can produce either 100 units of clothing and 0 units of food or 30 units of clothing
and 50 units of food, what is the opportunity
cost of producing 1 unit of clothing? Solving Economic Problems
Use your thinking skills and the information you
learned in this chapter to find solutions to the following problems.
1. Application. Suppose the United States buys 1
million cars from Japan each year. If the dollar
depreciates relative to the yen, will Americans
buy more or fewer than 1 million cars from
Japan? Explain your answer.
2. Analysis. Suppose that U.S. imports currently
equal U.S. exports. Explain how a fall in the
value of the dollar in comparison to other currencies can affect the current U.S. balance of
3. Cause and Effect. Over a six-month period
you notice that the dollar appreciates in value
compared to other currencies and that the U.S.
balance of trade goes from zero to $30 billion.
You suspect some relationship exists between
the change in the value of the dollar and the
U.S. balance of trade. Did the change in the balance of trade cause the change in the value of
the dollar, or did the change in the value of the
dollar cause the change in the balance of trade?
Explain your answer.
4. Writing. Suppose the people in Houston buy
more goods from the people in Los Angeles
than vice versa. This is not “news.” Write a onepage paper that answers this question: Why is
a city-to-city trade balance not news but a
country-to-country trade balance is? Go to www.emcp.net/economics and choose Economics:
New Ways of Thinking, Chapter 15, if you need more help in
preparing for the chapter test. Chapter 15 International Trade and Economic Development 427...
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