Introduction To Agricultural Economics 7th Edition John Penson - Solutions

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22. The current round of multilateral trade negotiations that began in 2001 is referred to asa. Qatar Charter.b. WTO Round.c. Doha Development Agenda.d. none of the above.
21. Draw two graphs, one to illustrate small-nation trade diversion and one to illustrate small-nation trade creation. Label and explain each one.
20. Discuss the five conditions under which preferential trading arrangements will most likely lead to trade creation and increased welfare of member nations.
19. List the five reasons discussed for preferential trading arrangements.
18. Important dynamic gains from the formation of a preferential trading arrangement includea. economies of scale.b. increased competition.c. stimulus to investment.d. more efficient use of economic resources.
17. The Southern Cone Common Market, MERCOSUR, was created to foster economic growth and mutual interests among the member nations ofa. Brazil, Guatemala, Paraguay, Argentina.b. Paraguay, Uruguay, Argentina, Brazil.c. Argentina, Guatemala, Panama, Brazil.d. Brazil, Paraguay, Argentina, Panama.
16. Under Article I of GATT, now the WTO, preferential tariff rates are prohibited, but an exception is allowed by Article XXVI if which of the following conditions are met?a. Trade barriers are eliminated on substantially all trade among members.b. Trade barriers remaining against nonmembers are
15. A trade-creating preferential trading agreement can increase the welfare gains of nonmember nations as well as member nations. T F
14. Trade creation occurs as some domestic production of a member nation is replaced by lower-cost imports from another member nation. T F
13. Preferential trading arrangements (PTAs) provide for the elimination of tariff and nontariff barriers to trade. T F
12. Identify and discuss the four general categories of arguments against trade. Discuss at least four reasons for undertaking policies designed to either restrict or promote agricultural exports.
11. The World Trade Organizationa. is a multilateral agreement establishing the rules for governing international trade.b. serves as an institutional forum for negotiating reductions to trade barriers and trade disputes.c. has the main objective of encouraging economic growth and development by
10. The three global institutions created after World War II to assist in rebuilding nations devastated by war and fostering economic recovery worldwide area. GATT, World Bank, International Bank for Reconstruction and Development.b. United Nations Conference on Trade, GATT, International Monetary
9. Nontariff barriers (NTB) include which of the following?a. Export subsidies, specific tariffs, restrictions at national bordersb. Export subsidies, ad valorem tariffs, price supportsc. Price supports, restrictions at national borders, favorable credit terms for exportersd. Price supports,
8. A quota representsa. a quantitative restriction on the amount of a good imported.b. a combination of ad valorem and specific duties.c. a compromise between taxpayers and consumers.d. none of the above.
7. Some of the net welfare effects of a tariff imposed by a small nation area. to reduce consumer welfare, increase producer welfare, and raise government revenue.b. to increase consumer welfare, decrease producer welfare, and raise government revenue.c. to increase consumer and producer welfare,
6. Tarrification is the process whereby quotas, licenses, variable levies, and other nontariff barriers to trade are converted to their tariff equivalents. T F
5. Nontariff barriers reduce imports and limit the domestic production of goods that substitute for imports. T F
4. The infant industry argument says that new firms need to be protected until their products become widely known in the market. T F
3. Protectionism occurs when government policy is implemented to remedy domestic economic problems associated with excessive exports. T F
2. Excess supply is the amount by which quantity demanded exceeds quantity supplied for each price level above equilibrium. T F
1. Under autarky, each nation operates as a closed economy and market equilibrium is determined solely by the interaction of domestic supply and demand conditions. T F
14. If the United States produces 20 tons of grain and 10 tons of coffee per man-hour and Mexico produces 15 tons of grain and 3 tons of coffee per man-hour, what commodity should each country produce according to the law of competitive advantage?
13. Discuss the difference between comparative advantage and competitive advantage.
12. Identify the factors affecting comparative advantage.
11. Opportunity cost theory states that a nation hasa. an absolute advantage in the production of the good with the lowest opportunity cost.b. no advantage in the production of any good with an opportunity cost.c. a comparative advantage in the production of the good with the lowest opportunity
10. According to comparative advantage, a nation shoulda. not import any goods if the nation does not have a relative disadvantage.b. specialize in production of the good for which it has the least relative disadvantage.c. import only the goods in which the nation has a disadvantage.d. not produce
9. The laissez-faire philosophy held thata. strict government control of all economic activity was necessary.b. little or no government control of the economy was needed.c. nations need the government to establish export laws to stimulate the economy.d. none of the above.
8. The shows all combinations of national output that can be produced by fully employing all available and the most productive .
7. In order to achieve gains from trade, nations must specialize in the of goods for which they are most efficient and those goods with other nations.
6. The basis for trade is differing among nations.
5. Competitive advantages based on nonmarket factors are dependent on politics rather than economics for sustained existence. T F
4. Comparative advantage is a monetary concept and is affected by changes in exchange rates or inflation. T F
3. Opportunity costs reflect the cost of a good as measured by the amount of a second good that must be given up in order to produce one additional unit of the first good. T F
2. Comparative advantage states that a nation will export the foods that it can produce more cheaply than others and import the goods that other nations can produce more cheaply. T F
1. The mercantilist philosophy argues that nations can become rich and powerful by exporting more than they import. T F
24. What are the two major components of the balance of payments?
23. The U.S. price of corn is $100 per ton, and the exchange rate between the U.S. dollar and the Japanese yen is ¥120 = $1.00.a. Calculate the international price of U.S. wheat for Japan.b. If the exchange rate changes to ¥145 = $1.00, calculate the new international wheat price for Japan.
22. Identify and describe the important participants in foreign exchange markets.
21. As the U.S. dollar depreciates in value, the price of goods in foreign currency declines, resulting ina. the decline in demand for U.S. goods.b. the decline of prices.c. loss of market share.d. all of the above.
20. A restrictive monetary policy accompanied by an expansionary fiscal policy would causea. real interest rates to decline and the value of the dollar to rise.b. real interest rates to rise and the value of the dollar to decline.c. real interest rates to rise and the value of the dollar to rise.d.
19. Expansionary fiscal policya. decreases exchange rates.b. increases interest rates.c. increases exports.d. decreases imports.
18. If a nation experiences a trade deficit, the value of the exchange rate in domestic currency will.
17. If the level of inf lation in the United States relative to other countries, U.S. goods and services would become more.
16. Monetary contraction can be accomplished directly in the United States by raising the or indirectly by decreasing the in the economy.
15. An expansionary monetary policy will cause the interest rate to decline and the exchange rate to depreciate. T F
14. An increase in U.S. interest rates would cause a decrease in demand for U.S. dollars. T F
13. Currency devaluation is used to deliberately decrease the value of a currency from a fixed level relative to other currencies. T F
12. The balance of payments is a record of all international transactions by U.S. private and public entities over a specific period of time, usually 1 year. T F
11. An exchange rate can be thought of as the value, or price, of one currency in terms of another currency. T F
10. Define balance of trade and discuss the two important implications for the economy as a whole and for agriculture in particular.
9. What is the difference between competitive and noncompetitive imports? Give two examples of each type.
8. U.S. agricultural exports generate ,, and throughout the economy.
7. Competitive imports substitute for U.S. domestic production causinga. higher prices.b. increased competition for U.S. farmers.c. increased grower returns.d. all of the above.
6. Which group of countries most likely represents future markets for U.S. agricultural products?a. Developing countriesb. Developed countriesc. Centrally planned countriesd. All of the above
5. Consumers depend on imported foods for quality, variety, and as a source of low-cost products. T F
4. World trade in value-added products has declined relative to world trade in bulk commodities. T F
3. The Uruguay Round of the GATT negotiations is the only round that attempts major reform of agricultural trade. T F
2. Expanded U.S. involvement in world trade resulted in higher farm prices, greater market stability, and increased farm incomes. T F
1. During the past 50 years, agriculture has generated a trade surplus that provides additional funds for investment, consumption, or savings. T F
13. Please complete the blanks in the following table for the Lower Slobovian economy operating in the normal range of the aggregate supply curve: Policy Effects on Expansionary Monetary Policy Expansionary Fiscal Policy Contractionary Monetary Policy Interest rate Real GDP Unemployment rate
12. The economy of Lower Slobovia is currently experiencing an interest rate of 12% and a real GDP of$5,000. The level of aggregate demand puts it in the Keynesian range of the country’s aggregate supply curve and perfectly elastic range of the country’s labor supply curve. Suppose the
11. The “Big Five” variablesa. include the rate of interest, the rate of employment, the rate of inflation, the rate of growth in real GDP, and the exchange rate.b. represent key linkages between the sectors in the food and fiber industry.c. include the rate of interest, the rate of
10. The national debt in the current year isa. equal to the national debt at the beginning of the year minus the annual budget deficit.b. equal to the national debt at the end of the year plus the annual budget deficit.c. equal to the national debt at the beginning of the year plus the annual
9. Expansionary fiscal policya. leads to growth in aggregate demand resulting from lower interest rates.b. causes an increase in national debt.c. can be inflationary if the economy is in the Keynesian range of the aggregate supply curve.d. none of the above.
8. The nation’s food and fiber industrya. includes the health care sector.b. represents a group in independent sectors including the farm sector.c. is affected by changes in farm policy and environmental regulations.d. none of the above.
7. Expansionary monetary policies to promote an economic recovery from the 2007–2009 recession were hampered by existing historically low interest rates. T F
6. A major factor influencing net farm income and farmland values in the 2000s and 2010s was the renewable fuel mandate for producing ethanol.T F
5. Real net farm income increased dramatically over the 1970–2012 period. T F
4. Expansionary monetary policies would likely cause farmland prices to increase due to rising interest rates resulting from a crowding-out effect in credit markets. T F
3. Expansionary monetary policies are likely to cause net farm income to and farm equity to .
2. A decrease in the value of the dollar relative to foreign currencies is likely to cause the level of imports to and the level of exports to .
1. The distinguishing difference between expansionary monetary and expansionary fiscal policy is the direction of movement in the .
14. The flow of people who are changing jobs and are thus currently unemployed is known as __________.
13. The phase of the business cycle where aggregate output is declining is known as the __________.
12. A sustained rise in the general price level is known as __________.
11. The inflation rate in 2015 can be calculated by subtracting the CPI in 2014 from the CPI in 2015 and dividing this difference by the CPI in 2015.T F
10. Demand-pull inflation may occur when union and business monopoly power is high, resulting in a wage–cost spiral. T F
9. Inflation erodes the purchasing power of wages earned by consumers. T F
8. Expansionary “supply-side macroeconomic policies”would includea. increasing government spending to shift the aggregate demand curve to the right.b. increasing government spending to shift the aggregate supply curve to the left.c. policies to shift the aggregate supply curve to the right.d.
7. The short-run Phillips curve showsa. the relationship between aggregate output and aggregate expenditures.b. the relationship between consumption and investment.c. the relationship between consumption and disposable income.d. none of the above.
6. The term laissez-faire macroeconomic policy refers toa. government regulation to maintain fair or equal opportunity in the economy.b. Federal Reserve policy to support fair or consistent commercial bank interest rates.c. fiscal policy to maintain full employment.d. the assumption that without
5. Define or graphically illustrate each of the following terms:Recessionary gap Potential GDP Demand-pull (excess demand) inflation Inflationary gap Cost-push inflation Stagflation Phillips curve
4. Given the following hypothetical information about aggregate consumer price levels in an economy, answer the following questions.a. What was the rate of inflation facing consumers in this economy in 2015?b. What likely happened to aggregate demand in this economy during 2015? Why?c. What can we
3. If the consumer price index was 166.6 in 2014 and 163.0 in 2013, calculate the annual rate of inflation that occurred in 2014.
2. If the total labor force is comprised of 250 million people, there are 6 million people in the armed services and institutions, and there are 225 million civilians employed in the economy, calculate the nation’s unemployment rate.
1. The nation, over a period of time, experiences cycles in business activity.a. In the graph template given in this question, draw and label the four phases of a business cycle.b. What are the two major economic consequences of business fluctuations in the nation’s economy?c. In the graph
16. Expansionary monetary policy would likelya. increase farmland prices.b. increase export demand for agricultural commodities.c. increase net farm income.d. all of the above.
15. Lowering the fractional reserve requirement ratio is an example ofa. contractionary fiscal policy.b. expansionary monetary policy.c. expansionary fiscal policy.d. none of the above.
14. By decreasing the discount rate, the Federal Reserve can increase the demand for money. T F
13. A fiduciary monetary system is based on the fact that each dollar of currency in the money supply may be redeemed for an equal amount of gold or silver at the request of the currency holder. T F
12. The money multiplier is equal to the of the fractional reserve requirement ratio.
11. The three major types of monetary policy instruments are , , and.
10. The rate of inflation in the economy will be highest in the range of the aggregate supply curve.
9. Automatic fiscal policy instruments includea. policy that requires specific policy actions.b. such instruments as actions to eliminate a recessionary or contractionary gap in the economy.c. instruments such as Congressional appropriations in the years when a drought or other natural disasters
8. Given the following demand and supply equation for a market, answer the following questions:MS = 1>rrm1TR2 MD = 45 - 1251i2 + 1.01Y2 MS K MD where i represents the rate of interest, Y represents national income, rrm represents the fractional reserve requirement ratio, and TR represents total
7. Complete the following table describing the short-run effects of specific macroeconomic policy actions with a “+” denoting an increase in the variable in each column heading and a “-” denoting a decrease (20 points; 1 point each). Policy Action Decreases in Federal income GDP Growth
6. Given the following figure, explain what type of inflation is taking place and the specific fiscal and monetary policies that may be used to combat this type of inflation if, during a period of years, the economy moves from AD1 to AD4. AD AD AD Aggregate Output
5. Review this graph and answer questions (a), (b), and (c).a. If the full-employment level of output is $6,000, is the economy in an inflationary or a recessionary gap? What specific fiscal policies could be used to correct this?b. If the full-employment level of output is $4,000, is the economy
4. Place a T or F in the blank appearing next to each statement.a. Only a small level of inflation occurs as the economy moves from AD1 to AD2.b. A tax cut represents one approach to reducing prices below P2.c. This graph depicts the effects of stagflation. Price Level AD AD Aggregate Output Yor AS

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