(Figure: Effects of Policy Shifts) If government spending increases, shifting aggregate demand from _____ to _____, aggregate output will increase from _____ to _____.

a. AD₁; AD₀;Q_f;Q₀

b. AD₁; AD₀;Q₀;Q_f

c. AD₀; AD₁;Q₀;Q_f

d. AD₀; AD₁;Q_f;Q₀

If the Fed pursues an expansionary monetary policy:

a. the dollar will rise.

b. U.S. imports from other countries will rise.

c. U.S. exports to other countries will rise.

d. aggregate supply will increase.

Which of the following statements concerning the infant industry argument is NOT correct?

a. The management and workers in an infant industry may be too inexperienced to compete in world markets.

b. Infant industry protection tends to focus on labor-intensive industries.

c. Infant industry protection is difficult to remove after the industry has matured.

d. An infant industry is too underdeveloped to achieve comparative advantage.

Increased trade:

a. deprives poor countries of the funds needed for investment.

b. reduces jobs in all industries that have comparative advantage.

c. always leads to environmental degradation in the long run.

d. tends to raise living standards in the countries to which jobs migrate.

Suppose that the United States and Italy are considering trade in two products: grain and oranges. Suppose that before trade, the United States produces 800 million bushels of grain and 200 million bushels of oranges. At the same time, Italy produces 200 million bushels of grain and 100 million bushels of oranges. Which of the following statements regarding absolute advantage is TRUE?

a. The United States has an absolute advantage in producing both grain and oranges.

b. Italy has an absolute advantage in producing both grain and oranges.

c. The United States has an absolute advantage in producing grain only.

d. Italy has an absolute advantage in producing oranges only.

Which of the following items is NOTa component of the balance of payments accounts?

a. commercial account

b. capital account

c. current account

d. financial account

Productovia, which had exports of $50 billion and imports of $40 billion, had a trade:

a. deficit of $40 billion.

b. deficit of $10 billion.

c. surplus of $10 billion.

d. The trade deficit or surplus cannot be calculated from the information provided

If there is excess demand for a currency, the currency will:

a. appreciate.

b. depreciate.

c. remain constant.

d. move to the gold standard.

Last year when Laura attended a business conference in Berlin, the exchange rate was 0.7 euro for US$1. This year she plans to attend that conference and the exchange rate is 0.8 euro for US$1. Laura estimates that her lodging and meals will be _____ expensive than last year.

a. 13% more

b. 13% less

c. 87% more

d. 87% less

In recent years, China has helped make its currency ____ by ____ U.S. dollars.

a. stronger; buying

b. stronger; selling

c. weaker; buying

d. weaker; selling