Worksheet nline Homework System 11/30/17 9:48:33 AM MST Name: ____________________________ Class: CR- ECON 1103-006 - F17: 40849.201704 Class #: ____________________________ Section #: ____________________________ Assignment: CR -ECON 1103-Assignment 3 -F17 Instructor: Judith Street Question 1: (1 point) The longrun aggregate supply (LRAS) corresponds to the supply curve envisioned by classical economists. (a) True (b) False Question 2: (1 point) Comparative advantage can result from different climates, natural resource endowments, and capital stocks in various countries. (a) True (b) False Question 3: (1 point) Tariffs and import quotas meant to increase domestic employment also eliminate domestic jobs in export industries. (a) True (b) False Question 4: (1 point) The "mostfavourednation" clause means that any tariff reductions Canada negotiates with a specific nation will automatically apply to many other nations. (a) True (b) False Question 5: (1 point) The principle of comparative advantage is that total output will be greatest when each good is produced by that nation which has the lowest domestic opportunity cost. (a) True (b) False Question 6: (1 point) GATT was an international organization designed to provide shortterm advances of foreign monies to those nations faced with trade deficits. (a) True (b) False Question 7: (1 point) Use the following to answer this question: Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are, 60X and 40Y. Refer to the above information. Alpha would prefer terms of trade at, or close to, 1X = 2/3 Y. (a) True (b) False Question 8: (1 point) International trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources. (a) True (b) False Question 9: (1 point) Use the following to answer this question: 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. Merchandise exports Merchandise imports Service exports Service imports Net investment income Net transfers Capital inflow Capital outflow Official international reserves $+15 -17 +5 -2 -5 +4 +5 -11 +1 Refer to the above data. In 2008 Transylvania was a net recipient of transfers from the rest of the world. (a) True (b) False Question 10: (1 point) The sum of a nation's current account balance and its capital account balance in any year is always equal to zero. (a) True (b) False Question 11: (1 point) Use the following to answer this question: 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. Merchandise exports Merchandise imports Service exports Service imports Net investment income Net transfers Capital inflow Capital outflow Official international reserves $+15 -17 +5 -2 -5 +4 +5 -11 +1 Refer to the above data. In 2008 Transylvania realized a $1 billion surplus on goods and services. (a) True (b) False Question 12: (1 point) Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall. (a) True (b) False Question 13: (1 point) Use the following to answer this question: 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. Merchandise exports Merchandise imports Service exports Service imports Net investment income Net transfers Capital inflow Capital outflow Official international reserves $+15 -17 +5 -2 -5 +4 +5 -11 +1 Refer to the above data. In 2008 Transylvania had a $2 billion balance of trade surplus. (a) True (b) False Question 14: (1 point) Canadian exports increase and Canadian imports decrease the supplies of foreign monies owned by Canadian banks. (a) True (b) False Question 15: (1 point) If the dollar depreciates, Canadian exports will eventually rise and Canadian imports will eventually fall. (a) True (b) False Question 16: (1 point) Fill in the blanks: The two phrases/words that can be expressed in terms of each other are? ____________________________________________ Question 17: (4 points) The next table shows PPP exchange rates (the price of 1 U.S. dollar in units of the foreign currency) for several countries, determined based on the Big Mac Index. According to this data, what are the predicted exchange rates between the following countries? PPP exchange rate (1US dollar) United States (US) --- Argentina (Peso) 3.45 Australia (Aus dollar) 1.3 Brazil (Real) 3.25 Britain () 0.84 Canada (Cn dollar) 1.05 Chile (Peso) 455 China (Yuan) 3.65 a. Argentina and Australia ____________ b. Brazil and Canada ____________ c. Chile and China ____________ d. China and Canada ____________ Question 18: (1 point) From the list below, choose the answer(s) that best describes what would occur in the following AD (aggregate demand) AS (aggregate supply)"situation(s). The domestic price level rises causing Canadian goods to become relatively more expensive, leading Canadians to increase their purchases of foreign goods. (a) Move to the right (up) along the AS curve (b) Shift to the left of the AS curve (c) Move to the right (down) along the AD curve (d) Shift to the right of the AS curve (e) Move to the left (up) along the AD curve (f) Shift to the left of the AD curve (g) Move to the left (down) along the AS curve (h) Shift to the right of the AD curve Question 19: (1 point) From the list below, choose the answer(s) that best describes what would occur in the following AD (aggregate demand) AS (aggregate supply)"situation(s). An depreciation of the Canadian dollar leads to a rise in net exports. (a) Shift to the right of the AS curve (b) Shift to the left of the AS curve (c) Shift to the right of the AD curve (d) Move to the right (up) along the AS curve (e) Move to the left (up) along the AD curve (f) Move to the left (down) along the AS curve (g) Move to the right (down) along the AD curve (h) Shift to the left of the AD curve Question 20: (1 point) Fill in the blanks: Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following events cause pressure on the Canadian dollar to Appreciate or Depreciate? Many Canadians plan to vacation in Florida for the winter ____________ Question 21: (1 point) Fill in the blanks: Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following events cause pressure on the Canadian dollar to Appreciate or Depreciate? Canadians are crossing the border to purchase their new cars in the United States ____________ Question 22: (1 point) Fill in the blanks: Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following events cause pressure on the Canadian dollar to Appreciate or Depreciate? A rise in the American rate of interest to a level substantially higher than that in Canada ____________ Question 23: (1 point) Fill in the blanks: Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following events cause pressure on the Canadian dollar to Appreciate or Depreciate? Americans are spending their summer vacations on Canada's east coast. ____________ Question 24: (5 points) The following table shows how much wine and cloth can be produced in Canada and in Portugal with the same amount of resource input. ( Ensure you put only the numbers, not the words 'cloth' and 'wine' when entering your answer) Canada Wine (barrels) 10 Cloth (meters) 20 Portugal 60 79.8 1. The opportunity cost of 1 barrel of wine in Canada is? ____________ 2. The opportunity cost of 1 barrel of wine in Portugal is?____________ 3. Portugal will export wine to Canada, if 1 barrel of wine can be traded for more than how many meter(s) of cloth?____________ 4. Canada will import wine from Portugal provided that 1 meter of cloth trades for more than how many barrel(s) of wine?____________ 5. If the international rate of exchange is 1 wine = 1.6 cloth can the two countries trade with each other? (Enter 1 or 2: 1 = yes or 2 = no) ____________ Question 25: (10 points) Given the data in the graph below, answer the following questions. 6 5 12 14 Part 1. The opportunity cost for 1 unit of wheat in nation Y is ____________ Part 2. The opportunity cost for 1 unit of Steel in nation Y is ____________ Part 3. The opportunity cost for 1 unit of wheat in nation X is____________ Part 4. The opportunity cost for 1 unit of Steel in nation X is ____________ For the following questions use the numeric answer key below (Answer 1, 2 or 3): 1 = Country X 2 = Country Y 3 = Neither Country Part 5. Which Nation has an absolute advantage in production of Steel ____________ Part 6. Which Nation has an absolute advantage in production of Wheat ____________ Part 7. Which Nation has a comparative advantage in production of Steel ____________ Part 8. Which Nation has a comparative advantage in production of Wheat ____________ Part 9. Which Nation should specialize in the production of steel____________ Part 10. Which Nation should specialize in the production of Wheat____________ Question 26: (7 points) The table below contains hypothetical international balance of payments data for Canada. All figures are in billions. Compute with the appropriate sign (+ or -) and enter in the table the eight missing items. What is the condition of the balance of payments in Canada? Current account (1) Canada goods exports 300 (2) Canada goods imports 190 (3) Balance of trade ____________ (4) Canada exports of services 145 (5) Canada imports of services 310 (6) Balance on services ____________ (7) Balance on goods and services ____________ (8) Net investment income (9) Net transfers (10) Balance on current account Capital account 32 10 ____________ (11) Foreign purchases of assets in Canada 205 (12) Canada purchases of assets abroad 58 (13) Balance on capital account ____________ (14) Current and capital account balance ____________ Official settlements account (15) Official reserves (16) Balance of payments ____________ 0