Figure 16-1
In Figure 16-1, there are four levels of income. G is government expenditures and TT is taxes less transfers. Y3 is the full-employment level of income. At Y3
a.
there is an official deficit but a structural budget balance.
b.
there is a structural deficit but an official budget surplus.
c.
the official and structural deficit are in balance.
d.
both the official and structural budgets show a deficit.
c
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Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of
a. a U.S. import and a Canadian export b. a U.S. export and a Canadian import c. an export for both the U.S. and Canada d. an import for both Canada and the U.S.
If the Fed buys more bonds from the public, then the money supply will:
A. Decrease and the aggregate demand curve will shift to the right. B. Increase and the aggregate demand curve will shift to the right. C. Increase and the aggregate demand curve will shift to the left. D. Decrease and the aggregate demand curve will shift to the left.
Suppose labor productivity in France is such that one hour of labor is required to produce one gallon of wine while two hours of labor are required to produce one pound of cheese. Assuming the availability of one million labor hours, draw a constant-cost production-possibility curve for France with the quantity of cheese measured along the vertical axis and the quantity of wine on the horizontal axis. If the free-trade price of wine is two pounds of cheese per gallon, show where, with free trade, France will produce on its production-possibilities curve. Then, draw and use a trade line to illustrate how France can gain from free trade.
What will be an ideal response?
Which of the following statements is used to justify protectionism?
A) Free trade leads to higher prices for imported goods. B) Free trade increases employment by protecting domestic firms. C) A country should not rely on other countries for goods that are critical to its national defense. D) Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection.