Different countries have different factor endowments eg climate, skilled labour force, and natural resources vary between nations. (Figure: Trade 2) Refer to the figure. Government spending and taxes have little effect on aggregate demand. Let's check on whether you are rationally ignorant. If Tyler and Alex are trading partners, do their gains from trade depend on whether Tyler and Alex live in the same country? If an increase in investment spending causes a shift of the AD curve from AD1 to AD4, then the government can avoid a short-run increase in inflation by: increasing taxes so that the AD curve shifts back to AD1. The Gains from Trade; Two-Way Trade; Restrictions on International Trade; Review and Practice; Chapter 18: The Economics of the Environment. Fiscal policy can BEST be defined as the use of: government expenditure, borrowing, and taxation to influence the business cycle. With a floating exchange rate, an increase in the U.S. interest rate will cause: capital to flow into the United States, an increase in the demand for dollars, and an appreciation of the dollar. A negative real shock causes the LRAS curve to: In order for fiscal policy to effectively offset a $1 million decrease in consumer spending, the government would MOST likely have to: increase spending by less than $1 million. Gain Attributes of International Trade: It further follows that when countries A and В enter into trade, both will gain. If the economy is in a recession, the most appropriate fiscal policy would be to: increase government spending and cut taxes, thus running a higher budget deficit. Higher standards of living are associated with. (Figure: Foreign Trade 2) Refer to the figure. Politicians have a strong incentive to support projects even when their costs outweigh their benefits if: the costs of the project are spread widely across taxpayers and the benefits are concentrated on a small group. An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a: The U.S. Congressional Budget Office has projected the debt-to-GDP ratio to increase dramatically in the future. Think back to the thriving trade in your elementary school cafeteria. What are the four major limits to fiscal policy? (Figure: International Trade 2) Refer to the figure. individual income tax, corporate income tax, and Social Security and Medicare taxes. Wages will become flexible and spending growth will recover to increase aggregate demand, moving the economy to point X. A decrease in consumption growth will cause aggregate demand to: The crowding out effect of fiscal policy refers to: the decrease in private spending as a result of higher government spending. (Figure: International Trade 2) Refer to the figure. When consumers save their tax cut for a future tax increase, they are adhering to: In the short run, a decrease in consumption growth will cause the inflation rate to: If $500,000 in new taxes is raised and spent on building a new school and $300,000 in private spending would have been spent anyway, how much is added to short-run aggregate demand? PLAY. Start studying ECON 202. Elhanan Helpman (1984), ‘A Simple Theory of International Trade with Multinational Corporations’, Journal of Political Economy, 92 (3), June, 451–71 102 8. Refer to the figure. up, and the benefit of the trade was the bag of grapes you would gain. This occurs in two ways. View CH20 Trade.pptx from ECON 202 at West Virginia University. International trade is similar to local trade because: both are based on the concept of comparative advantage. (Figure: Economic Freedom and Living Standards) Refer to the figure. Trade should cause countries to specialize more in production and to export goods distinctly di⁄erent from … U.S. government spending on Social Security, defense, Medicare, and Medicaid makes up approximately _____ of federal government spending. Which of the following four items is the biggest in terms of government expenditure? Today Amy makes 25%more than she did in pharmaceutical sales and enjoys her new job much more than her old job. How can the government address these concerns?I. 18.1 Maximizing the Net Benefits of Pollution; 18.2 Alternatives in Pollution Control; 18.3 Review and Practice; Chapter 19: Inequality, Poverty, and Discrimination. The first payment of Social Security benefits began in: Government spending as a percentage of GDP in the United States today is: one of the smallest among developed countries. Which of these is a form of fiscal policy? Why do studies show that food distribution is not better in economies with higher political competition? First introduced by David Ricardo in 1817, comparative advantage exists when a country has a ‘margin of superiority’ in the supply of a good or service i.e. **comparative advantage** | the ability to produce a good at a lower opportunity cost than another entity. Economics 181: International Trade The Heckscher-Ohlin Framework, Part II I. Recap from last class, distribution of gains and losses Recap: * Edgeworth Box diagrams: what happens when the endowment of one factor increases? James R. Markusen (1984), ‘Multinationals, Multi-Plant Economies, and the Gains from Trade’, Journal of International Economics, 16 (3–4), May, 205–26 123 9. Which of the following statements is FALSE? Why do countries trade? If A, B, and C are all candidates in the election, and a smoking ban is the only issue being debated, based on the median voter theorem which candidate will win the election? With respect to the sugar quota, the people who are harmed are _____ and the people who benefit are _____. Some nations prefer to produce one thing while others produce another *b. Maximizing the Net Benefits of Pollution; Alternatives in Pollution Control; Review and Practice; Chapter 19: Inequality, Poverty, and Discrimination. 3. To fight a recession, the federal government can: limits the increase in aggregate demand due to fiscal policy. As the government builds new schools, the construction workers and material vendors employed on the project spend more in the community where they live. Special interest groups stand to gain millions if particular laws are passed and lobby very hard for them; whereas voters stand to lose only a little and don't find opposing them worth their effort. According to public choice theory, a more democratic country: will have more policies that promote economic growth because it has a larger share of population that is brought into power. Glenda chooses to purchase a new CD at the store 1 mile from her home instead of driving all over town to see if she can find a lower price. Which of the following would be recorded as a credit in the U.S. current account? Econ-202: PPF and Gains from Trade Worksheet Name: ID: 1. A situation in which the value of a country's exports exceeds the value of its imports is called a(n): A capital surplus occurs when the value of a country's: inflow of foreign capital exceeds the outflow of its domestic capital. Table: Government SpendingVoterPreferred Level of Government SpendingAmy$0.5 trillion Bob1 trillion Cal2 trillion Dan3 trillion Eli4 trillion According to the median voter theorem and the data in this table, candidates will position their ideal level of spending at: (Figure: Smoking Ban Policy Spectrum) Refer to the figure. because domestic producers also consume at least some imported goods that cost less. C) the terms-of-trade gain exceeds the deadweight loss. British financial investments in the United States pay higher dividends. In technical terms, they are the increase of consumer surplus [1] plus producer surplus [2] from lower tariffs [3] or otherwise liberalizing trade . The labor theory of value *b. If the benefits of informing oneself are greater than the costs, then ignorance is. 31> B.1 Brownies on the vertical axis and Cookies on the horizontal axis. Gains from trade should be greatest between coun-tries with the greatest di⁄erences. gains from trade the extra production and consumption benefits that countries can achieve through INTERNATIONAL TRADE.Countries trade with one another basically for the same reasons as individuals, firms and regions engaged in the exchange of goods and services - to obtain the benefits of SPECIALIZATION.By exchanging some of its own products for those of other nations, a country can … Which of the following concepts best illustrates this scenario? Transactions included in the balance of payments are: foreign direct investment, exports, and imports. Which provides an automatic stabilizer when the economy is declining? For example, we could harmonize international taxes on corporations and boost enforcement across countries to address the problem of tax havens. Suppose the economy is initially at point A in the diagram. According to the text, popular surveys about government programs show evidence that the majority of American voters are: One reason for the good record of democracies on economic growth is that: the public as a whole can become rich by supporting efficient policies that generate economic growth. when AD is low compared with the long-run equilibrium position of the economy. the total tax payment divided by total income. Based on this chart, we can conclude that: there is a positive relationship between economic freedom and GNI per capita. Consumers are more likely to spend tax rebates that they believe are: is less significant when consumers deem tax cuts or rebates as permanent. Which statement is NOT a reason government spending sometimes increases growth? And now, let's appreciate the gains from trade that they would both have here. Se connecter S'inscrire; Masquer. The quota is imposed to protect both sugar consumers and producers. Voter decisions seem to depend greatly on: economic conditions in the year of an election. An analysis of the main issues in international finance. First, trade gives countries access to physical capital (technology, tools, and equipment) that they might not produce domestically. Which of the following would be recorded as a debit in the U.S. current account? Se connecter S'inscrire; Masquer. Which of the following would NOT prevent purchasing power parity from holding? 7. However the implications of traditional trade theory were found to be at odds with data. In spite of people's apprehension about trade, both imports and exports are at all-time highs (see the figure). Just before the 1972 election, ________ sent a letter to 24 million Social Security recipients informing them of increased payment benefits. P. 169. ii. If the U.S. government decides to decrease the budget deficit in the future, it could: raise taxes, decrease Social Security payments, or reduce health-care spending. expansionary fiscal policy can reduce real growth. Trade re-allocates jobs across industries. 3 Lecture Hours. Imposing a restrictive quota on the import of sugar will likely: increase the price of sugar and decrease the quantity consumed. The government spends more on foreign aid than: economic conditions tend to improve immediately before elections but then worsen afterwards. changes in government spending, tax rebates, and tax rate cuts. The ban was encouraged, in part, by the makers of the more expensive CFLs. Consumers used much of the rebate to pay off existing debt. The difference, or surplus amount, is the benefit the producer receives for selling the good in the market. The time necessary to determine that an economic problem exists is called the: When consumers spend all of their tax rebate checks, what takes place in the economy? Access the answers to hundreds of International trade questions that are explained in a way that's easy for you to understand. The societal cost of a draft was much higher than the paychecks of a volunteer army because of the significant opportunity cost of drafted soldiers. After a real shock, the economy is operating at point Y in the figure. Let's check on whether you are rationally ignorant. If you are a married man, you can expect: more in Social Security benefits than a single man. Voter 2 supports government spending of $60. When the two individuals have to exchange two things, the case is one of bilateral monopoly. Get help with your International trade homework. Sami Kurdi. Only countries with low wages will export b. Fiscal policy under the 2009 American Recovery and Reinvestment Act took the form of: a mix of government spending and tax cuts. This is an example of the: Under which circumstance should an economic advisor for a small economy recommend a large increase in government spending? No, the benefits of $600 are less than the costs of $2,000.  An appreciation of the Mexican peso would most likely be a result of: an increase of foreign investment in Mexico. Which transactions cause the U.S. capital account to increase? [ECON 202] International Trade. Chapter 17: International Trade. If there are approximately 100 million consumers in the chicken market each year, how much would each be willing to spend, on average, to contest the chicken tax? If a policy transfers $600 to the special interest at a cost of $100,000 to society, will the special interest group lobby for this policy? World, drug dealers keep their wealth in the United States budget get, at price! 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