1. If Congress put a quota on foreign video games, then
• more domestic jobs would be created and domestic producers would be more efficient.
• domestic standard of living would decrease and the price of video games would increase.
• foreign manufacturers would be more efficient and the price of video games would decrease.
• domestic manufacturers would be more efficient and the price of video games would decrease.
• domestic standard of living would increase and the price of video games would increase.
2. If Congress removes all tariffs on Chinese products in response to a new free trade agreement with China, then
• imports will decrease.
• aggregate supply will shift left.
• aggregate demand will shift left.
• resources will be used more efficiently.
• fewer Chinese goods and services will be sold.
3. If two nations who are each capable of producing consumer and capital goods agree to trade based on comparative advantage, then
• the two nations will become more independent of each other.
• employment will increase in one nation and decrease in the other.
• one nation will increase its efficiency while the other does not.
• the citizens of both nations will have a better standard of living.
• both nations will be less efficient in production of consumer and capital goods.
4. Assume a nation's economy is operating in equilibrium. If exports increase and imports decrease, how will output, employment, and price level likely change?
Output / Employment / Price Level
• Increase / Increase / Increase
• Increase / Increase / Decrease
• Increase / Decrease / Increase
• Decrease / Decrease / Increase
• Decrease / Decrease / Decrease
5. Problems with (or leakages from) the money creation process would include
• an increase in the reserve requirement.
• unwillingness of borrowers to obtain loans from banks to invest in factories or expansion of the firm.
• a decrease in the reserve requirement.
• an increase in the federal funds rate.
• a decrease in the federal funds rate.
6. Suppose the United States and Sweden sign a free trade agreement. If real interest rates increase in Sweden but not in the United States, which of the following will be true of Swedish capital flow, the value of the krona, and exports?
Capital Flow /Value of Krona / Exports
• Inflow / Appreciate/ Increase
• Inflow / Appreciate / Decrease
• Inflow / Depreciate / Increase
• Outflow / Appreciate / Decrease
• Outflow / Depreciate / Increase