63. Refer to Figure 32-5. Starting from 3% and .75, an increase in the government budget surplus
can be illustrated as a move to
a. 4% and 1
b. 4% and .5
c. 2% and 1
d. 2% and .5
64. A trade policy is a government policy
a. directed toward the goal of improving the tradeoff between equity and efficiency.
b. that directly influences the quantity of goods and services that a country imports or exports.
c. intended to exploit the tradeoff between inflation and unemployment by altering the budget
deficit.
d. concerning employment laws.
65. A tax on imported goods is called a(n)
a. excise tax.
b. tariff.
c. import quota.
d. None of the above is correct.
66. A limit on the quantity of a good produced abroad that can be purchased domestically is called
a(n)
a. tariff.
b. excise tax.
c. import quota.
d. None of the above is correct.
67. If the U.S. were to impose import quotas
a. the demand for loanable funds and the demand for dollars in the market for foreign-currency
exchange would both increase.
b. nether the demand for loanable funds nor the demand for dollars in the market for foreign-
currency exchange would increase.
c. the demand for loanable funds would increase, but the demand for dollars in the market for
foreign-currency exchange would not.
d. the demand for dollars in the market for foreign-currency exchange would increase, but the
demand for loanable funds would not.
68. The imposition of an import quota shifts
a. the supply of currency right, so the exchange rate falls.
b. the supply of currency left, so the exchange rate rises.
c. the demand for currency right, so the exchange rate rises.
d. the demand for currency left, so the exchange rate falls.
69. If the U.S. imposes an import quota on clothing, then the
a. supply of dollars in the market for foreign-currency exchange shifts right.
b. supply of dollars in the market for foreign-currency exchange shifts left.
c. demand for dollars in the market for foreign-currency exchange shifts right.
d. demand for dollars in the market for foreign-currency exchange shifts left.
70. A U.S.-imposed quota on automobiles would shift
a. both the demand and supply curves in the market for foreign-currency exchange right.
b. both the demand and supply curves in the market for foreign-currency exchange right.
c. only the demand curve in the market for foreign-currency exchange right.
d. only the supply curve in the market for foreign-currency exchange right.
71. At the original exchange rate an import quota
a. creates a surplus in the market for foreign-currency exchange, so the exchange rate rises.
b. creates a surplus in the market for foreign-currency exchange, so the exchange rate falls.
c. creates a shortage in the market for foreign-currency exchange, so the exchange rate rises.
d. creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.
72. If the U.S. raised its tariff on tires, then at the original exchange rate there would be a
a. surplus in the market for foreign-currency exchange, so the real exchange rate would
appreciate.
b. surplus in the market for foreign-currency exchange, so the real exchange rate would
depreciate.
c. shortage in the market for foreign-currency exchange, so the real exchange rate would
appreciate.
d. shortage in the market for foreign-currency exchange, so the real exchange rate would
depreciate.
73. Suppose that the United States imposes an import quota on televisions. In the open-economy
macroeconomic model this quota shifts the
a. U.S. supply of loanable funds left.
b. U.S. demand for loanable funds left.
c. demand for U.S. dollars in the market for foreign-currency exchange right.
d. supply of U.S. dollars in the market for foreign-currency exchange left.
74. Which of the following is the correct way to show the effects of a newly imposed import quota?
a. shift the demand for loanable funds left, the supply of dollars in the market for foreign–
currency exchange left, and the demand for dollars in the market for foreign-currency exchange
right
b. shift the demand for loanable funds left, the supply of dollars in the market for foreign-
currency exchange right, and the demand for dollars in the market for foreign-currency
exchange left
c. shift the demand for dollars in the market for foreign-currency exchange to the right
d. shift the supply of dollars in the market for foreign-currency exchange to the left
75. Trade policies
a. alter the trade balance because they alter imports of the country that implemented them.
b. alter the trade balance because they alter net capital outflow of the country that implemented
them.
c. do not alter the trade balance because they cannot alter the national saving or domestic
investment of the country that implements them.
d. do not alter the trade balance because they cannot alter the real exchange rate of the currency
of the country that implements them.
76. When a country imposes an import quota, its
a. imports fall and its net exports rise.
b. imports fall and its net exports are unchanged.
c. imports rise and its net exports are unchanged.
d. imports and exports are unchanged.
77. Which of the following decrease if the U.S. imposes an import quota on computer components?
a. U.S. exports and U.S. imports
b. U.S. exports but not U.S. imports
c. U.S. imports but not U.S. exports
d. neither U.S. exports nor U.S. imports
78. Which of the following decreases if the U.S. removes an import quota on computer components?
a. U.S. imports and U.S. exports.
b. U.S. imports but not U.S. exports.
c. U.S. exports but not U.S. imports.
d. Neither U.S. exports nor U.S. imports.
79. Which of the following results if the U.S. imposes an import quota on computer components?
a. U.S. exports and U.S. imports both increase
b. U.S. exports increase but U.S. imports are unchanged
c. U.S. imports increase but U.S. exports are unchanged
d. None of the above is correct.
80. Which of the following results if the U.S. removes an import quota on computer components?
a. U.S. exports and U.S. imports both increase
b. U.S. exports increase but U.S. imports are unchanged
c. U.S. imports increase but U.S. exports are unchanged
d. None of the above are correct
81. If a tariff on beef were implemented, which of the following would rise?
a. exports and net exports
b. exports but not net exports
c. net exports but not exports
d. neither exports nor net exports
82. If the U.S. government imposed quotas on imports of clothing, then U.S.
a. imports and exports would both fall.
b. imports would fall and exports would rise.
c. imports would rise and exports would fall.
d. None of the above is correct.
83. If the U.S. imposed an import quota on corn, then in the U.S.
a. exports and imports would rise.
b. exports and imports would fall.
c. exports would rise and imports would fall.
d. exports would fall and imports would rise.
84. If a country removed an import quota on cotton, then overall that country’s
a. exports and imports would rise.
b. exports would rise and imports would fall.
c. exports would fall and imports would rise.
d. exports and imports would fall.
85. If the United States imposes an import quota on clothing, then U.S. exports
a. increase, U.S. imports increase, and U.S. net exports will not change.
b. increase, U.S. imports decrease, and U.S. net exports increase.
c. decrease, U.S. imports increase, and U.S. net exports decrease.
d. decrease, U.S. imports decrease, and U.S. net exports will not change.
86. When a country imposes an import quota, its
a. net exports rise and its real exchange rate appreciates.
b. net exports rise and its real exchange rate depreciates.
c. net exports fall and its real exchange rate depreciates
d. None of the above is correct.
87. When a country imposes an import quota, its exchange rate
a. rises because the supply of dollars in the market for foreign-currency exchange falls.
b. falls because the supply of dollars in the market for foreign-currency exchange rises.
c. rises because the demand for dollars in the market for foreign-currency exchange rises.
d. falls because the demand for dollars in the market for foreign-currency exchange falls.
88. If a country places tariffs on imported goods, then
a. its currency appreciates which reduces exports.
b. its currency appreciates which increases exports.
c. its currency depreciates which reduces exports.
d. its currency depreciates which increases exports.
89. Imposing an import quota causes the domestic real exchange rate to
a. appreciate, which increases foreign demand for domestic goods.
b. appreciate, which decreases foreign demand for domestic goods.
c. depreciate, which increases foreign demand for domestic goods.
d. depreciate, which decreases foreign demand for domestic goods.
90. In 2002, the United States imposed restrictions on the importation of steel into the United States.
The open- economy macroeconomic model shows that such a policy would
a. lower the real exchange rate and increase net exports.
b. lower the real exchange rate and have no effect on net exports.
c. raise the real exchange rate and decrease net exports.
d. raise the real exchange rate and have no effect on net exports.
91. If the U.S. imposed import quotas on cotton, then which of the following would rise?
a. the U.S. real exchange rate and U.S. net exports
b. the U.S. real exchange rate but not U.S. net exports
c. U.S. net exports but not the U.S. real exchange rate
d. neither the U.S. real exchange rate nor U.S. net exports
92. Suppose the U.S. removes an import quota on steel. U.S. exports
a. increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow
increases.
b. increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is
unchanged.
c. decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is
unchanged.
d. decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow
decreases.
93. Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange
rate of the U.S. dollar
a. appreciate but does not change the real interest rate in the United States.
b. appreciate and the real interest rate in the United States increase.
c. depreciate and the real interest rate in the United States decrease.
d. depreciate but does not change the real interest rate in the United States.
94. If the U.S. government imposes a quota on imports of jet planes, then
a. net capital outflow rises.
b. net exports rise.
c. the exchange rate rises.
d. All of the above are correct.
95. If the U.S. government imposes a quota on leather shoes, then net exports of U.S. shoes would
a. rise.
b. not change.
c. fall.
d. rise, not change, or fall depending on what happened to the exchange rate.
96. According to the open-economy macroeconomic model, import quotas increase which of the
following
a. net exports and net capital outflow
b. net exports but not net capital outflow.
c. net capital outflow but not net exports.
d. neither net exports nor net capital outflow.
97. Trade policies
a. affect a country’s overall trade balance, but affect all firms and industries the same.
b. affect a country’s overall trade balance, but affect some firms or industries differently than
others.
c. do not affect a country’s overall trade balance, but affect some firms or industries differently
than others.
d. do not affect either a country‘s overall trade balance or specific firms or industries.
98. Which of the following is the most accurate statement?
a. Trade policy has neither microeconomic nor macroeconomic effects.
b. Trade policy has similar microeconomic and macroeconomic effects.
c. The effects of trade policy are more macroeconomic than microeconomic.
d. The effects of trade policy are more microeconomic than macroeconomic.
99. If the U.S. imposed an import quota on furniture, U.S. net exports of furniture
a. and net exports of other U.S. goods and services would rise.
b. would rise but net exports of other goods and services would fall.
c. would fall but net exports of other goods and services would rise.
d. and net exports of other U.S. goods and services would fall.
100. A country produces two goods, soda and chips. It currently exports soda and imports chips. If it
were to impose a tariff on chips,
a. both imports of chips and exports of sodas would rise.
b. imports of chips would rise, but exports of sodas would fall.
c. imports of chips would fall, but exports of sodas would rise.
d. both imports of chips and exports of sodas would fall.
101. In 2002, the United States placed higher tariffs on imports of steel. According to the open-
economy macroeconomic model this policy should have
a. reduced imports into the United States and made U.S. net exports rise.
b. reduced imports into the United States and made the net supply of dollars in the foreign
exchange market shift right.
c. reduced imports of steel into the United States, but reduced U.S. exports of other goods by an
equal amount.
d. reduced imports of steel into the United States and increased U.S. exports of other goods by
an equal amount.
102. If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery
equipment producers would
a. rise and the exports of other U.S. industries would rise.
b. rise and the exports of other U.S. industries would fall.
c. fall and the exports of other U.S. industries would rise.
d. fall and the exports of other U.S. industries would fall.
103. Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would
a. rise and exports of other industries would increase.
b. rise and exports of other industries would decrease.
c. not change, exports of other industries would increase.
d. not change, exports of other industries would decrease.
104. If the U.S. imposes a quota on cotton, then
a. both exports and imports of other goods will rise.
b. exports of other goods will rise and imports of other goods will fall.
c. exports of other goods will fall and imports of other goods will rise.
d. both imports and exports of other goods will fall.
105. In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?
a. U.S. net exports rise
b. the exchange rate falls
c. U.S. production of power tools rises
d. All of the above are correct.
106. If the U.S. government imposes an import quota on beef, U.S. net exports will
a. increase, the real exchange rate of the dollar will appreciate, and domestic sales of U.S. beef
will increase.
b. increase, the real exchange rate of the dollar will depreciate, and domestic sales of U.S. beef
will not change
c. not change, the real exchange rate of the dollar will appreciate, and domestic sales of U.S.
beef will increase.
d. not change, the real exchange rate of the dollar will depreciate, and domestic sales of U.S.
beef will not change.
Figure 32–6
Refer to this diagram of the open-economy macroeconomic model to answer the questions
below.
107. Refer to Figure 32-6. Which of the following shifts show the effects of an import quota?
a. shifting the middle supply curve in panel c to the one to its left.
b. shifting the demand curve from the right to the left in panel c.
c. shifting the demand curve from the left to the right in panel c.
d. None of the above is correct.
108. Refer to Figure 32-6. If the interest rate were initially at r2 and an import quota were
imposed, the interest rate would
a. stay at r2.
b. decrease because supply would shift right.
c. increase because supply would shift left.
d. decrease because demand would shift left.
109. Refer to Figure 32-6. If the economy were initially in equilibrium at r1 and e3 and the
government removes import quotas, the exchange rate moves to
a. e5
b. e4
c. e2
d. e1
110. Refer to Figure 32-6. If equilibrium were at point j and the government imposed import quotas
the equilibrium moves to
a. g
b. h
c. i
d. None of the above is correct.
111. Refer to Figure 32-6. If the economy were originally in equilibrium at a and g and the
government removed import quotas on autos the economy would move to
a. b and k.
b. c and j.
c. d and i.
d. None of the above is correct.