Question : 21) If a country exporting more goods and services than : 1384528

21) If a country is exporting more goods and services than it is importing, we should consider this to be “beneficial” only in the sense that it

A) allows a country to add to its foreign-exchange reserves above the level needed to cope with fluctuations in private payments.

B) represents an accumulation of assets for the domestic economy that can be used in the future to finance consumption.

C) increases the standard of living through a larger national income.

D) is a necessary condition to enable a country to take full advantage of scale economies.

E) means that an economy is earning more than it is spending.

22) If all countries try to expand their exports and restrict their imports through the use of export subsidies and import tariffs, the net effect will probably be

A) a fall in the volume of trade and an increase in the standard of living in each country.

B) a fall in the volume of trade and a decline in the average living standards in each country.

C) an increase in the volume of trade but little change in unemployment levels.

D) no change in the volume of trade but an increase in the overall unemployment rates.

E) no change in the volume of trade but less unemployment.

23) It is not possible for one country to sell all products more cheaply than other countries for any length of time because the

A) importing countries will react by constructing severe trade barriers.

B) exporting country will find its cost of production decreasing relative to the importing country.

C) depreciation of the importing countries’ currencies ensures that trade will flow in both directions.

D) depreciation of the exporting country’s currency will lead to trade in both directions.

E) the principle of absolute advantage would then be violated.

24) Consider the following statement: “Canada is unambiguously better off if it is exporting more, in dollar value, to the rest of the world than it is importing.” This statement is ________ because ________.

A) correct; exports are good and imports are bad

B) correct; it is based on the mercantilist doctrine

C) incorrect; it fails to recognize that the gains from trade come from the volume rather than the balance of trade

D) incorrect; it does not recognize the operation of the foreign-exchange market

E) incorrect; imports improve Canada’s terms of trade

25) Consider the following statement: “Canadians on average are worse off when some manufacturing jobs migrate from Canada to low-wage countries in Central America.” This statement is ________ because ________.

A) correct; the loss of manufacturing jobs leads to permanent income losses in Canada

B) correct; Canadian firms cannot compete with production in low-wage countries

C) incorrect; the permanent gains to consumers from lower prices outweigh the temporary losses to the displaced manufacturing workers

D) incorrect; low-wage countries do not produce manufactured goods

E) incorrect; there are no Canadians made worse off by such an event

26) Consider the following statement: “With unemployment at its highest level in years, Canada needs to protect domestic jobs by promoting a “Buy Canadian” policy.” This statement is ________ because ________.

A) incorrect; it confuses the real and nominal gains from trade

B) incorrect; it fails to recognize that imports of foreign goods also help to encourage the export of domestic goods

C) correct; it recognizes that such a policy can sustain high levels of domestic employment

D) correct; a “Buy Canadian” policy will take advantage of Canada’s comparative advantage

E) incorrect; it will work against Canada’s pattern of absolute advantage

27) Consider the following statement: “Without a doubt, free trade improves the lives of every Canadian citizen.” This statement is ________ because ________.

A) correct; it is consistent with the idea of comparative advantage

B) correct; because Canada has long been a successful trading nation

C) incorrect; it fails to recognize that the movement to free trade involves both winners and losers

D) incorrect; we do not know much about the benefits of free trade

E) correct; there are no net costs associated with the movement to free trade

28) What is a tariff?

A) an encouragement to worldwide specialization and division of labour

B) a quota imposed on imported goods

C) a tax imposed on domestically produced manufactured goods

D) a tax imposed on exported goods

E) a tax imposed on imported goods

29) The effect of the imposition of a new tariff is to ________ domestic production of the commodity and ________ the domestic consumption of the commodity.

A) decrease; increase

B) leave unaffected; decrease

C) decrease; decrease

D) increase; increase

E) increase; decrease

30) For most products, Canada is a small economy with no market power in the global market. If Canada imposed a tariff on imported goods from a low-wage foreign country, this would

A) reduce the price of the imported good in Canada.

B) reduce the advantages of specialization and trade.

C) increase the income of the foreign producer.

D) equalize the costs of production between the two countries.

E) increase national income in the low-wage country.