1143 Questions & Blanks Flashcards
International trade has ________ since it began
increased
International trade decreased during the Great Depression because of _______
decreased income and increased trade restrictions
The value of a nation’s exports in generally _____
about the same as the value of its imports
A nation that can produce a good at a lower cost than another nation has an _______ in the _____ of that good
absolute advantage
production
________ advantage is more common than __________
Comparative
absolute
All nations benefit if each produces and exports goods in which it has the ___________ and imports goods in which it has the _________
greatest relative efficiency
least relative efficiency
If one nation has a comparative advantage in producing one good,
the other nation must have a comparative advantage in the other good
When there is more competition,
citizens receive the gains
Nations with the __________ realize more gains
greatest economies of scale
________ nations tend to receive a larger percentage of the gains.
smaller
When trade occurs between a large and a small nation, the ___________ receives more benefit from the trade because
smaller
trade provides more opportunities and therefore more relative gains for that nation
Almost no nation allows completely ______
free trade
Tariffs usually result in a _______ for both domestic and imported goods.
price increase
A _____ forces producers to become more efficient
tariff
Most economists prefer
free trade
Restrictions protect infant:
foreign industries
Restrictions protect ________ workers
domestic
Restrictions protect national
security
Restrictions provide increased ________
government revenue
Free trade ________ total output
increases
Free trade encourages
international competition
Free trade benefits ____
everyone
Free trade encourages peace.
.
Trade restrictions are seldom ______
beneficial
Since 1976 the United States has been running a ________, and today it has a larger ___________ than any other nation
trade deficit
national debt
The factors determining whether a nation runs a trade surplus or deficit are ____
its competitiveness and the relative state of its economy
An increase in the trade deficit reduces the __________
income of an average worker
Domestic production _________ during a trade deficit
decreases
Free trade allows
more people to enjoy economic freedom and prosperity
the laws of supply and demand to control the international market
businesses and nations to produce competitive and profitable goods
all consumers to benefit from high-quality, low-priced goods
Although free trade is preferable, governments impose trade restrictions because __________ such as low inflation, high growth, and low unemployment are important to them
domestic interests
International finance is more complicated than domestic finance because ______
it involves the exchange of one currency for another
The price of everything in an economy is dependent on the ___________.
value of its currency
The value of a nation’s currency and its _____ affect other nations
monetary and fiscal policies
Because a nation’s monetary and fiscal policies influence ___________, income, and price levels, they ultimately affect _______.
interest rates
exchange rates
Any increase in ____ or in _____ decreases the value of a nation’s currency
price
income
Payments coming into a nation are
credits
Payments going out of a nation are
debits
On a balance of payments account, incoming payments are indicated by a + and outgoing payments are indicated by a -
.
The combined value of all transactions listed on a balance of payments account _____
must equal zero
The three major categories of a balance of payments are __________, ____________, and the _____________
capital account
current account
official transactions account
No ____________ has the power to set economic policies by taxation, redistribution of income, imposition of regulations, or enforcement of property rights.
international organization
Adherence to international economic policies is purely _______
voluntary
Money is a highly ______ that makes the economy function smoothly
liquid financial asset
Three functions of money
medium of exchange
measure of value
store of wealth
For money to function in a modern economy,
all people must believe that all other people will accept it in exchange for other goods
To prevent fluctuations in the money supply, the money _________ must control the supply.
issuer
The ____________ issues money in the U.S.
Federal Reserve Bank
Any measurement of money is meaningful because it conveys a ____________
relative price
Banks __________ by using deposited funds as the basis for additional deposits in the form of loans
create money
The economic problems that may result from the creation of money by banks include
an increase in prices and a decrease in the value of money
a financial panic when depositors all demand their money at once
bank failures
Included as disadvantages to government insurance of deposits are the facts that ______
they are very expensive
they remove an effective restraint on bank lending policies
Fannie Mae and Ginnie Mae are government-organized companies that ___________ from banks
sell bonds and purchase mortgages
The Bible teaches that we are to lay up treasures in _______ rather than accumulate _________
Heaven
earthly wealth
the ___________ guarantees bank deposits through the FDIC and various bonds
government of the US
A ____ asset offers a higher rate of return but it less liquid and takes more than one year to mature
capital market
a loan secured by real estate
mortgage
FDIC
Federal Depository Insurance Corporation
EMU
European Monetary Union
An S&L is a ___________
savings and loan institution
sale to a third party to avoid trade restrictions
transshipment
Arguments in favor of trade restrictions
protection of domestic industries and workers
protection of national security
increased revenue
