TF Flashcards
A country has a comparative advantage over another only if it is able to produce all products more cheaply
False: if it is able to produce some products comparatively cheaper
David Ricardo first introduced the theory of comparative advantage
True
If a country is able to produce all products more cheaply than any other country, then there is no advantage in trade
false: it is comparative cost that determines the advantage to trade.
If a country wishes to specialize its production, it will also want to engage in trade.
true
The terms of trade relate to the laws and conditions that govern trade.
False: they relate to the comparative prices of exports and Imports
If the prices of a country’s exports decrease and the prices of imports increase, the the terms of trade will move in its favour
False: depends on the relative change in each
If a country’s trading possibilities curve lies to the right of it’s production possibilities curve, there are no gains from trade
False: it would be able tp obtain more by trading
Protectionism is the economic policy of protecting domestic producers by putting restrictions on exports
False: protectionism is aimed at imports
A tariff is a tax on exports; a quota is a tax on imports
False: a tariff is a tax on imports and a quota is a limit on imports
Domestic producers gain and domestic consumers lose as a result of the imposition of tariffs or quotas.
True
If the Panamanian balboa is worth $.20 Canadian, then $1 Canadian is worth 4 balboas
False: it is worth 5 balboas
The purchasing power parity theory suggests that exchange rates adjust so as to equate the purchasing power of each currency.
True
A major source of demand for the Canadian dollar in the international money markets is the desire of foreigners to buy Canadian exports
True
A resident in Canada receiving a British pension will have a demand for the British pound
False: A demand for Canadian dollars
An increase in Canadian interest rates will lead to an appreciation of the Canadian dollar
True
When the Canadian dollar depreciates, the effective price of Canadian exports increases and, as a result, total exports are likely to fall.
False: the effective price decreases and exports will increase
If the Canadian dollar appreciates, cross-border shopping by Canadians will increase
True
If Canada were on a fixed exchange-rate system, an increase in the demand for the Canadian dollar would result in the dollar being undervalued
True
A fixed exchange rate above the market value will lead to an outflow of foreign currencies
true
An increase in imports will have a negative effect on the current account balance
true
The most common way for government to fund expansionary fiscal policy is by borrowing from the general public
true
Monetary policy cannot be used effectively when a country had a fixed exchange rate
true
Expansionary fiscal policy may crowd out both private investment and export spending
True
Aggregate demand policies are effective in curing the problems of stagflation
false: stagflation can only be cured by changes in aggregate supply
The Phillips curve is based on the relationship between tax rates and the amount of tax revenue
False it is based on the relationship between unemployment and inflation rates
One of the major criticisms of the supply side emphasis not ax cuts as a way to stimulate the economy is that such cuts affect aggregate demand more than they do aggregate supply
true
The gaffer curve relates income levels with unemployment
false: it relates tax rates with tax revenyues
The rise of supply side economics is rooted in the stagflation of the 1970s
true
The Canadian dollar has not fallen below $0.8 US for over twenty years
false: it went as low as 64 cents during the 20 year period
Deflation means thats the rate of inflation is falling
false: it means that the average price level is falling
say’s law suggests that supply creates its own demand
true
according to neoclassical theory, the aggregate supply curve is horizontal at the prevailing price level
false,they felt it was vertical at the full-employment GDP level
according to neoclassical theory, an increase in the level of saving will cause the rate of interest to fall
true
according to keynesian theory, a change in aggregate demand might have a little or no effect on the price level
true
neoclassical economics believe that market economies can achieve full employment through self- adjustment
true
aggregate demand policies are effective in curing the problems of stagflation
false, they are ineffective in curing stagflation
the Phillips curve is based on the stable relationship between tax rates and the amount of tax revenue
false, it is based on the relationship between inflation and unemplyment
one of the major criticisms of the supply- side emphasis on using tax cuts to stimulate the economy is such cuts affect aggregate demand than aggregate supply
true
sub-prime mortgages and derivatives are associated with stagflation
false, they are associated with the financial crisis of 2008-10..
the external value of the Canadian dollar has been remarkably stable for several decades
false, it has varied considerably in the last twenty years
