International Trade and Economic Policies: A Comprehensive Quiz

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International Trade and Economic Policies: A Comprehensive Quiz Questions: 1. Stabilizing a nation’s price level and the purchasing power of its money can be achieved: A) only with fiscal policy. B) only with monetary policy. C) with both fiscal and monetary policy. D) with neither fiscal nor monetary policy. 2. Other things equal, an excessive increase in the money supply will : A) increase the purchasing power of each dollar. B) decrease the purchasing power of each dollar. C) have no impact on the purchasing power of the dollar. D) reduce the price level. 3. Which of the following is a tenet of supply - side economics? A) High marginal tax rates severely discourage work, saving, and investment. B) Increases in social security taxes and other business taxes shift the aggregate supply curve to the right. C) The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate. D) Transfer payments increase incentives to work. Gamma production possibilities: Sigma production possibilities: 4. On the basis of the above information: A) Gamma should export both tea and pots to Sigma. B) Sigma should export tea to Gamma and Gamma should export pots to Sigma. C) Gamma should export tea to Sigma and Sigma should export pots to Gamma. D) Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots. 5. Refer to the above data. What are the limits of the terms of trade between Gamma and Sigma? A) 1 tea = 2 pots to 1 tea = 6 pots B) 1 tea = 3 pots to 1 tea = 6 pots C) 1 tea = 2 pots to 1 tea = 3.5 pots D) 1 tea = 1 pot to 1 tea = 3 pots
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