Unit 5 Review SSENI 1,2,3

#1 Tariffs and quotas can be used to increase prices consumers pay for goods. protect domestic industry. reduce trade deficits.

#2 Revenue tariffs are levied to raise money. #5 A protective tariff is used to give inefficient domestic industries an advantage.

#3 The ______ is an international agency that administers trade agreements and settles trade disputes WTO

#4 A persistent trade deficit causes unemployment to increase in import industries.

#6 The North American Free Trade Agreement (NAFTA) proposed free trade between what countries. Also see 24, 44 and 50 on review sheet. United States Canada Mexico.

# 7 Under the fixed exchange rate, the value of a country's currency is determined by the amount of its gold reserves

# 8 A trade deficit in the United States causes the value of the dollar to fall in foreign exchange markets.

Use with questions 9, 10 and 11 on review sheet.

Use with questions 12, 13 and 15 on review sheet.

#14 Name an economic actor most likely to support free trade #14 Name an economic actor most likely to support free trade. Think multinational corporations such as… Nike, McDonalds, Coca- Cola

#19 The U.S will not allow cars into the country unless they meet certain specifications. What type of trade barrier is this? Standards #30 If an imported product has a tariff on it but it is still cheaper than the American product, which one do people usually buy? Imported product because it is cheaper

#18 and #20 When might a country devalue its currency If the country is running high trade deficits

#21 and # 28 ___________ and ___________ determine floating exchange rates. Supply & demand

#16 To say that net exports is negative means we have a _________ ___________ _____________. Current account deficit #22 What type of economic system is the BEST at providing incentives to produce? Market

# 26 and #45 Refusing to export your goods to another country. Embargo, Cuba, S. Africa

#23 Nations that deal with embargoes are forced to deal with ________ __________. Increased scarcity

Oil Steel Russia 8,000 200 Ukraine 80 160 See 25 on review sheet. Russia can make more oil and steel than Ukraine so it has an absolute advantage in both. Russia has a comparative advantage in oil because to make 1 steel they lose 40 oil. Ukraine has a comparative advantage in steel to make 2 steel, they lose only 1 oil.

#27 The U.S. charges 15 cents on every dollars worth of foreign made t- shirts entering the country. What is that called? tariff

#29 If we export more than we import, we are said to have a ____________ balance of trade. #43 and #47 If we import more we are said to have a ______ dollar Favorable Strong # 46 A reduction in the demand for US exports will usually result in a decrease in the international value of the US dollar. #38 If your dollar value goes down, you will __________ more goods Export

#31 Define or give an example- Fixed exchange rate One balboa will always equal One dollar.

#32 Comparative advantage equals a ________ opportunity cost. lower #42 Who opposes free trade? Protectionist that wants to protect American industry

#33 Country A can produce 10 apples or 3 oranges. Country B can produce 12 apples and 3 oranges. Which country has an absolute advantage? B

#34 New Industries Infant #17 What type of people oppose America practicing free trade? Those who support American jobs and industry.

#35 Price of our currency in terms of another country’s currency… Foreign exchange rate #41 What do we call a limit on a particular item from another country? quota

#36 What do you have if your imports exceed your exports? Trade deficit #37 A persistent trade imbalance tends to ____________ a country’s dollar. Reduce or devalue #39 Embargos lead to consumers facing ______________ prices. higher

Year Value of 1 euro per U.S. dollar Value of $1 U.S. per euro 2006 1.25 0.79 2007 1.42 0.70 #40 Which currency depreciated in value? dollar

#48 If the U.S. places a quota on Japanese products, then Japan will increase/ decrease trade barriers for American exports to japan? Increase #49 Two nations will not trade with each other if neither has a _____________ advantage producing products the other wants. comparative