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University of California - Irvine
Stergios Skaperdas

IS and Econ 13 - Sample Second Midterm d. They both choose trade protection. questions e. Either a or b should occur. Winter 2014 (Correct answers are starred “*”) Please note that these are just sample questions 5. It would be in the U.S.’s interest to that indicate the types of questions that you can a. pursue free trade regardless of what expect, not the questions that you will be asked China does. in the exam. b. pursue trade protection regardless of what China does.* 1. An example of a government transfer is a(n) c. pursue free trade only if China were to a. bequest from a deceased relative. b. subsidy to corn producers.* pursue free trade. d. pursue trade protection only if China c. tax on inheritance. were to pursue trade protection. d. salary for members of the armed forces. e. pursue either free trade or protection, e. expenditure on an interstate highway. depending on the level of sunspots. 2. Restrictions on international trade 6. It would be in China’s interest to a. have increased since WWII. a. pursue free trade regardless of what the b. include subsidies to exported goods.* c. were uncommon before WWII. U.S. does. b. pursue trade protection regardless of d. a and b. what the U.S. does.* e. All of the above. c. pursue free trade only if the U.S. were to pursue free trade. 3. The following are factors that help explain d. pursue trade protection only if the U.S. trade protection EXCEPT: were to pursue trade protection. a. The availability of new goods.* b. Strategic trade policy. e. pursue either free trade or protection, depending on the level of sunspots. b. The security externality of trade. c. The infant industry argument. d. Interest-group politics. 7. Then, if the U.S. and China were to choose their policies independently of one another so as to maximize their own growth, we would expect Suppose each of two countries, say China and a. China to choose free trade and the U.S. the U.S., can either pursue free trade or engage in trade protection. If both countries were to to choose trade protection. b. China to choose trade protection and the engage in free trade, they would each see their U.S. to choose free trade. income grow by $50 billion. If both were to c. both to choose free trade. engage in trade protection, they would each grow by $10 billion. If China were to choose free d. both to choose trade protection.* e. Either a or b would occur. trade and the U.S. trade protection, China would not grow at all and the U.S. would grow by $60 billion. Conversely, if the U.S. were to choose 8. When a quota is imposed on an import, typically in the importing country, free trade and China trade protection, China a. consumers lose. would grow by $60 billion and the U.S. would b. domestic producers gain not grow at all. Please use this information in the following four questions. (In answering c. foreign exporters lose. d. b and c. these questions, you might find helpful to draw e. All of the above.* the matrix of different outcomes.) 9. The value added of a business is a. its profit. 4. Which of the following combination of b. the value of final goods and services policies maximizes the sum of growths for the U.S and China? produced. c. the value of its sales minus the value of a. China chooses free trade and the U.S. its purchases of inputs from other businesses.* chooses trade protection. d. the value of its purchased inputs. b. China chooses trade protection and the U.S. chooses free trade. e. the value of its production, including intermediate inputs. c. They both choose free trade.* 10. An example of a government transfer is 17. Flexible exchange rates a. a subsidy to U.S. sugar producers.* a. imply that exchange rates are b. The State of California’s support for determined by the supply and demand university research. for currencies.* c. expenditure on fixing a highway. b. have existed throughout the West for d. the salary of a Social Security over two centuries. Administration employee. c. have been adopted by every country, e. the payroll tax. including China. d. were an integral part of the industrial 11. Which of the following transactions will be revolution. included in Canadian GDP? e. a and b. a. An American buys a bottle of French perfume. 18. “PPP” as used in this course refers to b. Mr. Moneybags buys an existing share a. Public Policy Polling. of the Bank of Montreal. b. Point-to-Point Protocol. c. Coca-Cola builds a new bottling plant in c. Purchasing Power Parity * California. d. Point-to-Point Protection d. United Airlines buys a new plane from e. Public Purchasing Policy Canada’s Bombardier.* e. A California winery produces a bottle of 19. Every working day at least 1 trillion dollars Pinot Noir and sells it to a customer in are traded in all foreign exchange markets. Most Vancouver, Canada. of this trading is due to a. to the currency needs of those who import and export goods and services. 13. If United Airlines were to sell one of its used b. short-term speculation on currency jets to Aero Boliviano, the transaction would rates.* a. not be included in U.S. GDP.* c. those who make long-term investments b. be included in Bolivian GDP. outside their own country. c. be included in U.S. GDP. d. the currency needs of t
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