Ch 6 The United States In The Global Economy

If a person, firm, or region has a comparative advantage in the production of a particular commodity, it means that they can produce that commodity at a lower opportunity cost compared to others. This implies that they are more efficient and productive in producing that commodity. By specializing in the production of that commodity, they can focus their resources and efforts on producing it, leading to increased efficiency, higher output, and potentially lower costs. This can result in economic benefits and improved competitiveness in the market. Therefore, it is true that if there is a comparative advantage, specialization in the production of that commodity is recommended.

The statement is true because the exchange rate between two currencies, in this case the dollar and the Japanese yen, is determined by the interaction between the demand for and the supply of those currencies. If there is a high demand for Japanese yen, its price in terms of the dollar will increase, and if there is a high supply of yen, its price will decrease. Therefore, the interaction between demand and supply ultimately determines the dollar price of Japanese yen.

Trade restrictions often receive public support because the perceived advantages of these restrictions are usually immediate and easily identifiable. On the other hand, the negative consequences of trade restrictions are often difficult to discern and are spread out across the entire economy. This lack of visibility and understanding of the adverse effects makes it easier for the public to support trade restrictions.

Canada is the most important trading partner for the US in terms of the volume of exports and imports because of the close geographical proximity between the two countries and the strong economic ties they share. The US and Canada have a long history of trade relations, with a significant amount of goods and services being exchanged between the two nations. The US relies heavily on Canada for various imports, such as energy resources, while also exporting a significant amount of goods to Canada. This high volume of trade makes Canada the most important trading partner for the US.

The statement is true because the United States has the largest economy in the world, and as a result, it engages in significant international trade. It exports a wide range of goods and services to countries around the world, including automobiles, machinery, electronic equipment, and financial services. It also imports various products from other nations, such as consumer goods, petroleum, and industrial supplies. The value of these exports and imports combined surpasses that of any other country, making the statement accurate.

Specialization and trade between nations can lead to economic growth and efficiency. When countries specialize in producing goods and services that they have a comparative advantage in, they can increase their productivity and output. This leads to an increase in the quantity of resources available for consumption and investment. Similarly, trade allows countries to access a wider range of goods and services, which can be seen as a form of technological progress. Therefore, the economic effects of specialization and trade can be compared to increasing the quantity of resources or achieving technological progress.

World trade allows an economy to access resources, goods, and services from other countries that may not be available domestically. This can lead to an increase in the overall production capacity of the economy, allowing it to surpass its domestic production possibilities curve. By engaging in international trade, countries can specialize in producing goods and services in which they have a comparative advantage, leading to increased efficiency and productivity. This enables the economy to produce more than it would be able to domestically, thus reaching a point beyond its domestic production possibilities curve.

The statement is true because there are certain commodities that the US cannot produce domestically and therefore relies on trade to obtain them. This could be due to factors such as limited resources or unfavorable climate conditions. Trade allows the US to access these commodities from other countries, ensuring a steady supply and meeting the demand within the domestic market.

The statement is true because when nations integrate economically, it allows firms within those nations to access larger markets. This means that firms can sell their products or services to a larger customer base, which can lead to increased sales and profits. Additionally, economic integration allows firms to take advantage of economies of scale in production. This means that as firms produce larger quantities of goods or services, their average costs decrease, leading to greater efficiency and potentially lower prices for consumers. Overall, economic integration benefits both firms and their customers through increased market access and economies of scale.

When the dollar depreciates relative to the value of other currencies, it means that the dollar has lost value compared to those currencies. As a result, goods imported into the US will become more expensive because it takes more dollars to purchase the same amount of foreign currency needed to buy those goods. Therefore, the statement is true.

The formation of the EU creates a unified market with reduced trade barriers among member countries. This allows European customers to have easier access to goods and services from firms located within the Union. As a result, US firms may face increased competition from European firms in the EU market, making it more difficult for them to compete effectively. Therefore, the statement is true.

The formation of the EU has indeed resulted in freer trade among its member countries. The EU was established with the goal of creating a single market where goods, services, capital, and labor can move freely across borders. This has been achieved through the elimination of trade barriers such as tariffs and quotas, the harmonization of regulations, and the implementation of common trade policies. As a result, member countries have experienced increased trade flows, expanded market access, and greater economic integration. Therefore, the statement is true.

Export subsidies are government payments that are provided to domestic producers to encourage them to export their products. These subsidies aim to reduce the production costs or increase the competitiveness of the exported goods, thereby lowering the price for buyers from other nations. This can help domestic producers gain a competitive advantage in international markets and stimulate exports. Therefore, the statement that export subsidies are government payments to reduce the price of a product to buyers from other nations is true.

If the US reaches a tariff agreement that reduces the tariff rates on imported goods from another country, those lower tariff rates will also be applied to goods imported from other nations with most-favored-nation (MFN) status. This means that the US will treat all nations with MFN status equally when it comes to tariff rates, regardless of their specific trade agreements.

Since 1947, the US economy's share of world trade has decreased. This suggests that the United States has faced a decline in its global trade influence over time. Factors such as the rise of other economies, changes in international trade policies, and shifts in global market dynamics could have contributed to this decrease. It is important to note that this answer is based on the given information and does not include any additional context or data.

The statement is false because the 1993 NAFTA (North American Free Trade Agreement) does not include all Central American countries. NAFTA specifically includes Canada, the United States, and Mexico, but it does not include countries such as Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama, which are part of Central America.

If one nation has a comparative advantage in the production of a commodity over another nation, it means that it can produce that commodity at a lower opportunity cost compared to the other nation. This implies that the nation with the comparative advantage has to give up less of other goods and services in order to produce more of the commodity. Therefore, the statement is false as the nation with comparative advantage has a lower opportunity cost of production relative to the other nation, not a higher one.

The statement is false because excise taxes or duties placed on imported goods are actually examples of tariff barriers, not nontariff barriers. Nontariff barriers refer to other forms of restrictions or regulations, such as quotas, licensing requirements, or technical standards, that can limit or hinder international trade without involving the imposition of taxes or duties.

The Smoot-Hawley Tariff Act of 1930 actually increased tariffs in the US rather than reducing them. It was passed in an attempt to protect American industries from foreign competition during the Great Depression. However, it had unintended consequences as other countries retaliated with their own tariffs, leading to a decline in international trade and worsening the economic downturn.

NAFTA, which stands for the North American Free Trade Agreement, is not an example of the gains to be obtained from voluntary export restrictions. In fact, NAFTA is a trade agreement between the United States, Canada, and Mexico that aims to reduce trade barriers and promote free trade among the member countries. It does not involve any restrictions on exports, but rather encourages the free flow of goods and services between the participating nations. Therefore, the statement that NAFTA is an example of the gains from voluntary export restrictions is false.

When the dollar price of another nation's currency increases, it means that it takes more dollars to buy one unit of that currency. This indicates a depreciation in the value of the dollar, not an appreciation. Therefore, the statement is false.

The statement suggests that major US firms are unable to compete in global markets without protection from foreign competition. However, this is not true. Major US firms have a strong presence in global markets and are often leaders in their respective industries. They have the resources, expertise, and technology to compete globally without relying on protection from foreign competition. Additionally, many US firms have successfully expanded their operations and captured significant market share in various countries around the world. Therefore, the correct answer is false.

The statement suggests that while the volume of international trade for the United States has been increasing, it is not increasing absolutely. This means that although there has been growth, it is not a significant or substantial increase. Therefore, the statement is false.

An increase in incomes in the US would not necessarily cause the dollar price of the yen to fall. In fact, it could have the opposite effect. If incomes in the US increase, it could lead to an increase in demand for goods and services, including imports from Japan. This increased demand for Japanese products could lead to an increase in the demand for yen, causing the dollar price of the yen to rise. Therefore, the statement is false.

Tariffs and quotas do not benefit domestic consumers by lowering prices for goods. In fact, they often lead to higher prices for consumers because they restrict competition and limit the supply of goods from other countries. While tariffs and quotas may protect domestic firms in the protected industries, they can also lead to inefficiencies, reduced choices, and higher costs for consumers. Therefore, the statement that tariffs and quotas benefit both domestic firms and consumers by lowering prices is false.