Exam (elaborations)
ECON 340 Final Exam Study Guide Detailed Questions and Expert Answers
- Course
- ECON 340
- Institution
- University Of Michigan
ECON 340 Final Exam Study Guide Detailed Questions and Expert Answers
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ECON 340 Final Exam Study Guide DetailedQuestions and Expert Answers
Which of the following is NOT a preferential trading arrangement?
a. EU
b. NAFTA
c. OECD
d. GSP
e. Anti-dumping duty - ANS OECD
Which of the following explains why trade diversion is undesirable for an importing
country that lowers its tariff against a partner in a free trade area?
a. The country imports from the partner at higher cost than it previously imported
from some other country.
b. Domestic producers suffer a loss of income.
,c. Workers are laid off as producers shift production into the partner country.
d. Consumers pay a higher price for the good imported from the partner.
e. All of the above. - ANS The country imports from the partner at higher cost than
it previously imported from some other country.
When a country eliminates its tariff against a partner country, keeping the tariff
positive against other countries, the effect of that change alone is that the partner
as a whole
a. Must gain.
b. May either gain or lose.
c. Will neither gain nor lose.
d. Must lose.
e. None of the above; it depends on whether there is trade creation or trade
diversion. - ANS Must gain.
,Because wages in Mexico before the NAFTA were only a small fraction (perhaps
1/10) of wages in the US, we should infer that
a. Prior to NAFTA, Mexican workers were paid far below their productivity.
b. After NAFTA, most U.S. firms would be unable to compete with imports from
Mexico.
c. After NAFTA, most U.S. firms would close their U.S. plants and move to
Mexico.
d. Prior to NAFTA, since U.S. tariffs against Mexico were small, the productivity
of Mexican workers must also have been only a small fraction of that in the U.S.
e. After NAFTA, forcing Mexican workers to compete with more productive U.S.
workers would drive their wages even lower. - ANS Prior to NAFTA, since US tariffs
against Mexico were small, the productivity of Mexican workers must also have
been only a small fraction of that in the US.
Mexico's international reserves
a. Declined during the years that NAFTA was being negotiated, which was one of
the reasons Mexico wanted the agreement.
, b. Rose until NAFTA went into effect, but have declined ever since.
c. Fell during the year after NAFTA went into effect, precipitating the Peso Crisis.
d. Rose until the Peso Crisis, which caused them to fall precipitously.
e. Have risen steadily throughout the 1990s and since 2000. - ANS Fell during the
year after NAFTA went into effect, precipitating the Peso Crisis.
What effect did the NAFTA have on US unemployment?
a. NAFTA caused the 1991 recession.
b. NAFTA caused the 2001 recession.
c. NAFTA caused US unemployment to rise by two percentage points, in 1994,
when it went into effect.
d. NAFTA caused US unemployment to rise by two percentage points, but not
until 1995 when the Peso Crisis hit.
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