Question Details

1. A sales tax is sometimes said to be regressive because the rate at which it is
assessed declines as more and more taxable items are purchased.
a. True
b. False
2. The actual deficit is a poor measure of fiscal policy.
a. True
b. False
3. The United States has had a little success with the surplus aspect of balancing the
budget over the period of a business cycle.
a. True
b. False
4. The federal government- ability to repay the national debt is limited only by the
a. debt ceiling
b. incidence of taxes
c. total asset of the economy
d. political clout of the Fed- Board of Governors
5. Compared to the national debts of major European countries as a percentage of
national incomes, the U.S. national that
a. is the largest
b. is the smallest
c. is at the low end
d. falls in the highest ten percent
6. If the exchange rate between the U.S. dollar and the Swiss franc changes from 75
cents per Swiss franc to $1 per Swiss franc, the dollar has depreciated, since its
value has declined.
a. True
b. False
7. One factor that definitely did not contribute to the deficit in the U.S. balance of
payments during 2005 was
a. the war in Iraq
b. sales of military equipment to foreign nations
c. the large federal government deficit in the United States
d. investments abroad by U.S. companies
8. Under the gold standard, a nation experiencing chronic trade deficits had to
increase its money supply while reducing its holdings of gold.
a. True
b. False
9. The Bretton Woods system
a. fixed exchange rates in terms of U.S. dollars
b. fixed exchange rates in terms of all major currencies
c. fixed exchange rates in terms of gold
d. established a system of flexible exchange rates
10. Overseas investments by U.S. citizens are recorded as credit terms in the capital
account of the U.S. balance of payments.
a. True
b. False
11. The balance of payments is more like an income statement than a balance sheet.
a. True
b. False
12. If a country engaged in free trade has an unlimited quantity of imports of a good
available at a fixed price, the supply curve for that good is
a. upward sloping
b. perfectly inelastic
c. downward sloping
d. perfectly elastic
13. The Trade Expansion Act of 1974 restricted the authority of the president of the
United States to reduce tariffs.
a. True
b. False
14. If a tariff is used to protect U.S. jobs,
a. income is transferred from consumers to protected producers
b. national production and income increase
c. national production rises but income decreases
d. the effect is neutral since imports are replaced to domestic goods
15. The Maastricht Agreement calls for a common currency and a single central bank
in the European Union.
a. True
b. False
16. Although political arguments strongly favor free trade, most decisions affecting
international trade are made in the economic arena.
a. True
b. False
17. In 2003, Japan restricted imports of beef from the United States because of fear of
“mad cow” disease. This an example of
a. an antidumping measure
b. protecting an infant industry
c. a voluntary restraint measure
d. a technical barrier.