Use a J-curve to illustrate the effect on the current account of an exchange rate depreciation. Explain why the curve has the shape that it does.
What will be an ideal response?
Question 2 - The demand for labor is said to be a derived demand because it comes from the demand for goods that labor produces. Suppose that strawberries are a labor-intensive good. An increase in the price of strawberries will ________ the demand for strawberries, which will ________ the demand for strawberry pickers.
A) increase, increase
B) increase, decrease
C) decrease, increase
D) decrease, decrease
Question 3 - Describe the history and consequent deepening as the European Union developed. Which treaties created which level of economic integration? Do countries have the ability to participate in some levels of integration and not others? Give specific examples.
What will be an ideal response?
Question 4 - Which of the following is NOT a problem with finding a solution to global climate change?
A) Countries have not recognized that there is a problem with climate change.
B) Solutions must be adopted globally, not unilaterally.
C) Science can only provide probabilities of future events, not certainties.
D) It is difficult to determine an appropriate level of response to climate change problems.
Question 5 - How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?
What will be an ideal response?
Question 6 - The graph above shows the PPC for a country that can produce oil, which is labor intensive, or televisions, which are capital intensive. The country is currently producing at point A and not trading with the rest of the world. With trade, the world price can be represented by slope of the straight line through Point A. Which of the following is a true statement?
A) When this country produces the optimal amount with trade, workers in this country will be better off.
B) When this country produces the optimal amount with trade, capital in this country will be better off.
C) When this country produces the optimal amount with trade, both factors of production will be better off.
D) When this country produces the optimal amount with trade, the income of factors of production will not change.