## contents

### Test

Which of the following is a situation in which trade is advantageous?

When one producer can create a given amount of output with fewer inputs, what exists?

When one producer has a lower opportunity cost of production than another producer for a given item, what exists?

Farmer John has a pistachio farm. It takes him 5 hours worth of work to harvest 1 pound of nuts. Farmer Rick also has a pistachio farm. It takes him 10 hours worth of work to harvest 1 pound of nuts. Finally, Farmer Erica owns a third pistachio farm. She can harvest 1 pound of nuts in 2 hours. Who has the absolute advantage in this example?

There are three producers. Producer A spends \$10 to make a widget. Producer B spends \$50 to make a widget. Producer C spends \$4. Who has the absolute advantage?

Mechanic A can change a tire in 1 hour and change a sparkplug in 2 hours. Mechanic B can change a tire in 0.5 hours and change a sparkplug in 0.25 hours. Who has the comparative advantage in changing sparkplugs?

Rancher Tom can raise 10 goats and 20 pigs in a year. Rancher Joe can raise 20 goats and 100 pigs in a year. Who has the comparative advantage for raising pigs?

What term applies when one option is chosen from among several possibilities?

If there are two producers and two products, which of the following cannot happen?

When a comparative advantage exists, what should the producer with the comparative advantage do?

When an absolute advantage exists, what should the producer with the absolute advantage do?

Is it possible for a producer to have both an absolute advantage and a comparative advantage?

What equation describes output?

What else does the equation Y = C + I + G + NX describe?

In the equation Y = C + I + G + NX, what does Y stand for?

What is the equation that describes net exports?

When a country exports and imports the same amount of goods, what is its net exports?

When a country exports more than it imports, what is the value of net exports?

When a country imports more than it exports, what is the value of the net exports?

When net exports are negative, what accounts for the difference?

What is the equation that relates net exports to net foreign investment?

If a country always imports more than it exports, what will its net foreign investment look like?

If a country always exports more than it imports, what will the net foreign investment look like?

Which of the following pairs go together?

Which of the following pairs go together?

What do you call the number that represents the nominal value of currency in two countries?

What do you call the number that compares the real cost of goods between two countries?

Which is easier to calculate, the nominal exchange rate or the real exchange rate?

Which of the following is not necessary to calculate the real exchange rate?

What is the equation for the real exchange rate?

How are the nominal exchange rate and the real exchange rate related?

What is the real exchange rate if the domestic price is \$5, the foreign price is 3 pounds, and the exchange rate is 1.5?

What is the real exchange rate if the domestic price is \$2, the foreign price is 2 pounds, and the exchange rate is 1.5?

What is the real exchange rate if the domestic price is \$10, the foreign price is 30 pounds, and the exchange rate is 2?

What can be determined from the real exchange rate?

Which of the following situations is best if you wish to travel to a foreign country?

What is the effect on net exports of an increase in the real exchange rate?

When the real exchange rate falls, what is likely to increase?

What is the general term for when a government interferes in free trade?

Which of the following is not a reason that the government might impose a barrier to trade?

What do you call barriers to trade that help domestic producers?

What is it called when the government places limits on the number of a given good that can be imported?

What is it called when the government places taxes on imported goods?

What is it called when the government gives domestic industries grants to keep them running competitively?

What develops when exports exceed imports?

What develops when imports exceed exports?

Which of the following is not an effect of a trade deficit?

Which of the following is not a way to cure the trade deficit?

Which of the following is thought to be related to a high trade deficit?

## Take a Study Break

### What's your Pretty Little Liars name?

Take this quiz to find out!

### Which young actress just got married?

Click to find out!

### Cat bearding WINS THE INTERNET

Have you seen this yet?

### Scary movies with funny posters

These. Are. Hilarious.

### Geeky Actors: Then and Now

Travel back in time!

### Villains We Want These Actresses to Play

From super cute to super bad!

### 10 Movies Better Than Their Books

What do you think?