Economics Final Exam Practice Test With Complete Solutions

197. If the banking sector borrows internationally and lends locally, how does this intensify a financial crisis? {Ans: Answer: The borrowed funds have to be repaid with appreciating international currencies while payments received come in the depreciating local currency.}113. Based on Figure 6.1, given a tariff of $0.25 per bushel on soybean imports, how much will domestic production increase? {Ans: Domestic firms will increase output by 10 million bushels.}90. In a small country, the net national cost of tariff protection is equal to the reduction in consumer surplus minus {Ans: the increase in government revenue and the increase in producer surplus.}91. In economic terms, tariffs are preferred to quotas because {Ans: given the way quotas are usually administered, tariffs cause a smaller net national welfare loss.}121. An increase in domestic demand for a product protected by a quota results in an increase in producer surplus for domestic firms, while for a tariff it would result in more imports. T/F {Ans: TRUE}47. Wage inequality has been on the rise in virtually all high-income industrial economies since the 1970s. The causes are probably numerous, but the leading explanation for the greatest share of the increase in inequality