1) According to the Laffer curve, as tax rates increase tax revenue ?
a. initially increase and then decrease
b. decrease continuously.
c. rise continuously
d. initially decrease and then increase.
2) According to Supply-side economists. if taxes are cut so that people have an increased incentive to work and businesses have an increased incentive to invest ?
a. aggregate supply will increase will increase aggregate demand will decrease and the price level will decrease
b. aggregate supply will increase will increase aggregate output will increase and the price level will decrease
c. aggregate supply will increase will increase aggregate output will increase and the price level will increase
d. both aggregate supply and demand will increase will increase and the price level will increase
3) A group of economists argue that the real problem with the economy is high rates of taxation and heavy regulation that reduce the incentives to work, save and invest. These economists are?
a. Supply-side economics
b. neo-Keynesian economists
c. rational-expectations economists.
d. new classical economists.
4) According to the factor price equalization theorem, the ________ factor should oppose free. trade policies in any given country?
d. can’t tell without more information
5) By adjusting the model of comparative advantage to include transportation costs along with production costs we would expect ?
a. The prices of trade goods to be lower than when there are no transportation costs
b. specialization to stop when the production costs of the trading partners equalize
c. The volume of trade to be less than when there are no transportation costs
d. The gains from trade to be greater than when there are no transportation costs
6) Advocates of industrial policy maintain that government should ?
a. pursue free trade as a policy that leads to maximum global efficiency
b. grant subsidies to firms offering potential comparative advantage
c. provide loans to domestic workers in exporting industries
d. increase interest rates on loans made to firms in import-competing industries
7) According to the Heckscher-Ohlin model ?
a. everyone automatically gains from trade
b. The gainers from trade outnumber the losers from trade
c. The scarce factor necessarily gains from trade
d. None of the above
8) In his empirical test of comparative advantage Wassily Leontief found that ?
a. U.S exports are capital intensive relative to U.S imports
b. U.S imports are labor intensive relative to U.S exports
c. U.S exports are neither labor nor capital intensive
d. None of the above
9) The Heckshcer-Ohl assumes that are indentical between countries?
a. tastes and preferences
b. technology levels
c. factor indowments
d. Both A and B
10) One of the predictions of the Heckscher-Ohlin model is that ?
a. countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other
b. countries with tend to specialize but not completely in their comparative advantage good
c. reciprocal demand leads to an equilibrium terms of trade by inducing change in both demand and supply
d. All of the above