MACRO: International Economics Flashcards
7 cards from real AP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 MACRO: International Economics flashcards as text
If the U.S. dollar appreciates relative to the euro, what happens to U.S. exports to Europe?
Answer: U.S. exports become more expensive for Europeans, decreasing exports
A stronger dollar makes U.S. goods more expensive in foreign currency terms, reducing demand for U.S. exports abroad.
Country A has a current account surplus. Which of the following must be true?
Answer: Country A has a capital and financial account deficit
The balance of payments must sum to zero, so a current account surplus is offset by a capital and financial account deficit of equal size.
Which scenario best illustrates the concept of comparative advantage?
Answer: A country produces a good at a lower opportunity cost than its trading partner
Comparative advantage is determined by opportunity cost, not absolute productivity — a country specializes where its opportunity cost is lowest.
A quota on imported steel would most likely result in which of the following in the domestic steel market?
Answer: Higher domestic steel prices and higher domestic steel output
Restricting imports reduces supply available domestically, raising the price while incentivizing domestic producers to increase output.
If a nation runs a persistent trade deficit, which of the following is the most likely long-run consequence for its currency under a flexible exchange rate system?
Answer: The currency will depreciate as supply of domestic currency on forex markets increases
Persistent trade deficits mean more domestic currency is supplied to pay for imports, increasing supply on forex markets and depreciating the currency over time.
Which of the following is recorded as a credit (positive entry) in the U.S. current account?
Answer: A Japanese tourist spends money at U.S. hotels
Foreign tourists spending in the U.S. is an export of services, recorded as a credit in the U.S. current account.
A tariff on imported goods is most similar to which domestic policy tool in terms of its economic effect on consumers?
Answer: An excise tax on a domestically produced good
Like an excise tax, a tariff raises the price consumers pay for a good, reducing consumer surplus and distorting market outcomes.