ECN 306 Exam 1 Study Guide 2026 | Economics Review, Practice Questions &
Test Prep
The characteristic of nations that differentiates them from regions and that allows them the
freedom to decide what policies they will pursue is: - correct answer ✔✔sovereignty
Increasing tariffs generally has what effect on the country imposing the tariffs: - correct answer
✔✔The country imposing the tariff generally has a net economic loss as a result of the tariff.
In the mid 2000's, what was the result of the decline in the U.S. tire production and the increase
in the importation of tires? - correct answer ✔✔The number of tire production workers in the
US declined.
Immigration that is the result of people moving from country to country seeking employment
has what economic effect? - correct answer ✔✔Immigrants are benefited because they find
higher paying jobs that they could have found without migrating, and countries to which they
immigrate are benefitted as a result of an increased work force and increased economic activity.
Temporary trade barriers to protect against surges of imports from specific countries, if such
surges are causing significant harm to a domestic industry, are called: - correct answer
✔✔safeguards
The value of one country's currency expressed in terms of another country's currency is the: -
correct answer ✔✔international valuation rate
In the early part of the 21st century, what did the Chinese government do to bring stability to
the value of the Chinese yuan? - correct answer ✔✔It bought U.S. dollars and sold yuan.
Why have so many states enacted laws in recent years to limit immigration? - correct answer
✔✔Congress has enacted laws specifically granting authority to states to deal with immigration.
,One of the first signs the financial crisis that appeared in 2007 was: - correct answer ✔✔the
rising default rate of sub-prime mortgages and the losses on securities that were backed by
those mortgages.
In the context of international currency regulations a "crawling peg" is a(n) - correct answer
✔✔policy in which the government allows small changes in the exchange rate value of the
country's currency.
The most important economic policies that countries can control involve: - correct answer
✔✔movement of production resources, taxing and spending, and money and exchange.
Possibly the most important difference between domestic and international trade is that
international transactions often involve: - correct answer ✔✔use of different currencies.
Who controls the supply of a particular currency? - correct answer ✔✔The central bank of the
country that issued the currency.
What is the primary factor that affects both international trade flows of goods and services and
international financial flows? - correct answer ✔✔exchange rates
When considering factor mobility, how can land be mobile? - correct answer ✔✔Land can be
put to different productive uses.
What does classical economics say about factor mobility? - correct answer ✔✔Factors of
production are not mobile across national boundaries.
With regard to migration, where are people more likely to move? - correct answer ✔✔Within
their own country.
, With respect to financial capital, "home bias" means a preference to invest in: - correct answer
✔✔one's own country
One thing that international economics and economics in general have in common is that both:
- correct answer ✔✔deal with challenges of scarce resources.
What factor has the most profound effect of discouraging the mobility of financial capital
internationally? - correct answer ✔✔the preference for investors to invest in their own
countries
Why do countries trade? - correct answer ✔✔Demand and supply conditions differ between
countries, so price differ between countries if there is no international trade. Trade begins as
someone conducts arbitrage to earn profits from the price difference between previously
separated markets. A product will be exported from countries where its price was lower without
trade to countries where its price was higher.
How does trade affect production and consumption in each country? - correct answer ✔✔The
move from no trade to a free-trade equilibrium changes the product price from its no trade
value to the free-trade equilibrium international price or world price. The price change in each
country results in changes in quantities consumed and produced. In the country importing the
product, trade rises the quantity consumed and lowers the quantity produced of that product.
In the exporting country, trade rises the quantity produced and lowers the quantity consumed
of the product.
Which country gains from trade? - correct answer ✔✔If we use one dollar, one vote metric,
then both do. Each country's net national gains from trade, are proportional to the change in its
price that occurs in the shift from no trade to free trade. The country whose prices are
disrupted more by trade gains more.
Within each country, who are the gainers and losers from opening trade? - correct answer
✔✔The gainers are the consumers of imported products and the producers of exportable
Test Prep
The characteristic of nations that differentiates them from regions and that allows them the
freedom to decide what policies they will pursue is: - correct answer ✔✔sovereignty
Increasing tariffs generally has what effect on the country imposing the tariffs: - correct answer
✔✔The country imposing the tariff generally has a net economic loss as a result of the tariff.
In the mid 2000's, what was the result of the decline in the U.S. tire production and the increase
in the importation of tires? - correct answer ✔✔The number of tire production workers in the
US declined.
Immigration that is the result of people moving from country to country seeking employment
has what economic effect? - correct answer ✔✔Immigrants are benefited because they find
higher paying jobs that they could have found without migrating, and countries to which they
immigrate are benefitted as a result of an increased work force and increased economic activity.
Temporary trade barriers to protect against surges of imports from specific countries, if such
surges are causing significant harm to a domestic industry, are called: - correct answer
✔✔safeguards
The value of one country's currency expressed in terms of another country's currency is the: -
correct answer ✔✔international valuation rate
In the early part of the 21st century, what did the Chinese government do to bring stability to
the value of the Chinese yuan? - correct answer ✔✔It bought U.S. dollars and sold yuan.
Why have so many states enacted laws in recent years to limit immigration? - correct answer
✔✔Congress has enacted laws specifically granting authority to states to deal with immigration.
,One of the first signs the financial crisis that appeared in 2007 was: - correct answer ✔✔the
rising default rate of sub-prime mortgages and the losses on securities that were backed by
those mortgages.
In the context of international currency regulations a "crawling peg" is a(n) - correct answer
✔✔policy in which the government allows small changes in the exchange rate value of the
country's currency.
The most important economic policies that countries can control involve: - correct answer
✔✔movement of production resources, taxing and spending, and money and exchange.
Possibly the most important difference between domestic and international trade is that
international transactions often involve: - correct answer ✔✔use of different currencies.
Who controls the supply of a particular currency? - correct answer ✔✔The central bank of the
country that issued the currency.
What is the primary factor that affects both international trade flows of goods and services and
international financial flows? - correct answer ✔✔exchange rates
When considering factor mobility, how can land be mobile? - correct answer ✔✔Land can be
put to different productive uses.
What does classical economics say about factor mobility? - correct answer ✔✔Factors of
production are not mobile across national boundaries.
With regard to migration, where are people more likely to move? - correct answer ✔✔Within
their own country.
, With respect to financial capital, "home bias" means a preference to invest in: - correct answer
✔✔one's own country
One thing that international economics and economics in general have in common is that both:
- correct answer ✔✔deal with challenges of scarce resources.
What factor has the most profound effect of discouraging the mobility of financial capital
internationally? - correct answer ✔✔the preference for investors to invest in their own
countries
Why do countries trade? - correct answer ✔✔Demand and supply conditions differ between
countries, so price differ between countries if there is no international trade. Trade begins as
someone conducts arbitrage to earn profits from the price difference between previously
separated markets. A product will be exported from countries where its price was lower without
trade to countries where its price was higher.
How does trade affect production and consumption in each country? - correct answer ✔✔The
move from no trade to a free-trade equilibrium changes the product price from its no trade
value to the free-trade equilibrium international price or world price. The price change in each
country results in changes in quantities consumed and produced. In the country importing the
product, trade rises the quantity consumed and lowers the quantity produced of that product.
In the exporting country, trade rises the quantity produced and lowers the quantity consumed
of the product.
Which country gains from trade? - correct answer ✔✔If we use one dollar, one vote metric,
then both do. Each country's net national gains from trade, are proportional to the change in its
price that occurs in the shift from no trade to free trade. The country whose prices are
disrupted more by trade gains more.
Within each country, who are the gainers and losers from opening trade? - correct answer
✔✔The gainers are the consumers of imported products and the producers of exportable
