1. List as many Economic reasons for countries to trade.

-Enables nations to specialize their production

-Enhance resource productivity
-Acquire more goods and services
2. List and define economic barriers.
-Revenue tariffs are tariffs designed to produce income for the Federal government.
-Import quota is a limit imposed by a nation on the quantity (or total value) of a good that
may be imported during some period of time.
-Nontariff barriers are all barriers other than protective tariffs that nations erect to impede
international trade, including import quotas, licensing requirements, unreasonable productquality standards, unnecessary bureaucratic detail in customs procedures, and so on.
-Voluntary export restrictions, are voluntary limitations by countries or firms of their
exports to a particular foreign nation to avoid enactment of formal trade barriers by that nation.
3. List, with a short one-sentence explanation, the arguments for protectionism.
The arguments for protectionism consist of:
-Military Self Sufficiency, protective tariffs are needed to preserve or strengthen
industries that produce the materials essential for national defense.
-Diversification for Stability, specialized economies are dependent on
international markets for their income. Tariff and quota protections are allegedly needed in such
nations to enable great industrial diversification.
-Infant Industry, protective tariffs are needed to allow new domestic industries to
establish themselves, shielding young firms from more mature competition will give them the
chance to develop.
-Protection against dumping, states that tariffs are needed to protect domestic
firms from selling excess goods in a foreign market at a price below cost.
-Increased Domestic Employment, argues for a tariff to save U.S. jobs and
reducing imports will divert spending on another nations output to spending on domestic output.
-Cheap Foreign Labor, says that domestic firms and workers must be shielded
from the ruinous competition of countries where wages are low.
-Trade Adjustment Assistance, is meant to help those hurt by shifts in
international trade pattern since a nations comparative advantage in the production of a certain
product is not forever fixed.
4. List as many ways as possible to correct a balance of payments problem.

5. US Exports:
-Create a demand for Dollars
-Supply of Foreign Currencies
US exports increase supply of money in Foreign Countries
US exports increase supply of money in US
6. List the determinants of Exchange Rates
The determinants of exchange rates are:
-changes in taste
-relative income change
-relative price level
-relative interest rates
-speculations
7. List as many causes of US trade deficit as possible
-More imports
-Oil trades
-Declining saving rate
8. Who is responsible for the US Health Care Crisis? List as many groups as possible.
The Government, drug companies (pharmacies), insurance companies
(health/professional), attorneys, doctors, unions, and hospitals are all argued to be at fault for the
US Health Care Crisis.
9. Is the US income distribution unequal? Explain how the Government redistributes
income.
US income distribution has become more unequal since 1970. The way income is
distributed affects the size of that income. The basic argument for income inequality is that
inequality is essential to maintain incentives to produce output and income-to get the output
produced and income generated year after year.
10. What are the major changes in the 1996 Welfare Reform?
Grew out of the reality that welfare spending was not ending poverty. The Personal
Responsibility Act of 1996 replaced AFDC with the Temporary Assistance for Needy Families
program, which ended the Federal governments welfare program based on cash assistance for
poor families. TANF set a lifetime limit of 5 years on receiving benefits, Ended food-stamp
eligibility for able-bodied persons age 18 to 50, tightened the definition of disabled children
regarding eligibility for SSI, and established a 5-year waiting period on public assistance for new
legal immigrants who have not become citizens.