AGBM 338 EXAM 2 UPDATED QUESTIONS AND
ANSWERS
economically inefficient - CORRECT ANSWER✅✅✅distorts the allocation of factors of production
import tariffs - CORRECT ANSWER✅✅✅tax on imports
import quotas - CORRECT ANSWER✅✅✅quantitative restriction on imports
rents - CORRECT ANSWER✅✅✅difference between domestic price & world price, multiplied by the
quota
antidumping laws - CORRECT ANSWER✅✅✅help domestic industries by restricting foreign products
that are allegedly being sold below the cost of production or @ prices lower than those in the home
market
cost dumping - CORRECT ANSWER✅✅✅products sold below the cost of production
price dumping - CORRECT ANSWER✅✅✅products sold at prices lower than those in the home
market
export subsidies - CORRECT ANSWER✅✅✅subsidies paid by a government on exported goods
export taxes - CORRECT ANSWER✅✅✅taxes levied by a government on exported goods
export quotas/bans - CORRECT ANSWER✅✅✅quantitive limits on exports
limit = 0 if it's a ban
, bottom line - CORRECT ANSWER✅✅✅terms of a loan better than under a private market
transaction
exchange rate - CORRECT ANSWER✅✅✅the price of one currency in terms of another
appreciation - CORRECT ANSWER✅✅✅an increase in the value of the currency
depreciation - CORRECT ANSWER✅✅✅a loss in the value of the currency
floating (flexible) exchange rate policy - CORRECT ANSWER✅✅✅government policy to let supply-
and-demand conditions determine exchange rates
clean (free) float - CORRECT ANSWER✅✅✅a pure market solution to determine exchange rates
dirty (managed) float - CORRECT ANSWER✅✅✅using selective government intervention to
influence exchange rates
fixed exchange rate policy - CORRECT ANSWER✅✅✅a government policy to set the exchange rate of
a currency relative to other currencies
target exchange rate (crawling band) - CORRECT ANSWER✅✅✅specified upper & lower bounds
within which an exchange rate is allowed to fluctuate
peg - CORRECT ANSWER✅✅✅a stabilizing policy of linking a developing country's currency to a key
currency
Gold Standard (1870-1914) - CORRECT ANSWER✅✅✅values of most major currencies were
maintained by fixing their price in terms of gold, which served as the common denominator
Bretton Woods (1944-1973) - CORRECT ANSWER✅✅✅all major currencies were pegged @ fixed
rate to the US dollar, which was the common denominator
ANSWERS
economically inefficient - CORRECT ANSWER✅✅✅distorts the allocation of factors of production
import tariffs - CORRECT ANSWER✅✅✅tax on imports
import quotas - CORRECT ANSWER✅✅✅quantitative restriction on imports
rents - CORRECT ANSWER✅✅✅difference between domestic price & world price, multiplied by the
quota
antidumping laws - CORRECT ANSWER✅✅✅help domestic industries by restricting foreign products
that are allegedly being sold below the cost of production or @ prices lower than those in the home
market
cost dumping - CORRECT ANSWER✅✅✅products sold below the cost of production
price dumping - CORRECT ANSWER✅✅✅products sold at prices lower than those in the home
market
export subsidies - CORRECT ANSWER✅✅✅subsidies paid by a government on exported goods
export taxes - CORRECT ANSWER✅✅✅taxes levied by a government on exported goods
export quotas/bans - CORRECT ANSWER✅✅✅quantitive limits on exports
limit = 0 if it's a ban
, bottom line - CORRECT ANSWER✅✅✅terms of a loan better than under a private market
transaction
exchange rate - CORRECT ANSWER✅✅✅the price of one currency in terms of another
appreciation - CORRECT ANSWER✅✅✅an increase in the value of the currency
depreciation - CORRECT ANSWER✅✅✅a loss in the value of the currency
floating (flexible) exchange rate policy - CORRECT ANSWER✅✅✅government policy to let supply-
and-demand conditions determine exchange rates
clean (free) float - CORRECT ANSWER✅✅✅a pure market solution to determine exchange rates
dirty (managed) float - CORRECT ANSWER✅✅✅using selective government intervention to
influence exchange rates
fixed exchange rate policy - CORRECT ANSWER✅✅✅a government policy to set the exchange rate of
a currency relative to other currencies
target exchange rate (crawling band) - CORRECT ANSWER✅✅✅specified upper & lower bounds
within which an exchange rate is allowed to fluctuate
peg - CORRECT ANSWER✅✅✅a stabilizing policy of linking a developing country's currency to a key
currency
Gold Standard (1870-1914) - CORRECT ANSWER✅✅✅values of most major currencies were
maintained by fixing their price in terms of gold, which served as the common denominator
Bretton Woods (1944-1973) - CORRECT ANSWER✅✅✅all major currencies were pegged @ fixed
rate to the US dollar, which was the common denominator
