(15985)
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing
50 British pounds if the exchange rate is 1.50 dollars per one British pound?
A. 62.5 dollars
B. 50 dollars
C. 60 dollars
D. 75 dollars
E. 80 dollars
(16017)
When the production possibility frontier shifts out relatively more in one direction,
we have
A. balanced growth.
B. biased growth.
C. imbalanced growth.
D. unbiased growth.
E. immiserizing growth.
(16010)
What are the biggest advantages the U.S. has over the EU in terms of being an
Optimum Currency Area?
A. low mobility of labor, higher labor productivity, lower level of intra-regional
trade
B. high unionization of U.S. Labor force
C. more specialized labor force and natural resource advantages
D. higher uniformity of population's taste in consumption
E. high mobility of labor force, more transfer payments between regions
(16017)
What is the basic problem of developing countries?
A. poverty
B. corruption
C. stock market
D. natural resources
E. murder
(16017)
International trade has strong effects on income distributions. Therefore,
international trade
A. will tend to hurt everyone in both countries.
B. will tend to hurt one trading country
C. will tend to hurt some groups in each trading country.
D. is beneficial to everyone in both trading countries
E. will be beneficial to all those engaged in international trade.
(4333)
Historians of economic thought often describe _____ written by ______ and
published in ______ as the first real exposition of an economic model.
A. "Of the Balance of Trade," David Hume, 1758
B. "Of the Balance of Trade," David Hume, 1776
C. "Wealth of Nations," David Hume, 1758
D. "Wealth of Nations," Adam Smith, 1758
E. "Wealth of Nations," Adam Smith, 1776
(4539)
Given the information in the table above, if it is ascertained that Foreign uses
prison-slave labor to produce its exports, then home should
A. export widgets.
B. export widgets and import cloth
C. export cloth.
D. export and import nothing
E. export both and import nothing.
(4535) The gravity model explains why
A. countries with oil reserves tend to export oil.
B. capital rich countries export capital intensive products
C. European countries rely most often on natural resources
D. intra-industry trade is relatively more important than other forms of trade
between neighboring countries.
E. trade between Sweden and Germany exceeds that between Sweden and
Spain.
(16017)
Which of the following is NOT an example of a financial derivative?
A. swaps
B. forwards
C. bonds
D. futures
E. options
(16017)
In the 2-factor, 2 good Heckscher-Ohlin model, the country with a relative
abundance of_____will have a production possibility frontier that is biased toward
production of the_____good.
A. land; labor intensive
B. labor; labor intensive
C. labor; capital intensive
D. capital; land intensive
E. capital; capital intensive
(15955) Tariff rates on products imported into the U.S.
A. were prohibited by the Constitution.
B. have risen steadily since 1920.
C. have dropped substantially over the past 50 years.
D. were the government's main source of income in 2006.
E. reached an all time high in 2002.
(15907)
The Ricardian model of international trade demonstrates that trade can be
mutually beneficial.
Why, then, do governments restrict imports of some goods?
A. Imports are only restricted when foreign-made goods do not meet domestic
standards of quality.
B. Import restrictions are the result of trade wars between hostile countries.
C. Trade can have substantial effects on a country's distribution of income.
D. The Ricardian model is often incorrect in its prediction that trade can be
mutually beneficial.
E. Restrictions on imports are intended to benefit domestic consumers.
(4367)
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing
50 British pounds if the exchange rate is 1.50 dollars per one British pound?
A. 60 dollars
B. 75 dollars
C. 80 dollars
D. 50 dollars
E. 70 dollars
(16017) Export-led growth tends to
A. lower the overall volume of imports.
B. exploit domestic comparative advantages
C. help firms benefit from diseconomies of large-scale production.
D. lead to unemployment among domestic workers
E. discourage competition in the global economy.
(16017) A country will be able to consume a combination of goods that is not
attainable solely from domestic production if
A. the country specializes in one product.
B. the world terms of trade equal the domestic relative costs.
C. the country's domestic production value equals world relative value.
D. the world terms of trade differ from its domestic relative costs.
E. the country avoids international trade.
(15937) The meaning of "terms of trade" is
A. the tariffs in place between two trading countries.
B. the price of a country's exports divided by the price of its imports.
C. the amount of exports sold by a country.
D. the quantities of imports received in free trade
E. the price conditions bargained for in international markets
(15920) According to the Heckscher-Ohlin model
A. only the country with the more advanced technology gains from trade.
B. the gainers from trade could compensate the losers and still retain gains.
C. everyone gains from trade.
D. the scarce factor gains from trade and the abundant factor loses.
E. a country gains from trade if its exports have a high value added
(15928)
In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A. relative abundance of factors of production.
B. the size of their economies.
C. military capabilities.
D. tastes and preferences
E. labor productivities.
(16017) Trade benefits a country by
A. increasing the wage rate
B. increasing available consumption choices
C. increasing the real income of all resource owners
D. reducing the relative price of the exported good
E. reducing the need for specialization in production
(16017) In the present, most of the exports from China are
A. overpriced by world market standards.
B. manufactured goods.
C. primary products including agricultural.
D. technology intensive products.
E. services.
(15991)
The future date on which the currencies are actually exchanged is called what?
A. the two-day window
B. the two-day window
C. the commitment date
D. the forward exchange rate
E. the value date
(15933) Trade benefits a country by
A. increasing the wage rate.
B. increasing available consumption choices.
C. increasing the real income of all resource owners.
D. reducing the relative price of the exported good.
E. reducing the need for specialization in production.
(15924) The Leontief Paradox
A. still accurately applies to today's pattern of U.S. international trade.
B. refers to the finding that U.S. Exports were more capital intensive than its
exports.
C. refers to the fact that Leontief • an American economist • had a Russian
name.
D. refers to the finding that U.S. exports were more labor intensive than its
imports.
E. refers to the finding that the U.S. produces outside its Edgeworth Box.
(4558) Modeling trade in imperfectly competitive industries is problematic
because
A. collusion among imperfectly competitive firms makes usable data rare
B. there are no models of imperfectly competitive behavior.
C. it is difficult to find an imperfectly competitive firm in the real world
D. there is no single generally accepted model of behavior by imperfectly
competitive firms.
E. there is only a single model of imperfect competition (monopoly) but imperfect
competition can take many
forms in the real world.
(16017)
In the second half of the 1990s a rapidly growing movement focused on the harm
caused by international trade to
A. terms of trade in developing countries.
B. capital owners in rich industrialized countries.
C. land owners in poor countries.
D. production workers in both rich and poor countries.
E. land owners in rich industrialized countries.
(15935)
Factors tend to be specific to certain uses and products
A. in countries lacking comparative advantage.
B. in countries lacking fair labor laws
C. in the short run.
D. in labor-intensive industries.
E. in capital-intensive industries.
(4365)
The highest component of GNP is
A. investment.
B. government purchases.
C. consumption.
D. trade.
E. the current account.
(4348) Ad valorem tariffs are
A. import taxes calculated solely on the origin country
B. import taxes calculated as a fraction of the value of the imported goods.
C. import taxes stated in ads in industry publications
D. import taxes calculated as a fixed charge for each unit of imported goods.
E. the same as import quotas.
(15961)
The optimum tariff is
A. the tariff, which maximizes the terms of trade gains.
B. not practical for a large country due to the likelihood of retaliation.
C. not practical for a small country due to the likelihood of retaliation.
D. the best tariff a country can obtain via a WTO negotiated round of
compromises.
E. the tariff, which maximizes the difference between terms of trade gains and
terms of trade loses.
(15903) The Ricardian model demonstrates that
A. trade between two countries may benefit both regardless of which good each
exports.
B. trade between two countries may benefit both if each exports the product in
which it has a comparative advantage.
C. trade between two countries will benefit both countries.
D. trade between two countries may benefit one but harm the other.
E. trade between two countries always benefits the country with a larger labor
force.
(16017)
The intertemporal tradeoff between present and future consumption is measured
by the
A. terms of trade
B. real interest rate.
C. nominal interest rate
D. inflation rate.
E. rate of economic growth.
(15963) The prohibitive tariff is a tariff that
A. is so high that it eliminates imports.
B. is so high that it causes undue harm to trade-partner economies.
C. is so high that it causes undue harm to import competing sectors.
D. is so low that it causes domestic producers to leave the industry.
E. other
(4379) The current account balance is
A. the supply of a country's exports less the country's own demand for imports.
B. the demand for a country's exports less the country's own demand for imports.
C. the demand for a country's exports plus the country's own demand for
imports.
D. the country's own demand for imports less the demand for a country's exports
E. the country's federal reserves minus the national debt.
(16017)
If a firm's output less than doubles when all inputs are doubled, production is
said to occur under conditions of
A. decreasing returns to scale.
B. imperfect competition.
C. constant returns to scale
D. increasing returns to scale.
E. other
(16017)
Since World War II, the relative importance of raw materials, including oil, in total
world trade
A. remained constant.
B. increased.
C. decreased
D. fluctuated widely with no clear trend
E. increased slightly before dropping off.
[C. decreased]
(15999) Equity Instruments include
A. bonds.
B. bank statements.
C. banks deposits
D. stocks.
E. receipts.
[D. stocks.]
(4579) In effect, the U.S. does subsidize high-tech firms by subsidizing R&D.
This is done through
A. the budget of the Department of Education
B. systematic protection through the levying of tariffs
C. relatively accelerated "depreciation" of R&D investment in the Federal tax
codes.
D. subsidies for high-tech firms.
E. systematic protection through the establishment of NTBs.
[C. relatively accelerated "depreciation" of R&D investment in the Federal tax
codes.]
(15882) Who sells what to whom
A. is determined by political rather than economic factors.
B. has been a major preoccupation of international economics.
C. is not a valid concern of international economics.
D. is not considered important for government foreign trade policy since such
decisions are made in the
private competitive market.
E. is less important than international economic theory.
[B. has been a major preoccupation of international economics.]
(15993) A foreign exchange swap
A. is a spot sale of a currency.
B. make up a negligible proportion of all foreign exchange trading.
C. is a forward repurchase of the currency.
D. is a spot sale of a currency combined with a forward repurchase of the
currency.
E. is a spot sale of a currency combined with a forward sale of the currency.
[D. is a spot sale of a currency combined with a forward repurchase of the
currency].
(16017) A nation engaging in trade according to the Ricardian model will find its
consumption bundle
A. Outside its production possibilities frontier.
B. on its production possibilities frontier.
C. on its trade-partner's production possibilities frontier.
D. inside its production possibilities frontier.
E. inside its trade-partner's production possibilities frontier.
[A. Outside its production possibilities frontier.]
(4361)
In the Brander-Spencer model the subsidy raises profits by more than the
subsidy because of
A. the military-industrial complex.
B. the "multiplier" effect of government expenditures.
C. the economies of scale once the company enters the market
D. the forward and backward linkage effects of certain industries.
E. the deterrent effect of the subsidy on foreign competition.
[E. the deterrent effect of the subsidy on foreign competition.]
(15976)
Sophisticated theoretical arguments supporting import-substitution policies
include
A. the problem of appropriability.
B. domestic market failure arguments.
C. scale economy arguments.
D. learning curve considerations.
E. terms of trade effects.
[A. the problem of appropriability.]
(16017)
A factor of production that can be used in any sector of an economy is a(an)
____
A. import-competing factor.
B. export-competing factor.
C. mobile factor.
D. specific factor.
E. variable factor.
[C. mobile factor.]
(4559)
The simultaneous export and import of widgets by the United States is an
example of
A. increasing returns to scale
B. imperfect competition.
C. inter-industry trade
D. intra-industry trade
E. the effect of a monopoly on international trade
[D. intra-industry trade]
(4545)
Japan's trade policies with regard to rice reflect the fact that
A. there would be no gains from trade available to Japan if it engaged in free
trade in rice.
B. Japanese rice farmers have significant political power.
C. Japan has a comparative advantage in rice production and therefore exports
most of its rice crop
D. there are gains from trade that Japan captures by engaging in free trade in
rice
E. Japan imports most of the rice consumed in the country.
[B. Japanese rice farmers have significant political power.]
(16017)
If Japan is relatively capital rich and the United States is relatively land rich, and
if food is relatively land intensive then trade between these two, formerly autarkic
countries will result in
A. an increase in the relative price of food in both countries.
B. an increase in the relative price of food in the U.S.
C. a decrease in the relative price of food in both countries.
D. an increase in the relative price of food in Japan.
[B. an increase in the relative price of food in the U.S.]
(16017)
The gravity model suggests that over time
A. world trade will eventually be swallowed by a black hole.
B. the value of trade between two countries will be proportional to the product of
the two countries' GDP.
C. trade between Earth and other planets will become important.
D. trade between all countries will increase.
E. trade between neighboring countries will increase.
[B. the value of trade between two countries will be proportional to the product of
the two countries' GDP.]
(15951)
Which of the following is a fixed percentage of the value of an imported product?
A. specific tariff
B. ad valorem tariff
C. nominal tariff
D. effective protection tariff
E. infant industry tariff
[B. ad valorem tariff]
(4377)
How does an increase in the real exchange rate affect exports and imports?
A. Exports increase; imports change ambiguously.
B. Exports change ambiguously; imports decrease
C. Exports decrease; imports increase
D. Exports increase; imports are constant
E. Exports increase; imports decrease.
[A. Exports increase; imports change ambiguously.]
(4346) Monopolistic competition is associated with
A. product differentiation.
B. increasing returns to scale.
C. explicit consideration at the firm level of the strategic impact of other firms'
pricing decisions.
D. price-taking behavior
E. high profit margins in the long run.
[A. product differentiation.]
(16017)
for
An export subsidy will cause the relative demand for_____
to_____and the relative supply for______to_______
A. exports; increase; imports; decrease
B. imports; increase; imports; decrease
C. imports; decrease; imports; increase
D. exports; increase; exports; decrease
E. exports; decrease; exports; increase
[E. exports; decrease; exports; increase]
(4360)
The Brander-Spencer model identified market failure in certain industries due to
A.limited competition
B. environmental negative externalities associated with pollution.
C. wildcat destructive competition.
D. unfair competition.
E. lack of excess returns.
[A.limited competition]
(16017)
A country's current account
A. balance equals the change in its foreign wealth.
B. balance equals its GNP.
C. deficit equals the change in its foreign wealth.
D. balance equals the change in its net foreign wealth.
E. surplus equals the change in its foreign wealth.
[D. balance equals the change in its net foreign wealth.]
(4574) Criticisms of the Brander-Spencer model include all EXCEPT which of the
following?
A. the problem of insufficient information
B. the problem of simultaneously causing harm to other industries
C. the problem of harm to interests of consumers
D. the problem of likely foreign retaliation
E. the problem of adverse effects of trade policy politics
[C. the problem of harm to interests of consumers]
(15886)
The distinction between international trade and international money is not entirely
clear because
A. developments caused by purely monetary changes have no real effects.
B. real developments in the trade accounts do not have monetary implications.
C. most international trade involves monetary transactions.
D. the balance of payments includes only real measures.
E. trade models focus on real, or barter relationships.
[C. most international trade involves monetary transactions.]
(4349) The efficiency case made for free trade is that as trade distortions such as
tariffs are dismantled and removed
A. government tariff revenue will increase, hence increasing national economic
welfare.
B. government tariff revenue will decrease, and therefore national economic
welfare will increase.
C. deadweight losses for producers and consumers will decrease, hence
increasing national economic welfare.
D. deadweight losses for producers and consumers will decrease, hence
decreasing national economic
welfare
E. government tariff revenue will decrease, and therefore national economic
welfare will decrease.
[C. deadweight losses for producers and consumers will decrease, hence
increasing national economic welfare.]
(15988) When a country's currency depreciates
A. foreigners are not affected, but domestic residents find that imports from
abroad are more expensive.
B. foreigners find that its exports are more expensive, and domestic residents
find that imports from abroad
are more expensive.
C. foreigners find that its exports are cheaper and domestic residents find that
imports from abroad are more expensive.
D. foreigners find that its exports are cheaper; however, domestic residents are
not affected.
E. foreigners find that its exports are more expensive, and domestic residents
find that imports from abroad
are cheaper.
[C. foreigners find that its exports are cheaper and domestic residents find that
imports from abroad are more
expensive.]
(4371)
Money serves as all of the following EXCEPT
A. a store of value.
B. a unit of account.
C. a highly liquid asset
D. a symbol that is made of or can be redeemed for a fixed amount of precious
metal.
E. a medium of exchange.
[D. a symbol that is made of or can be redeemed for a fixed amount of precious
metal.]
(15913)
In modern economies,
A. outsourcing increases international labor mobility.
B. restrictions on international labor mobility are common.
C. restrictions on international labor mobility are rare.
D. labor is far more mobile internationally than capital.
E. labor is far more mobile internationally than it is intra-nationally.
[C. restrictions on international labor mobility are rare.]
(15909)
In the specific factors model, the effects of trade on welfare are_____for mobile
factors,_____for fixed factors used to produce the exported good, and______for
fixed factors used to
produce the imported good
A. positive; positive; positive
B. ambiguous; negative; positive
C. positive; ambiguous; ambiguous
D. negative; ambiguous; ambiguous
E. ambiguous; positive; negative
[E. ambiguous; positive; negative]
(16017)International borrowing and lending may be interpreted as one form of
A. intertemporal trade.
B. trade in services.
C. intermediate trade.
D. aid to offset trade advantages.
E. unrequited international transfers.
[A. intertemporal trade.]
(15912)
Economists consider the effects of free trade on income distribution to
be______importantthan the effects on overall welfare because_________
A. less; those who are harmed can be compensated by those who gain
B. more; those who are harmed are not compensated by those who gain
C. less; the wealthy benefit and only the poor lose
D. more; the effects on income distribution are major and consequential
[A. less; those who are harmed can be compensated by those who gain]
(16017)
Internal economies of scale will_____average cost when output is_____
by_____
A. reduce, increased; the industry
B. reduce; reduce; the industry
C. reduce, increased; a firm
D. increase; increased; the industry
E. increase; increased; a firm
[C. reduce, increased; a firm]
(16017)
The median voter model
A. does not work well in the area of trade policy.
B. tends to result in biased tariff rates.
C. works well in the area of trade policy.
D. is not widely practiced in the United States.
E. is not intuitively reasonable.
[A. does not work well in the area of trade policy.]
(15910)
A country's budget constraint states that
A. a country will engage in trade only if the value of goods produced exceeds the
value of goods consumed.
B. whether or not a country engages in trade, the value of goods consumed must
be equal to the value of goods produced
C. a country will engage in trade only if the value of goods consumed exceeds
the value of goods produced.
D. real income in the exporting country must be equal to real income in the
importing country.
E. unless a country engages in trade, the value of goods consumed cannot
exceed the value of goods produced.
[B. whether or not a country engages in trade, the value of goods consumed
must be equal to the value of goods produced]
(16017)
Historically those few developing countries which have succeeded in significantly
raising their per-capita income levels
A. tended to provide heavy protection to domestic industrial sectors.
B. favored industrial to agricultural or service sectors.
C. did so to the detriment of their nearest neighbors.
D. did accomplish this with import-substituting industrialization.
E. did not accomplish this with import-substituting industrialization
[E. did not accomplish this with import-substituting industrialization]
(16018)
How would you describe the world distribution of income?
A. completely unpredictable
B. persistently unequal
C. fairly equal
D. temporarily unequal
E. converging
[B. persistently unequal]
(15966)
The quantitative importance of U.S. protection of the domestic clothing industry is
best explained by the fact that
A. most of the exporters of clothing into the U.S. are poor countries.
B. the technology involved is very advanced.
C. this industry is an important employer of highly skilled labor.
D. this industry is an important employer of low skilled labor.
E. this industry is a politically well organized sector in the U.S.
[E. this industry is a politically well organized sector in the U.S.]
(4554)
If a firm's output doubles when all inputs are doubled, production is said to occur
under conditions of
A. constant returns to scale
B. imperfect competition
C. intra-industry equilibrium.
D. increasing returns to scale.
E. decreasing returns to scale
[A. constant returns to scale]
(16017)
Low wages and poor working conditions in many U.S. trade partners
A. prove that international trade is exploitative.
B. prove that the gains-from-trade arguments of the Ricardian model are true.
C. prove that the gains-from-trade arguments of the Ricardian model are false.
D. may be a fact of life, but economists don't care.
E. are facts emphasized by U.S. labor in its contract negotiations.
[E. are facts emphasized by U.S. labor in its contract negotiations.]
(4353)
The infant industry argument was an important theoretical basis for
A. the East-Asian miracle.
B. the reduction of tariffs on Western Europe.
C. neo-colonialist theory of international exploitation.
D. historiography of the industrial revolution in Western Europe.
E. import-substituting industrialization.
[E. import-substituting industrialization.]
(15981)
Taiwan and South Korea are examples of developing nations that have recently
pursued these
industrialization policies
A. export promotion.
B. commercial dumping.
C. import substitution.
D. trade embargoes.
E. multilateral contract.
[A. export promotion.]
(15997)
Suppose one is offered a gamble in which you win $1,000 half the time but lose
$1,000 half the time. Since in this case one is as likely to win as to lose the
$1,000, the average payoff on this gamble # its expected value L is:
0.5 $1,000 + 0.5 (-$1,000) = 0.
Under such circumstances:
A. risk averse individuals will take the gamble.
B. no one will take the gamble.
C. risk lovers individuals will not take the gamble.
D. risk lovers and risk neutral individuals may take the gamble.
E. risk neutral individuals will not take the gamble
[D. risk lovers and risk neutral individuals may take the gamble.]
(15971)
For most developing countries
A. productivity is high among domestic workers.
B. population growth and illiteracy rates are low.
C. saving and investment levels are high.
D. pollution emissions are relatively low.
E. agricultural goods and raw materials constitute a high proportion of domestic
output.
[E. agricultural goods and raw materials constitute a high proportion of domestic
output.]
(15879)
The United States is less dependent on trade than most other countries because
A. the military power of the United States makes it less dependent on anything.
B. the United States is a relatively large country with diverse resources.
C. the United States is a "Superpower."
D. the United States invests in many other countries.
E. many countries invest in the United States.
[B. the United States is a relatively large country with diverse resources.]
(15939)
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the
international marketplace, then
A. the terms of trade of all countries will improve.
B. the terms of trade of food exporters will improve.
C. the terms of trade of cloth exporters will improve.
D. all countries would be better off.
E. the terms of trade of cloth exporters will worsen.
[C. the terms of trade of cloth exporters will improve.]
(15998) For most practical matters, economists assume that
A. most individuals are risk neutral
B. most individuals are risk lovers
C. individuals are risk lovers.
D. individuals are risk neutral
E. individuals are risk averse
[E. individuals are risk averse]
(15915) In the two-country model of international labor mobility
A. migration may reduce global output, although some groups are made better
off
B. migration results in increased global output, and all groups are made better
off.
C. migration has no effect on global output, although some groups are made
worse off
D. migration results in increased global output, although some groups are made
worse off.
E. migration has no effect on global output, although some groups are made
better off.
[D. migration results in increased global output, although some groups are made
worse off.]
(15947)
Specific tariffs are
A. import taxes calculated based solely on the origin country
B. import taxes calculated as a fraction of the value of the imported goods.
C. the same as import quotas.
D. import taxes calculated as a fixed charge for each unit of imported goods.
E. import taxes stated in specific legal statutes.
[D. import taxes calculated as a fixed charge for each unit of imported goods.]
(4541) The earliest statement of the principle of comparative advantage is
associated with
A. David Ricardo.
B. Adam Smith
C. David Hume
D. Bertil Ohlin
E. Eli Heckscher
[A. David Ricardo.]
(16017) The strongest political pressure for a trade policy that results in higher
protectionism comes from
A. domestic workers lobbying for export restrictions.
B. domestic consumers lobbying for export restrictions.
C. domestic workers lobbying for free trade.
D. domestic consumers lobbying for import restrictions.
E. domestic workers lobbying for import restrictions.
[E. domestic workers lobbying for import restrictions.]
(15914)
Immigration into the U.S. over the past century has caused the percentage of
immigrants in the U.S. population to
A. fall steadily over the entire century.
B. rise steadily over the entire century
C. fall steadily until the 1970s and increase thereafter.
D. remain relatively constant over the time period.
E. rise steadily until the 1970s and fall thereafter.
[C. fall steadily until the 1970s and increase thereafter.]
(4564) A lower tariff on imported steel would most likely benefit
A. foreign producers at the expense of domestic consumers.
B. domestic manufacturers of steel.
C. foreign consumers of steel.
D. domestic consumers of steel
E. workers in the steel industry
[D. domestic consumers of steel]
(15946)
If some industries exhibit internal increasing returns to scale in each country, we
expect to see
A. perfect competition in these industries.
B. high levels of specialization in both countries.
C. increased productivity in both countries.
D. intra-industry trade between countries.
E. inter-industry trade between countries.
[A. perfect competition in these industries.]
(15978)
The imperfect capital market justification for infant industry promotion
A. assumes that new industries will tend to have low profits
B. assumes that infant industries will be in products of comparative advantage
C. assumes that infant industries will soon mature.
D. assumes that developing country will reward the donor country.
E. assumes that banks can allocate resources efficiently.
[A. assumes that new industries will tend to have low profits]
(4338)
The Ricardian two-country two-good model predicts that there are potential
benefit NOT
A. when one country has significantly lower wages than the other country.
B. the mechanism that determines which country will specialize in which good.
C. when both countries have the same types of technology available.
D. the effect of trade on income distribution.
E. when one country has an absolute advantage in the production of both goods.
[D. the effect of trade on income distribution.]
An important insight into international trade theory is that when two countries
engage in voluntary trade
A) one country always benefits at the expense of the other.
B) it is almost always beneficial to both countries.
C) it only benefits the low-wage country.
D) it only benefits the high-wage country.
E) it is almost never beneficial to both countries.
[B) it is almost always beneficial to both countries.]
One way in which the Heckscher-Ohlin model differs from the Ricardo model of
comparative advantage is by assuming that ________ is (are) identical in all
countries.
A. factor endowments
B. scale of production
C. factor intensities
D. technology
E. opportunity costs
[D. technology]
Since World War II, the likelihood that the job of a new college graduate will be
directly or indirectly affected by world trade
A) remained constant.
B) increased.
C) decreased.
D) fluctuated widely with no clear trend.
E) increased slightly before dropping off.
[B) increased.]
Japan's protection of its semiconductor (RAM) producers is today seen as an
object lesson in:
A) how strategic planning may backfire cause a large waste of resources
B) How monopolies can outlast government intervention
C) how government intervention may create a meaningful comparative
advantage
D) How externalities may be successfully exploited by protectionist policies
E) how excess returns may be successfully exploited by protectionist policies.
[A) how strategic planning may backfire cause a large waste of resources]
(16017)
Net unilateral transfers
A. are part of a national income.
B. are part of a country's product.
C. must be added to NNP in calculations of national income.
D. are part of a country's GNP.
E. Only A and C.
[E. Only A and C.]
The evidence usually cited to prove that globalization hurts workers in developing
countries
a. is conclusive.
b. is inconclusive due to the poorly funded Central Statistical Office of Mexico.
c. is inconclusive due to the ambiguous theoretical implications of the findings.
d. is inconclusive due to poor statistical design of the underlying samples.
e. does not take into account the Heckscher-Ohlin model.
[c. is inconclusive due to the ambiguous theoretical implications of the findings.]
International trade can have important effects on the distribution of income
because
A. some resources are immobile in the short run
B. of government corruption
C. the more powerful countries take advantage of poor countries
D. rich countries take advantage of poor countries
E. different countries use different currencies
[A. some resources are immobile in the short run]
2) Which of the following type of funds cater to wealthy individuals, are not bound
by government regulations, and are actively traded in foreign exchange markets?
A. mutual funds
B. pension funds
C. exchange funds
D. hedge funds
[D. hedge funds]
The growth successes of the high performance Asian economies
A. rejects the belief that economic development requires import substitution
policies.
B. rejects the belief that export-oriented industrialization is likely to promote
economic devel
C. enforces United States' hesitation to trade with developing countries.
D. enforces United States' hesitation to trade with developing countries.
E. supports the belief that economic development requires import substitution
policies
[A. rejects the belief that economic development requires import substitution
policies.]
(16009)
An inflation-prone country
A. loses from vesting its fiscal policy decisions with a "conservative" central bank.
B. loses from vesting its monetary policy decisions with a "conservative" central
bank.
C. remains constant when vesting its fiscal policy decisions with a "conservative"
central bank
D. gains from vesting its monetary policy decisions with a "conservative" central
bank.
E. gains from vesting its fiscal policy decisions with a "conservative" central
bank.
[D. gains from vesting its monetary policy decisions with a "conservative" central
bank.]
(15986) The Japanese currency is called the
A. Euro.
B. Yen.
C. DM.
D. Pound.
E. Dollar.
[B. Yen.]
(16017)
The sale of
A. the GNP does not include sale of used items priced below $1000.
B. a used textbook does enter GNP.
C. both a used textbook and a used house do not enter GNP.
D. a used house does not enter GNP, but the sale of a used book does.
E. a used textbook does not enter GNP, but the sale of a used house does.
[C. both a used textbook and a used house do not enter GNP.]
The General Agreement on Tariffs and Trade and the World Trade Organization
have resulted in
A. a number of rounds of multilateral trade agreements.
B. termination of international theft of copyrights.
C. termination of export subsidies applied to manufactured goods.
D. termination of import tariffs applied to manufactures.
E. termination of import tariffs applied to agricultural commodities.
[A)a number of rounds of multilateral trade agreements.]
(15898) Trade between two countries can benefit both countries if
A. each country enjoys superior terms of trade.
B. each country has a more elastic demand for the imported goods.
C. each country has a more elastic supply for the exported goods.
D. each country produces a wide range of goods for export.
E. each country exports that good in which it has a comparative advantage.
[E. each country exports that good in which it has a comparative advantage.]
The Ricardian model of comparative advantage lends support to the argument
that
a. trade is mutually beneficial to the countries that engage in it.
b. trade tends to worsen the conditions of owners of capital in rich countries.
c. trade tends to worsen the conditions of workers in rich countries.
d. trade tends to worsen the conditions of workers in poor countries.
e. trade tends to worsen the conditions of unskilled labor in rich countries.
[a. trade is mutually beneficial to the countries that engage in it.]
(16017) Terms of trade refers to
A. what goods are imported.
B. the relative price at which trade occurs.
C. the tariffs applied to trade.
D. what goods are exported
E. the volume of trade
[B. the relative price at which trade occurs.]
In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across
the border would
A) move the point of production along the production possibility curve.
B) shift the production possibility curve outward, and increase the production of
both goods.
C) shift the production possibility curve outward and decrease the production of
the labor-intensive product.
D) shift the production possibility curve outward and decrease the production of
the capital-intensive product.
E) shift the possibility curve outward and displace preexisting labor.
[D) shift the production possibility curve outward and decrease the production of
the capital-intensive product.]
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing
50 British pounds if the exchange rate is 1.8 dollars per one British pound?
A) 40 dollars
B) 90 dollars
C) 50 dollars
D) 100 dollars
E) 95 dollars
[B) 90 dollars]
The Heckscher-Ohlin, factor-proportions model lends support to the argument
that
A) trade tends to worsen the conditions of unskilled labor in rich countries.
B) trade tends to worsen the conditions of owners of capital in rich countries.
C) trade tends to worsen the conditions of workers in poor countries.
D) trade tends to worsen the conditions of workers in rich countries.
E) trade tends to worsen the conditions of highly skilled workers in rich countries.
[A) trade tends to worsen the conditions of unskilled labor in rich countries.]
One of the major issues that arose during the Doha round of negotiations
involved complaints by ________ about ________.
A. manufacturers; intellectual property
B. South and Central American countries; domestic content requirements
C. Eastern European countries; European Union tariffs
D. developing countries; agricultural subsidies.
E. industrialized countries; enforcement of contracts
[D. developing countries; agricultural subsidies.]
(4363) For most macroeconomists
A. national income accounts and national output accounts are equal to each
other.
B. national income accounts exceed national output accounts
C. it is impossible to tell whether national income accounts equal to national
output accounts
D. national income accounts is much more important than national output
accounts.
E. national output accounts exceed national income accounts.
[A. national income accounts and national output accounts are equal to each
other.]
Export embargoes cause greater losses to consumer surplus in the target
country
a.the larger the target country's labor force is.
b.the more elastic is the target country's domestic supply
c.the lesser its initial dependence on foreign produced goods
d.the more inelastic the target country's supply.
[d.the more inelastic the target country's supply.]
Approximately what percent of all world production of goods and services is
exported to other countries?
A) 10%
B) 30%
C) 50%
D) 100%
E) 90%
[B) 30%]
(15891)
In the pre-World War I period, the U.S. exported mainly
A. weapons.
B. services.
C. technology intensive products.
D. manufactured goods.
E. primary products including agricultural.
[E. primary products including agricultural.]
(16017)
If a good is capital intensive it means that the good is produced
A. using capital as the only input
B. using relatively more capital than goods that are not labor intensive.
C. using capital such that the cost of capital is more than 50% of total cost.
D. using more capital per unit of output than goods that are not capital intensive.
E. using capital such that the total cost of capital is greater than the total cost of
labor.
[D. using more capital per unit of output than goods that are not capital
intensive.]
(4556) The existence of external economies of scale
A. focuses more on individual firms than the industry as a whole
B. tends to result in one huge monopoly
C. tends to result in large profits for each firm.
D. cannot be associated with a perfectly competitive industry.
E. may be associated with a perfectly competitive industry
[E. may be associated with a perfectly competitive industry]
(4378)
Which one of the following statements is MOST accurate?
A. In general, consumption demand rises by more than income.
B. In general, consumption demand rises by more than disposable income.
C. In general, consumption demand rises by the same amount as disposable
income rises
D. In general, consumption demand rises by less than disposable income.
E. In general, consumption demand rises are unrelated to disposable income
rises.
[D. In general, consumption demand rises by less than disposable income.]
(16017)
Assume that labor is the only factor of production and that wages in the United
States equal $20 per hour while wages in Japan are $10 per hour. Production
costs would be lower in the United States as compared to Japan if
A. U.S. labor productivity equaled 40 units per hour and Japan's 15 units per
hour.
B. U.S. labor productivity equaled 40 units per hour and Japan's 25 units per
hour.
C. U.S. labor productivity equaled 15 units per hour and Japan's 40 units per
hour.
D. U.S. labor productivity equaled 30 units per hour and Japan's 20 units per
hour.
E. U.S. labor productivity equaled 20 units per hour and Japan's 30 units per
hour.
[A. U.S. labor productivity equaled 40 units per hour and Japan's 15 units per
hour]
(16017) The dollar rate of return on euro deposits is
A. the euro interest rate plus the rate of inflation against the euro.
B. the euro interest rate minus the rate of inflation against the euro.
C. approximately the euro interest rate minus the rate of depreciation of the
dollar against the euro.
D. the rate of appreciation of the dollar against the euro.
E. approximately the euro interest rate plus the rate of depreciation of the dollar
against the euro.
[E. approximately the euro interest rate plus the rate of depreciation of the dollar
against the euro.]
(16017)
Statistical evidence suggests that
A. import substitution is to this day the preferred growth strategy promoted by the
World Bank.
B. import substitution proved to be the most effective aid for developing countries
before 1970.
C. import substitution tends to lead to relatively low effective rates of protection
D. free trade policies promote economic growth more effectively than do import
substitution policies.
E. import substituting policies tend to promote effective exploitation of scale
economies.
[D. free trade policies promote economic growth more effectively than do import
substitution policies.]
(4536)
According to the gravity model, a characteristic that tends to affect the probability
of trade existing between any two countries is
A. the number of different product varieties produced by their industries.
B. their cultural affinity
C. their colonial-historical ties.
D. the distance between them.
E. the average weight/value of their traded goods.
[D. the distance between them.]
(16017)
An export subsidy will cause the terms of trade of the_____country to_____and
will____
the country.
A. importing; suffer, benefit
B. exporting; improve; benefit
C. importing; improve; harm
D. importing; suffer; harm
E.exporting; suffer; harm
[E. exporting; suffer; harm]
(16008)|
The EU countries were prompted to seek closer coordination of monetary
policies and greater
exchange rate stability in order
A. both to enhance Europe's role in the world monetary system and to turn the
European Union into a truly unified market.
B. to turn the European Union into a truly unified market.
C. to homogenize all European cultures.
D. both to turn the European Union into a truly unified market and to counter the
rise of Japan in international
financial markets.
E. to enhance Europe's role in the world monetary system.
[A. both to enhance Europe's role in the world monetary system and to turn the
European Union into a truly unified market.]
(16017)
In the 2-factor, 2 good Heckscher-Ohlin model, trade will______the owners of a
country's______factor and will________the good that uses that factor
intensively.
A. benefit; scarce; import
B. harm; scarce; export
C. harm; abundant, import
D. benefit; abundant; export
E. benefit; scarce; export
[D. benefit; abundant; export]
(16017)
Assume that labor is the only factor of production and that wages in the United
States equal $20 per hour while wages in Japan are $10 per hour. Production
costs would be lower in the United States as
compared to Japan if
A. U.S. labor productivity equaled 40 units per hour and Japan's 15 units per
hour.
B. U.S. labor productivity equaled 40 units per hour and Japan's 25 units per
hour.
C. U.S. labor productivity equaled 15 units per hour and Japan's 40 units per
hour.
D. U.S. labor productivity equaled 30 units per hour and Japan's 20 units per
hour.
E. U.S. labor productivity equaled 20 units per hour and Japan's 30 units per
hour.
[A. U.S. labor productivity equaled 40 units per hour and Japan's 15 units per
hour.]
(16017)
Which industrialization policy used by developing countries places emphasis on
the comparative
advantage principle as a guide to resource allocation?
A. international commodity agreements
B. intra-industry trade practice
C. Infant industry promotion
D. import substitution
E. export promotion
[E. export promotion]
(4359) The United States
A. provides support for R&D through grant incentives.
B. provides support for R&D through tax legislation
C. does not provide more support for R&D as compared to other forms of
investment.
D. provides support for R&D by imposing high tariffs on R&D intensive products.
E. provides support for R&D by providing direct subsidies for such activities.
[B. provides support for R&D through tax legislation]
(16003) The international capital market is:
A. an organization of fiscal policies that dictate international trade.
B. a market in which capital assets are exchanged for services.
C. the international currency exchange.
D. not really a single market, but a group of closely interconnected markets in
which asset exchanges with some international dimension take place.
E. the market that is subject to intense regulation and must file a report to the
Basel committee on a biannual
basis.
[D. not really a single market, but a group of closely interconnected markets in
which asset exchanges with some international dimension take place.]
(16017)
External economies of scale arise when the cost per unit
A. rises as the industry and the average firm grows larger
B. rises as the industry grows larger and falls as the average firm grows larger
C. falls as the industry and the average firm grows larger.
D. rises as the industry and the average firm grows larger
[C. falls as the industry and the average firm grows larger.]
(15974) The effect of an export tariff on a large country is to _____ the terms of
trade.
A. sometimes worsen
B. leave unchanged
C. sometimes improve
D. always improve
E. always worsen
[D. always improve]
(4332)
In order to know whether a country has a comparative advantage in the
production of one particular product we need information on at least ________
unit labor requirements from 2 countries to compare opportunity costs.
A. four
B. five
C. two
D. three
E. one
[A. four]
(16017)
It is argued that special interest groups are likely to take over and promote
protectionist policies, which may lead to a decrease in national economic
welfare. This argument leads to
A. a presumption that free trade is generally a second-best policy, to be avoided
if feasible alternatives are available.
B. a presumption that free trade is generally a second-best policy, to be avoided
if feasible alternatives are available.
C. a presumption that protectionist policies will better serve a country as a whole
than free trade policies.
D. a presumption that free trade is the likely equilibrium solution if the
government allows special interest groups to dictate its trade policy.
E. a presumption that in practice a free trade policy is likely to be better than
alternatives.
[E. a presumption that in practice a free trade policy is likely to be better than
alternatives.]
(15977)
Which trade strategy have developing countries used to restrict imports of
manufactured goods
so that the domestic market is preserved for home producers?
A. export promotion
B. import substitution
C. export subsidies
D. international commodity
E. multilateral contract
[B. import substitution]
(15877) A fundamental problem in international economics is how to produce
A. a world government that can harmonize trade and monetary policies
B. a worldwide form of currency.
C. a counter-cyclical monetary policy so that all countries will not be adversely
affected by a financial crisis in one country.
D. an acceptable degree of harmony among the international trade policies of
different countries.
E. a perfect degree of monetary harmony.
[D. an acceptable degree of harmony among the international trade policies of
different countries.]
(16017)
In open economies
A. as in a closed economy, saving and investment are not necessarily equal.
B. saving and investment are not necessarily equal as they are in a closed
economy.
C. investment always refers to the domestic stock market.
D. saving and investment are necessarily equal.
E. saving and investment are necessarily equal contrary to the case of a closed
economy.
[B. saving and investment are not necessarily equal as they are in a closed
economy.]
(4538)
A country engaging in trade according to the principles of comparative advantage
gains from trade because it
A. is producing exports while outsourcing services.
B. is producing imports indirectly more efficiently than it could domestically
C. is producing imports indirectly using fewer labor units.
D. is producing exports using fewer labor units.
E. is producing exports indirectly more efficiently than it could alternatively.
[B. is producing imports indirectly more efficiently than it could domestically]
(4362) A country's gross national product (GNP) is
A. the value of all final goods produced by its factors of production and sold on
the market in a given time period.
B. the value of all final goods and services produced by its factors of production,
excluding land, and sold on the market in a given time period.
C. the value of all final goods and services produced by its factors of production
and sold on the market.
D. the value of all final goods and services produced by its factors of production
and sold on the market in a given time period.
E. the value of all intermediate goods and services produced by its factors of
production and sold on the market in a given time period
[D. the value of all final goods and services produced by its factors of production
and sold on the market in a given time period.]
(4352)
A trade policy designed to alleviate some domestic economic problem by
exporting it to foreign
countries is know as a(n)
A. countervailing tariff policy.
B. international dumping policy.
C. redistribution quota policy.
D. trade adjustment assistance policy.
E. beggar thy neighbor policy.
[E. beggar thy neighbor policy.]
(16017) In the specific factors model, which of the following is treated as a
specific factor?
A. Land
B. Food
C. Technology
D. Labour
E. Capital
[A. Land]
(15994)
The action of arbitrage is
A. the process of buying and selling currency at the same price.
B. the process of buying a currency cheap and selling it dear.
C. the process of selling currency at different prices in different markets.
D. the process of buying a currency and holding onto it to take it off the market
E. the process of buying a currency dear and selling it cheap
[B. the process of buying a currency cheap and selling it dear.]
(4537)
In general, which of the following do NOT tend to increase trade between two
countries?
A. the existence of well controlled borders between countries
B. larger economies
C. mutual membership in preferential trade agreements
D. historical ties
E. linguistic and/or cultural affinity
[A. the existence of well controlled borders between countries]
(16020) Most developing countries have tried to
A. control capital movements
B. Hard to tell from the data.
C. in the 1960s and 1970s liberalize, now to control.
D. liberalize capital movement
E. in the 1960s and 1970s control, now to liberalize.
[A. control capital movements]
(16017) The infant industry argument calls for active government involvement
A. only if the industry is not one already dominated by industrial countries
B. only if the government forecasts are accurate.
C. only if the industry has a high value added.
D. only if some market failure can be identified
E. only if the industry is independently able to earn high returns.
[D. only if some market failure can be identified]
(4336)
The gravity model offers a logical explanation for the fact that
A. trade in services has grown faster than trade in goods.
B. trade in manufactures has grown faster than in agricultural products.
C. Intra-European Union trade exceeds international trade by the European
Union.
D. trade between Asia and the U.S. has grown faster than NAFTA trade.
E. the U.S. trades more with Western Europe than it does with Canada.
[C. Intra-European Union trade exceeds international trade by the European
Union.]
(16019)
In developing countries, exchange rates tend to be
A. floating with some government intervention.
B. hard to tell from the data.
C. pegged.
D. run by currency boards.
E. flexible.
[C. pegged.]
If one observes that Japan was traditionally a net foreign lender, one could
conclude that relative to its international trade and financial partners
A) Japan's intertemporal production possibilities are biased toward present
consumption.
B) Japan's intertemporal production possibilities are not biased.
C) Japan preferred to consume beyond its production in the present.
D) Japan's intertemporal production possibilities are larger than that of the other
countries.
E) Japan's intertemporal production possibilities are biased toward future
consumption.
[E) Japan's intertemporal production possibilities are biased toward future
consumption.]
(16017) If the world terms of trade equal those of country F, then
A. country H but not country F will gain from trade.
B. country H and country F will both gain from trade.
C. neither country H nor F will gain from trade.
D. only the country whose government subsidizes its exports will gain.
E. country F but not country H will gain from trade.
[A. country H but not country F will gain from trade.]
The simple model of competition among political parties long used by political
scientists tends to lead to the practical solution of selecting the
A) optimal tariff
B) Zero (free-trade) tariffs
C) the tariff rate supported by exporters
D) the tariffs rate favored by the median voter
E) prohibitive tariff
[D) the tariffs rate favored by the median voter]
Given the information in the table above, if wages were to double in Home, then
Home should
A. export widgets and import cloth.
B. export widgets.
C. export cloth.
D. export both and import nothing.
E. export and import nothing.
[C. export cloth.]
Trade theory suggests that Japan would gain from a subsidy the United States
provides its grain farmers if the gains to Japanese consumers of wheat products
more than offsets the losses to Japanese wheat farmers. This would occur as
long as Japan
A) is a net importer in bilateral trade flows with the United States.
B) is a net importer of wheat.
C) has a comparative advantage in wheat.
D) has an absolute advantage in producing wheat.
E) is involved in intra-industry trade with the United States.
[B) is a net importer of wheat.]
In the United States at the end of 2012, the total money supply, M1, amounted to
approximately
A) 16 percent of that year's GNP.
B) 20 percent of that year's GNP.
C) 30 percent of that year's GNP.
D) 40 percent of that year's GNP.
E) 50 percent of that year's GNP
[A) 16 percent of that year's GNP.]
(16017) In today's world markets, poor developing countries tend to rely primarily
on exports of
A. primary products.
B. high-tech products.
C. mineral products.
D. manufactured products.
E. agricultural products.
[D. manufactured products.]
(4342)
A country cannot produce a mix of products with a higher value than where
A. the isovalue line is below the production possibility frontier.
B. the isovalue line is above the production possibility frontier.
C. the isovalue line intersects the production possibility frontier.
D. the isovalue line is tangent with the indifference curve
E. the isovalue line is tangent to the production possibility frontier.
[E. the isovalue line is tangent to the production possibility frontier.]
An important insight of international trade theory is that when two countries
engage in voluntary trade
A. it is almost never beneficial to both countries.
B. one country always benefits at the expense of the other.
C. it only benefits the high wage country.
D. it only benefits the low wage country.
E. it is almost always beneficial to both countries
[E. it is almost always beneficial to both countries]
(16002) Asset trades that deal with debt instruments are best described as
A. share of stock.
B. bonds or bank deposits.
C. factors.
D. receipts.
E. exchange rate.
[B. bonds or bank deposits.]
Where there are internal economies of scale, the scale of production possible in
a country is constrained by
A. the size of the trading partner's country.
B. the size of the domestic market.
C. the size of the domestic plus the foreign market.
D. the size of the country.
E. the size of the foreign market.
[C. the size of the domestic plus the foreign market.]
(15992) Forward and spot exchange rates
A. move closely together and are equal on the value date.
B. are always such that the forward exchange rate is higher.
C. are necessarily equal.
D. do not move closely together.
E. are unrelated to the value date.
[A. move closely together and are equal on the value date.]
Suppose the United States eliminates its tariff on ball bearings used in producing
exports. Ballbearing prices in the United States would be expected to
A. increase, and the foreign demand for U.S. exports would decrease
B. decrease, and the foreign demand for U.S. exports would decrease.
C. decrease, and the foreign demand would be unchanged.
D. decrease, and the foreign demand for U.S. exports would increase
E. increase, and the foreign demand for U.S. exports would increase
[D. decrease, and the foreign demand for U.S. exports would increase]
Describe three types of gains from trades?
A. trades of imports for exports, trades of exports for imports, and trades of
natural resources for final assets
B. trades of exchange rates for goods or services, trades of goods or services for
property, and trade gold for textiles
C. trades of current goods for future services, trades of currency for gold, and
trades of one type of c for another
D. trades of services for goods, trades of currency for services, and trades of one
type of currency fo
E. trades of goods or services for goods or services, trades of goods or services
for assets, and trac assets for assets
[E. trades of goods or services for goods or services, trades of goods or services
for assets, and trac assets for assets]
(16013) The monetary efficiency ___
A. gain from pegging say the Norwegian krone to the euro (for example) will be
higher if factors of production can migrate freely between Norway and the euro
area.
B. loss from pegging the Norwegian krone to the euro (for example) will be
higher if factors of production can migrate freely between Norway and the euro
area.
C. gain or loss from pegging the Norwegian krone to the Euro cannot be
predicted using the available information.
D. gain from pegging the Norwegian krone to the euro (for example) will be lower
if factors of production can migrate freely between Norway and the euro area.
E. gain from pegging the Norwegian krone to the euro (for example) will be
higher if factors of production can not migrate freely between Norway and the
euro area.
[A. gain from pegging say the Norwegian krone to the euro (for example) will be
higher if factors of production can migrate freely between Norway and the euro
area.]
(4374) Which of the following statements is the MOST accurate? The law of one
price states
A. in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in different countries must sell for the same price.
B. in competitive markets free of transportation costs and official barriers to
trade, identical goods sold in different countries must sell for the same price
when their prices are expressed in terms of the same currency.
C. in competitive markets free of official barrier to trade, identical goods are sold
at the same price regardless of transportation costs.
D. identical goods sold in different countries must sell for the same price when
their prices are expressed in terms of the same currency.
E. in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in the same country must sell for the same price when their
prices are
[B. in competitive markets free of transportation costs and official barriers to
trade, identical goods sold in different countries must sell for the same price
when their prices are expressed in terms of the same currency.]
(16017)
If a very small country trades with a very large country according to the Ricardian
model, then ___
A. the small country will suffer a decrease in economic welfare.
B. the small country only will enjoy gains from trade.
C. both countries will enjoy equal gains from trade.
D. the large country will enjoy gains from trade.
E. the large country will suffer a decrease in economic welfare.
[B. the small country only will enjoy gains from trade.]
(15989)
A(n)_________of a nation's currency will cause imports to_______and exports
to_____,all other things held constant.
A. appreciation; increase; increase
B. depreciation; decrease; decrease
C. depreciation; increase; decrease
D. appreciation; decrease; increase
E. depreciation; decrease; increase
[E. depreciation; decrease; increase]
(4338)
The Ricardian two-country two-good model predicts that there are potential
benefits from trade, but NOT
A. when one country has significantly lower wages than the other country.
B. the mechanism that determines which country will specialize in which good.
C. when both countries have the same types of technology available.
D. the effect of trade on income distribution.
E. when one country has an absolute advantage in the production of both goods.
[D. the effect of trade on income distribution.]
(16017) An import tariff will cause the relative demand for______to_______and
the relative supply for_____ to_________
A. exports; increase; exports; decrease
B. exports; increase; imports; decrease
C. exports; decrease; exports; increase
D. imports; decrease; imports; increase
E. imports; increase; imports; decrease
[D. imports; decrease; imports; increase]
(4356)
Which trade strategy have developing countries used to restrict imports of
manufactured goods so that the domestic market is preserved for home
producers?
A. export promotion
B. import substitution
C. export subsidies
D. international commodity agreement
E. multilateral contract
[B. import substitution]
One should expect________relationship between annual per-capita GDP and an
inverse index of corruption
A. a strong and positive
B. an unpredictable
C. a weak and positive
D. a weak and negative
E. a strong and negative
[A. a strong and positive]
The opportunity to exploit economies of scale is one of the gains to be derived by
removing tariffs and other trade distortions. These gains will be the result of a
decrease in __
A. world prices of imports
B. the consumption distortion loss triangle.
C. international labor mobility.
D. excessive entry and inefficient business practices.
E. the production distortion loss triangle.
[D. excessive entry and inefficient business practices.]
An efficient economy would set the marginal product in the traditional sector_
A. lower in the relatively capital intensive sector.
B. lower than that in the modern non-traditional sector
C. higher in the relatively capital intensive sector.
D. higher than that in the modern sophisticated sector.
E. equal to that in the modern sophisticated sector
[E. equal to that in the modern sophisticated sector]
The price of_______consumption in terms of_______consumption is__________
A. future; current; 1/(1 + r)
B. future; current; 1 + r
C. future; current; r
D. present; future; r
E. present; future; 1/(1 + r)
[A. future; current; 1/(1 + r)]
(15962)
The optimum tariff is most likely to apply to ___
A. a large tariff imposed by a large country.
B. a large tariff imposed by a small country.
C. an ad valorem tariff on a small country.
D. a small tariff imposed by a small country.
E. a small tariff imposed by a large country.
[A. a large tariff imposed by a large country.]
(4345) A monopolistic firm ___
A. cannot sell additional quantity unless it raises the price on each unit.
B. will always earn a profit in the long run.
C. can sell as much as it wants for any price it determines in the market.
D. will never sell a product whose demand is inelastic at the quantity sold.
E. cannot determine the price, which is determined by consumer demand.
[D. will never sell a product whose demand is inelastic at the quantity sold.]
(15987)
What is the exchange rate between the dollar and the British pound if a pair of
American jeans costs 60 dollars in New York and 30 Pounds in London?
A. 2.5 dollars per British pound
B. 3.5 dollars per British pound
C. 1.5 dollars per British pound
D. 0.5 dollars per British pound
E. 2 dollars per British pound
[E. 2 dollars per British pound]
(15945)
When there are external economies of scale, an increase in the size of the
market will ___
A. decrease the number of firms and lower the price per unit.
B. increase the number of firms and lower the price per unit
C. increase the number of firms and raise the price per unit.
D. not affect the number of firms, but will lower the price per unit.
E. decrease the number of firms and raise the price per unit.
[B. increase the number of firms and lower the price per unit]
Judging by the ongoing changes in tariff rates in major trading countries, the
world has been experiencing a great ___
A. trade liberalization.
B. lack of progress in the trade-policy area
C. shift from export subsidies to specific tariffs.
D. move towards regional integration
[A. trade liberalization.]
Rapidly growing developing countries tend to be borrowers on the international
capital markets. From this information we may surmise that they have a
comparative advantage in ___
A. consumer goods.
B. future income.
C. capital goods.
D. present income.
E. disposable income.
[B. future income.]
An increase in the real interest rate, all other things held constant, will cause a
country's__________to________
A. terms of trade; improve
B. current consumption: decrease
C. terms of trade; worsen
D. welfare level; improve
E. current consumption: increase
[B. current consumption: decrease]
Which of the following is NOT a major actor in the foreign exchange market?
A. non-bank financial institutions
B. commercial banks
C. corporations
D. tourists
E. central banks
[D. tourists]
(4531) Theories of international economics from the 18th and 19th Centuries are
A. not well understood by modern mathematically oriented theorists
B. only of moderate relevance in today's modern international economy.
C. highly relevant in today's modern international economy.
D. the only theories that actually relevant to modern international economy.
E. not relevant to current policy analysis.
[C. highly relevant in today's modern international economy.]
The Ricardian model of international trade demonstrates that trade can be
mutually beneficial. Why, then, do governments restrict imports of some goods?
A. Imports are only restricted when foreign-made goods do not meet domestic
standards of quality.
B. Import restrictions are the result of trade wars between hostile countries.
C. Trade can have substantial effects on a country's distribution of income
D. The Ricardian model is often incorrect in its prediction that trade can be
mutually beneficial.
E. Restrictions on imports are intended to benefit domestic consumers.
[C. Trade can have substantial effects on a country's distribution of income]
Cost-benefit analysis of international trade __
A. is empirically intractable.
B. never leads to government intervention in international trade.
C. focuses attention primarily on conflicts of interest within countries.
D. is basically useless.
E. focuses attention on conflicts of interest between countries.
[C. focuses attention primarily on conflicts of interest within countries.]
To help developing countries expand their industrial base, some industrial
countries have reduced tariffs on designated manufactured imports from
developing countries below the levels applied to imports from industrial countries.
This policy is called ___
A. export-led growth.
B. reciprocal trade agreement.
C. generalized system of preferences.
D. Most Favored Nation.
E. outsourcing.
[C. generalized system of preferences.]
Why does the gravity model work?
A. Large economies became large because they were engaged in international
trade.
B. Large economies tend to have large incomes and tend to spend more on
imports.
C. Large economies have relatively large incomes, and hence spend more on
government promotion of trade and investment.
D. Large economies tend to avoid trading with small economies.
E. Large economies have relatively larger areas which raises the probability that
a productive activity will take place within the borders of that country.
[B. Large economies tend to have large incomes and tend to spend more on
imports.]
(16017)
If firms in an industry are generating knowledge that other firms can use without
paying for it, this industry is characterized by
A. social benefits that exceed private benefits.
B. social benefits that undermine private benefits.
C. social costs that exceed social benefits.
D. social costs that exceed private costs.
E. private benefits that exceed social benefits.
[A. social benefits that exceed private benefits.]
(15944)
The existence of internal economies of scale
A. is associated only with sophisticated products such as aircraft.
B. focuses more on the industry than individual firms.
C. cannot be associated with a perfectly competitive industry.
D. cannot form the basis for international trade.
E. may be associated with a perfectly competitive industry.
[C. cannot be associated with a perfectly competitive industry.]
(15946)
If some industries exhibit internal increasing returns to scale in each country, we
should not expect to see
A. perfect competition in these industries.
B. high levels of specialization in both countries.
C. increased productivity in both countries.
D. intra-industry trade between countries.
E. inter-industry trade between countries.
[A. perfect competition in these industries.]
(15980) Import substitution policies make use of
A. tariffs that discourage goods from entering a country.
B. quotas applied to goods that are shipped abroad
C. production subsidies granted to industries with comparative advantage.
D. production facilities provided by industrialized countries.
E. tax breaks granted to industries with comparative advantage.
[A. tariffs that discourage goods from entering a country.]
If a country produces good Y (measured on the vertical axis) and good X
(measured on the horizontal axis), then the absolute value of the slope of its
production possibility frontier is equal to
A) the opportunity cost of good X.
B) the price of good Y divided by the price of good X.
C) the price of good X divided by the price of good Y.
D) the opportunity cost of good Y.
E) the cost of capital (assuming that good Y is capital intensive) divided by the
cost of labor.
[A) the opportunity cost of good X.]
(16017) If a good is capital intensive it means that the good is produced
A. using capital as the only input
B. using relatively more capital than goods that are not labor intensive.
C. using capital such that the cost of capital is more than 50% of total cost.
D. using more capital per unit of output than goods that are not capital intensive.
E. using capital such that the total cost of capital is greater than the total cost of
labor.
[B. using relatively more capital than goods that are not labor intensive.]
(4573) General equilibrium considerations lead to the realization that importsubstituting policies have the effect of
A. encouraging exports.
B. creating competitive manufacturing sectors
C. generating large tariff revenues for the government
D. encouraging an efficient use of a country's resources
E. discouraging exports.
[E. discouraging exports.]
(4553) If the ratio of price of cloth (PC) divided by the price of food (PF)
increases in the international marketplace, then
A. world relative quantity of cloth supplied will increase
B. world relative quantity of cloth demanded will decrease.
C. world relative quantity of cloth supplied and demanded will increase
D. world relative quantity of food will increase.
E. world relative quantity of cloth supplied and demanded will decrease.
[A. world relative quantity of cloth supplied will increase]
(16017) In the Heckscher-Ohlin model, when there is international-trade
equilibrium
A. workers in the capital rich country will earn more than those in the poor
country.
B. the capital rich country will charge more for the capital intensive good than the
price paid by the capital poor country for the capital-intensive good.
C. the capital rich country will charge less for the capital intensive good than the
price paid by the capital poor country for the capital-intensive good.
D. the relative price of the capital intensive good in the capital rich country will be
the same as that in the capital poor country.
E. the workers in the capital rich country will earn less than those in the poor
country.
[D. the relative price of the capital intensive good in the capital rich country will
be the same as that in the capital poor country.]
(15954) The most vocal political pressure for tariffs is generally made by
A. producers lobbying for import tariffs.
B. consumers lobbying for export tariffs.
C. consumers lobbying for import tariffs.
D. consumers lobbying for lower import tariffs.
E. producers lobbying for export tariffs.
[A. producers lobbying for import tariffs.]
(16017) A reason why it is difficult for developing countries to maintain a cartel is
that
A. the elasticity of demand for a cartel's output decreases over time
B. tariffs allow producers in the cartel to produce items that make no profit.
C. producers in the cartel have the motivation to lower prices but not to raise
prices.
D. economic profits discourage other producers from entering the industry.
E. producers in the cartel have an economic incentive to cheat.
[E. producers in the cartel have an economic incentive to cheat.]
(15984) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater
costing 50 British pounds if the exchange rate is 1.25 dollars per one British
pound?
A. 62.5 dollars
B. 50 dollars
C. 60 dollars
D. 70 dollars
E. 80 dollars
[A. 62.5 dollars]
(15983) Ricardian equivalence argues that when the government cuts taxes and
raises its deficit,
A. consumers anticipate that the low tax rates will continue.
B. consumers anticipate that they will face lower taxes later to pay for the
resulting government debt.
C. consumers anticipate that they will face higher taxes later to pay for the
resulting government debt.
D. consumers anticipate it will affect their future taxes, in general in the direction
of lowering future taxes.
E. consumers anticipate that they will higher services from the government.
[C. consumers anticipate that they will face higher taxes later to pay for the
resulting government debt.]
(16017) For most macroeconomists
A. gross national product is much more important than gross national income.
B. it is hard to tell whether gross national income equal gross national product.
C. gross national income and gross national product are the same.
D. gross national product exceeds gross national product.
E. gross national income exceeds gross national product.
[C. gross national income and gross national product are the same.]
(16015) Compared with industrialized economies, most developing countries are
poor in the factors of production essential to modern industry: These factors are
A. fertile land and unskilled labor.
B. fertile land and skilled labor.
C. water and capital.
D. capital and unskilled labor
E. capital and skilled labor
[E. capital and skilled labor]
(4343) If a firm's output more than doubles when all inputs are doubled,
production is said to occur under conditions of
A. constant returns to scale
B. imperfect competition.
C. intra-industry equilibrium.
D. increasing returns to scale
E. decreasing returns to scale.
[D. increasing returns to scale]
(4548) The Heckscher-Ohlin model differs from the Ricardian model of
Comparative Advantage in that the former
A. has two factors of production.
B. has varying wage rates.
C. has two production possibility frontiers (one for each country).
D. has only two products.
E. has only two countries.
[A. has two factors of production].
(15892) In the current Post-Industrial economy, international trade in services
(including banking and financial services)
A. is an increasingly important component of global trade.
B. does not exist.
C. far surpasses the predictions of economist Alan Blinder.
D. is relatively stagnant.
E. dominates world trade.
[A. is an increasingly important component of global trade.]
(16014) A country that joins an exchange rate area
A. gives up its ability to use the exchange rate and monetary policy for the
purpose of stabilizing output and employment.
B. gives up its ability to use only monetary policy for the purpose of stabilizing
output and employment.
C. does not give up its ability to use the exchange rate and monetary policy for
the purpose of stabilizing
output and employment.
D. does not gives up its ability to use only monetary policy for the purpose of
stabilizing output and employment.
E. gives up its ability to use the exchange rate for the purpose of stabilizing
output and employment.
[A. gives up its ability to use the exchange rate and monetary policy for the
purpose of stabilizing output and employment.]
(16017) A factor of production that cannot be used outside of a particular sector
of an economy is a(an) ___
A. import-competing factor.
B. export-competing factor.
C. mobile factor.
D. specific factor.
E. variable factor.
[D. specific factor.]
(16017) If Australia has relatively more land per worker, and Belgium has
relatively more capital per worker, then if trade began between these two
countries
A. the relative price of the capital-intensive product would increase in Australia.
B. the relative price of the land-intensive product would increase in Belgium.
C. the relative price of the capital-intensive product would decrease in Belgium.
D. relative product prices would diverge between Australia and Belgium.
[C. the relative price of the capital-intensive product would decrease in Belgium.]
(15893) Since the period following World War II (the early 1950s), the proportion
of most countries production being used in some other country
A. remained constant.
B. increased
C. decreased.
D. fluctuated widely with no clear trend.
E. increased slightly before dropping off.
[D. fluctuated widely with no clear trend.]
(15956) The tariff levied in a "large country" (Home), lowers the world price of the
imported good. This causes
A. no change in the foreign price of the good it imports.
B. foreign consumers to demand less of the good on which was levied a tariff.
C. domestic demand for imports to decrease.
D. domestic demand for imports to increase.
E. foreign suppliers to produce less of the good on which was levied a tariff.
[E. foreign suppliers to produce less of the good on which was levied a tariff.]
(15949) A specific tariff provides home producers more protection when
A. it is levied on manufactured goods rather than primary products.
B. the home supply outnumbers the foreign imports.
C. it is applied to a commodity with many grade variations.
D. the home market buys cheaper products rather than expensive products.
E. the home demand for a good is elastic with respect to price changes.
[D. the home market buys cheaper products rather than expensive products.]
(15982) In a closed economy, private saving,, is equal to
A. I-(G-T).
B. I+ (G-T) + C.
C. I + (G + T).
D. I + (G-T).
E. I- (G + T).
[D. I + (G-T).]
(16005) As a country begins to liberalize its capital account, what would you
expect to happen to the difference between the interest rates for similar assets in
this country and another country with open capital markets?
A. it depends on the existing exchange rate.
B. exponential divergence
C. get larger
D. stay the same
E. get smaller
[E. get smaller]
(16017) Which one of the following statements is the MOST accurate?
A. Spot exchange rates and forward exchanges rates are equal when the value
date and the date of the spot transaction are the same.
B. Spot exchange rates and forward exchange rates never move closely
together.
C. Spot exchange rates are always higher than forward exchange rates.
D. Spot exchange rates are always lower than forward exchange rates.
E. Spot exchange rates and forward exchanges rates are always equal.
[A. Spot exchange rates and forward exchanges rates are equal when the value
date and the date of the spot transaction are the same.]
(16017) If the goods' money prices do not change, a depreciation of the dollar
against the pound
A. makes British jeans more expensive in Britain.
B. doesn't change the relative price of sweaters and jeans.
C. makes British sweaters cheaper in terms of American jeans.
D. makes British sweaters more expensive in terms of American jeans.
E. makes American jeans more expensive in terms of British sweaters.
[D. makes British sweaters more expensive in terms of American jeans.]
(15942) One advantage of the specialization that results from international trade
is that countries can take advantage of
A. production diversification
B. scale economies.
C. lower transport costs.
D. lower transport costs.
E. taste reversals.
[B. scale economies.]
The Ricardian model demonstrates that
A. trade between two countries may benefit both regardless of which good each
exports.
B. trade between two countries may benefit both if each exports the product in
which it has a comparative advantage.
C. trade between two countries will benefit both countries.
D. trade between two countries may benefit one but harm the other.
E. trade between two countries always benefits the country with a larger labor
force.
[B. trade between two countries may benefit both if each exports the product in
which it has a comparative advantage.]
Given the information in the table above, if it is ascertained that Foreign uses
prison-slave labor to produce its exports, then home should
A. export and import nothing
B. export widgets and import cloth.
C. export widgets
D. export cloth.
E. export both and import nothing.
[D.export cloth.]
Given the information in the table above, if the
Home economy suffered a meltdown, and the
Unit Labor Requirements doubled to 20 for cloth
and 40 for widgets then home should
A. export widgets and import cloth
B. export cloth.
C. export and import nothing
D. export both and import nothing
E. export widgets
[B. export cloth.]
A game-theory explanation of the paradox that even though all countries would
benefit if each chose free trade, in fact each tends to follow protectionist policies
is
A. prisoner's dilemma.
B. trade war.
C. collective action.
D. rent seeking.
E. benefit-cost analysis.
[A. prisoner's dilemma.]
Refer to the figure above, which shows domestic
supply and demand. If P1 is equal to P2 (the
world price) plus a tariff, then the social loss from
the tariff is equal to
A. P1 (Q3 - 02)
B. a + b+ c
С. в + с
D. b
E. P2 ((Q2 - Q1) + (Q4 - Q3)]
[C. в + с]
The optimum tariff is
A. the tariff, which maximizes the terms of trade gains.
B. not practical for a large country due to the likelihood of retaliation.
C. not practical for a small country due to the likelihood of retaliation.
D. the best tariff a country can obtain via a WTO negotiated round of
compromises.
E. the tariff, which maximizes the difference between terms of trade gains and
terms of trade loses.
[B. not practical for a large country due to the likelihood of retaliation.]
The quantitative importance of U.S. protection of the domestic clothing industry is
best explained by the fact that
A. most of the exporters of clothing into the U.S. are poor countries.
B. the technology involved is very advanced.
C. this industry is an important employer of highly skilled labor.
D. this industry is an important employer of low skilled labor.
E. this industry is a politically well organized sector in the U.S.
[E. this industry is a politically well organized sector in the U.S.]
The international capital market is
A. a set of arrangements by which individuals and firms exchange money now for
promises to pay in the future.
B. the place where emerging economies accept capital invested by banks.
C. the arrangement where banks build up their capital by borrowing from the
Central Bank.
D. the place where you can rent earth moving equipment anywhere in the world.
E. exclusively concerned with the debt crisis that ended in the 1990s.
[A. a set of arrangements by which individuals and firms exchange money now
for promises to pay in the future.]
The United States is less dependent on trade than most other countries because
A. the military power of the United States makes it less dependent on anything.
B. the United States is a relatively large country with diverse resources.
C. the United States is a "Superpower."
D. the United States invests in many other countries.
E. many countries invest in the United States.
[B. the United States is a relatively large country with diverse resources.]
If there are large disparities in wage levels between countries, then
A. trade is likely to be harmful to the country with the low wages
B. trade is likely to be harmful to the country with the high wages.
C. trade is likely to be harmful to both countries.
D. trade is likely to have no effect on either country.
E. trade is likely to be harmful to neither country.
[E. trade is likely to be harmful to neither country.]
Japan's trade policies with regard to rice reflect the fact that
A. there would be no gains from trade available to Japan if it engaged in free
trade in rice.
B. japanese rice farmers have significant political power.
C. Japan has a comparative advantage in rice production and therefore exports
most of its rice crop.
D. there are gains from trade that Japan captures by engaging in free trade in
rice.
E. Japan imports most of the rice consumed in the country.
[B. japanese rice farmers have significant political power.]
A country's budget constraint states that
A. a country will engage in trade only if the value of goods produced exceeds the
value of goods consumed.
B. whether or not a country engages in trade, the value of goods consumed must
be equal to the value of goods produced.
C. a country will engage in trade only if the value of goods consumed exceeds
the value of goods produced.
D. real income in the exporting country must be equal to real income in the
importing country.
E. unless a country engages in trade, the value of goods consumed cannot
exceed the value of goods produced.
[B. whether or not a country engages in trade, the value of goods consumed
must be equal to the value of goods produced.]
Economists consider the effects of free trade on income distribution to
be____important than the effects on overall welfare because
A. less; those who are harmed can be compensated by those who gain
B. more; those who are harmed are not compensated by those who gain
C. less; the wealthy benefit and only the poor lose
D. more; the effects on income distribution are major and consequential
E. less; the wealthy benefit and only the poor lose
[B. more; those who are harmed are not compensated by those who gain]
The learning curve describes the___relationship between__and___
A. inverse; education; annual income
B. direct; education; annual income
C. direct; education; labor productivity
D. inverse; unit cost; cumulative output
E. direct; unit cost; cumulative output
[D. inverse; unit cost; cumulative output]
The share of_ goods in employment is ___across the country. The share
of___goods in employment is___across the country.
A. nontradable; uniform; tradable; variable
B. nondurable; uniform; durable; variable
C. durable; uniform; nondurable; variable
D. traded; uniform; nontraded; variable
E. nontraded; variable; traded; uniform
[A. nontradable; uniform; tradable; variable]
In presence of external economies of scale, given competition among producers,
the downward-sloping
average cost curve can be interpreted as
A. a forward-falling supply curve.
B. an upward-sloping supply curve.
C. a horizontal supply curve.
D. a vertical supply curve.
[A. a forward-falling supply curve.]
How do we allocate statistical discrepancy among the current, capital, and
financial accounts?
A. We have no way of knowing exactly how to allocate this discrepancy.
B. Depend on the degree of certainty which we attribute to these accounts.
C. Divide it evenly amongst the three accounts.
D. Depend on the convention adopted by the specific financial institution.
E. Statistical discrepancy signals human errors made when dealing with financial
accounts.
[A. We have no way of knowing exactly how to allocate this discrepancy.]
An example of how GNP accounts for services provided by foreign-owned capital
(and GDP does not) is
A. earnings of a Spanish factory with British owners counts only in Spain's GDP.
B. earnings of a Spanish factory with British owners counts only in Britain's GNP.
C. earnings of a Spanish factory with British owners counts in Spain's GNP but
are part of Britain's GDP.
[D. earnings of a Spanish factory with British owners counts in Spain's GDP but
are part of Britain's GNP.]
E. earnings of a Spanish factory with British owners counts in Spain's GNP but
not in Britain's GDP or GNP.
[C. earnings of a Spanish factory with British owners counts in Spain's GNP but
are part of Britain's GDP.]
Disposable income is national income
A. less taxes collected from households and firms by the government.
B. plus net taxes collected from households and firms by the government.
C. less net taxes collected from firms by the government.
D. less net taxes collected from households by the government.
E. less net taxes collected from households and firms by the government.
[E. less net taxes collected from households and firms by the government.]
A major economic
A. benefit of fixed exchange rates is that they simplify economic calculations and
provide a more predictable basis for decisions that involve international
transactions than do floating rates.
B. benefit of flexible exchange rates it that they simplify economic calculations
and provide a more predictable basis for decisions that involve international
transactions than do crawling peg rates.
C. benefit of fixed exchange rates is that the value of goods will remain constant
across a large region of consumers.
D. benefit of floating exchange rates it that they simplify economic calculations
and provide a more predictable
[A. benefit of fixed exchange rates is that they simplify economic calculations and
provide a more predictable basis for decisions that involve international
transactions than do floating rates.]
In the pre-World War I period, the U.S. exported mainly
A. weapons.
B. services.
C. technology intensive products.
D. manufactured goods.
E. primary products including agricultural.
[E. primary products including agricultural.]
The gravity model offers a logical explanation for the fact that
A. trade in services has grown faster than trade in goods.
B. trade in manufactures has grown faster than in agricultural products.
C. Intra-European Union trade exceeds international trade by the European
Union.
D. trade between Asia and the U.S. has grown faster than NAFTA trade.
E. the U.S. trades more with Western Europe than it does with Canada.
[C. Intra-European Union trade exceeds international trade by the European
Union.]
Trade liberalization in developing countries has led to
A. a large rise in exports as a percentage of GDP.
B. a large decline in exports as a percentage of GDP.
C. a large rise in imports as a percentage of GDP.
D. a large decrease in imports as a percentage of GDP.
[C. a large rise in imports as a percentage of GDP.]
The high rates of effective protection in some industries in Latin America and
South Asia before 1970s allowed these industries
A. to exist even when their cost of production was three or four times the price of
the imports they replaced.
B. to be more globally competitive.
C. to have highly efficient scale production.
D. to thrive and promote further exports.
[A. to exist even when their cost of production was three or four times the price of
the imports they replaced.]
The Indian city of Bangalore has become famous for its growing role in the
A. global information technology industry.
B. global food and agriculture industry.
C. global steel industry.
D. global movie industry.
[A. global information technology industry.]
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing
50 British pounds if the exchange rate is 1.25 dollars per one British pound?
A. 62.5 dollars
B. 50 dollars
C. 60 dollars
D. 70 dollars
E. 80 dollars
[A. 62.5 dollars]
The future date on which the currencies are actually exchanged is called what?
A. the two-day window
B. the two-day window
C. the commitment date
D. the forward exchange rate
E. the value date
[E. the value date]
What is the exchange rate between the dollar and the British pound if a pair of
American jeans costs 60 dollars in New York and 30 Pounds in London?
A. 2.5 dollars per British pound
B. 3.5 dollars per British pound
C. 1.5 dollars per British pound
D. 0.5 dollars per British pound
E. 2 dollars per British pound
[E. 2 dollars per British pound]
For many developing countries, natural resources or agricultural commodities
make up___share of exports
A. close to no
B. an important
C. an unimportant
D. close to a 10 percent
E. close a to 5 percent
[E. close a to 5 percent]
In developing countries, exchange rates tend to be
A. floating with some government intervention.
B. hard to tell from the data.
C. pegged.
D. run by currency boards.
E. flexible.
[C. pegged.]
Most developing countries have tried to
A. control capital movements
B. Hard to tell from the data
C. in the 1960s and 1970s liberalize, now to control.
D. liberalize capital movement
E. in the 1960s and 1970s control, now to liberalize.
[A. control capital movements]
The intertemporal budget constraint means that the value of Home's
consumption over the two periods ___the value of consumption goods produced
in the two periods.
A. equals
B. is greater than
C. is less than
D. is different from
[C. is less than]
Terms of trade refers to
A. what goods are exported.
B. the volume of trade.
C. the relative price at which trade occurs.
D. the tariffs applied to trade.
E. what goods are imported.
[C. the relative price at which trade occurs]
A rise in the relative price of cloth leads the economy to produce___cloth
and____food, therefore___ the relative supply of cloth.
A. more; less; increase
B. more, less; decrease
C. less; more; increase
D. less; more; decrease
[A. more; less; increase]
The intertemporal tradeoff between present and future consumption is measured
by the
A. nominal interest rate.
B. real interest rate.
C. terms of trade.
D. rate of economic growth.
E. inflation rate.
[B. real interest rate.]
In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across
the border would
A. move the point of production along the production possibility curve.
B. shift the production possibility curve outward and decrease the production of
the capital-intensive product.
C. shift the production possibility curve outward and decrease the production of
the labor-intensive product.
D. shift the production possibility curve outward, and increase the production of
both goods.
E. shift the possibility curve outward and displace preexisting labor.
[B. shift the production possibility curve outward and decrease the production of
the capital-intensive product.]
Assume that only two countries. A and B, exist. Refer to the table above. If good
S is capital intensive, then following the Heckscher-Ohlin Theory
A. country B will export good S
B. trade will not occur between these two
countries
C. both countries will import good S.
D. country A will export good S.
E. both countries will export good S.
[A. country B will export good S]
In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A. relative abundance of factors of production.
B. the size of their economies.
C. military capabilities.
D. tastes and preferences
E. labor productivities.
[A. relative abundance of factors of production.]
For most practical matters, economists assume that
A. most individuals are risk neutral
B. most individuals are risk lovers
C. individuals are risk lovers.
D. individuals are risk neutral
E. individuals are risk averse
[E. individuals are risk averse]
As a country begins to liberalize its capital account, what would you expect to
happen to the difference between the interest rates for similar assets in this
country and another country with open capital markets?
A. it depends on the existing exchange rate.
B. exponential divergence
C. get larger
D. stay the same
E. get smaller
[C. get larger]
The two types of trade, intertemporal and pure asset swap .____perfect
substitutes, because_____
A. are not; asset swapping never relates to intertemporal trade
B. could possibly be; different economic states occur at different points in time
C. are not, asset swapping is immediate and involves only assets, while
intertemporal trade takes two time periods and involves both assets and
goods/services
D. are; they both offer considerable payoff and are equal in the long run
E. are; they both involve the smoothing out of now and future consumption
[B. could possibly be; different economic states occur at different points in time]
A country can control
A. its flexible exchange rate.
B. and avoid risks in international trade
C. monetary policy oriented toward domestic goals
D. foreign inflationary policies.
E. international capital movements.
[C. monetary policy oriented toward domestic goals]
When Japan's MITI (Ministry of International Trade and Industry) focused
resources on the semiconductor industry, and in particular on Random Access
Memory (RAM), it was viewed as a typically successful|
Japanese foray into a new dynamic strategic sector. The results, as viewed by
the late 1990s
A. justified this view.
B. led to similar structuring of industrial policy in the U.S.
C. lent support to the Brander-Spencer model.
D. helped shift the focus of economists away from Japanese-style industrial
policy.
E. propelled Japan into the leading country in high-tech manufacturing.
[D. helped shift the focus of economists away from Japanese-style industrial
policy.]
Working conditions for clothing workers in Bangladesh are very poor. If countries
refuse to buy clothing from Bangladesh in order to encourage change, the effect
is likely to be that
A. firms will be forced to comply and workers will be better off.
B. firms will refuse to comply, but workers will be better off.
C. firms will try to comply and workers will be worse off.
D. firms will try to comply and workers will be better off.
E. regardless of how firms respond, workers will be better off.
[C. firms will try to comply and workers will be worse off.]
At a world level,
A. globalization had indeed harmed the environment.
B. globalization has done no harm to the environment.
C. globalization always protects the environment.
D. globalization has no environmental impact.
[A. globalization had indeed harmed the environment.]
Rapid growth of Chinese exports after 1990, and especially after 2001, when
China joined the WTO,
A. created much more hardship in the United States than most economists had
realized.
B. created only losers in the United States as most economists had expected.
C. created only winners in the United States as most economists had expected.
D. created much more trade favor in the United States than most economists had
realized.
[A. created much more hardship in the United States than most economists had
realized.]
A tax of 20 percent per unit of imported garlic is an example of a(n)
A. specific tariff.
B. ad valorem tariff.
C. nominal tariff.
D. effective protection tariff.
E. a disadvantageous tariff.
[A. specific tariff.]
Which of the following is a fixed percentage of the value of an imported product?
A. specific tariff
B. ad valorem tariff
C. nominal tariff
D. effective protection tariff
E. infant industry tariff
[B. ad valorem tariff]
A specific tariff provides home producers more protection when
A. it is levied on manufactured goods rather than primary products.
B. the home supply outnumbers the foreign imports.
C. it is applied to a commodity with many grade variations.
D. the home market buys cheaper products rather than expensive products.
E. the home demand for a good is elastic with respect to price changes.
[D. the home market buys cheaper products rather than expensive products.]
Since World War II, the likelihood that the job of a new college graduate will be
directly or indirectly affected by world trade
A. remained constant.
B. increased.
C. decreased
D. fluctuated widely with no clear trend
E. increased slightly before dropping off.
[B. increased.]