1) refer to table 2.2. according to the principle of comparative advantage:
a.south korea should export steel
b.south korea should export steel and vcrs
c.japan should export steel
d.japan should export steel and vcrs
2) ____ is the ability of a firm/industry, under free and fair market conditions, to design,
produce, and market goods and services that are better and/or cheaper than those of
other firms/industries.
a.competitiveness
b.protectionism
c.comparative advantage
d.absolute advantage
3) figure 4.1 illustrates the demand and supply schedules for pocket calculators in
mexico, a ‘small” nation that is unable to affect the world price.
figure 4.1. import tariff levied by a ‘small” country
according to figure 4.1, the tariff results in the mexican government collecting:
a.$100
b.$120
c.$140
d.$160
4) as the profitability of japanese assets rises relative to the profitability of australian
assets, australian residents will make additional investments in japan; this results in an
increased demand for yen and a depreciation of the dollar under a system of floating
exchange rates.
a.true
b.false
5) assume that interest rates on comparable securities are identical in the united states
and foreign countries. now suppose that investors anticipate that in the future the u.s.
dollar will appreciate against foreign currencies. investment funds would thus be
expected to:
a.flow from the united states to foreign countries
b.flow from foreign countries to the united states
c.remain totally in foreign countries
d.not be affected by the expected dollar appreciation
6) according to the escape clause, temporary trade restrictions may be imposed in
industries where domestic producers are substantially being harmed by surging imports.
a.true
b.false
7) empirical testing by wassily leontief gave support to the heckscher-ohlin theory of
trade.
a.true
b.false
8) multilateral trade negotiations have led to
a.continued trade liberalization
b.financial liberalization
c.increased investment
d.all of the above
9) figure 4.4 market for gasoline in a small nation
figure 4.4 represents the market for gasoline in a small nation.the free trade world price
of gasoline is $3.50.suppose this small nation imposes a tariff on gasoline of $.50 per
gallon.the change in consumer surplus would be
a.$15
b.$12.50
c.$27.50
d.$57.50
10) under a fixed exchange-rate system and high capital mobility, an expansionary
fiscal policy leads to a:
a.trade-account deficit and a capital-account surplus
b.trade-account deficit and a capital-account deficit
c.trade-account surplus and a capital-account surplus
d.trade-account surplus and a capital-account deficit
11) refer to table 10.3. the payments data suggest that the united states was a “net
demander” of $30 billion from the rest of the world.
a.true
b.false
12) figure 6.3 represents the iraqi computer market. assume iraq purchases all of its
computers from the united states.
figure 6.3 iraqi computer market and economic sanctions
consider figure 6.3. with free trade, iraq purchases ____ computers at a price of $____,
and realizes $____ of consumer surplus from the availability of computers.
a.30, $3,000, $25,000
b.30, $3,000, $35,000
c.30, $3,000, $45,000
d.30, $3,000, $55,000
13) the flexibility of floating rates may generate the problem of
a.inflationary bias
b.deflationary bias
c.continuous depreciation
d.both a and c
14) in order to stabilize a currency, the central bank will need to adopt
a.an expansionary monetary policy to offset currency depreciation
b.an expansionary monetary policy to offset currency appreciation
c.a contractionary policy to offset currency appreciation
d.both b and c
15) explain david hume’s theory of automatic adjustment for balance of payments
disequilibria.
16) the sugar import quotas of the u.s. government have tended to increase the market
price of sugar, thus reducing the costs to the government of maintaining sugar price
supports for domestic growers.
a.true
b.false
17) figure 4.1 illustrates the demand and supply schedules for pocket calculators in
mexico, a ‘small” nation that is unable to affect the world price.
figure 4.1. import tariff levied by a ‘small” country
according to figure 4.1, mexican manufacturers gain ____ because of the tariff.
a.$75
b.$85
c.$95
d.$105