1) given an open economy with high capital mobility, all of the following statements are
true except:
a.fiscal policy is strengthened under fixed exchange rates
b.monetary policy is weakened under fixed exchange rates
c.monetary policy is strengthened under floating exchange rates
d.fiscal policy is strengthened under floating exchange rates
2) figure 13.4. canadian economy under a fixed exchange rate system
refer to figure 13.4. starting at equilibrium income $100 billion, where (s – i)0 intersects
(x – m)0, an autonomous decrease in saving of $10 billion leads to a $20 billion increase
in income and a trade deficit of $5 billion.
a.true
b.false
3) the trade theories of adam smith and david ricardo viewed the determination of
competitiveness from the demand side of the market.
a.true
b.false
4) according to the principle of comparative advantage, an open trading system results
in resources being channeled from uses of low productivity to those of high
productivity.
a.true
b.false
5) assume that boeing anticipates receiving 20 million yen in 3 months from exports of
jumbo jets to a japanese airline. the firm could hedge against the risk of a depreciation
of the dollar against the yen by contracting to sell its expected yen proceeds for dollars
in the forward market at today’s forward rate.
a.true
b.false
6) figure 13.1. u.s. capital and financial account
refer to figure 13.1. the u.s. capital and financial account schedule would shift upward
from ca0 to ca1 if:
a.u.s. interest rates exceeded foreign interest rates
b.foreign interest rates exceeded u.s. interest rates
c.taxes were placed on income earned by u.s. residents from their foreign investments
d.taxes were placed on income earned by foreign residents from their u.s. investments
7) forward vertical integration would occur if a u.s. automobile manufacturer acquired a
german subsidiary.
a.true
b.false
8) which of the following is considered a capital inflow?
a.a sale of u.s. financial assets to a foreign buyer
b.a loan from a u.s. bank to a foreign borrower
c.a purchase of foreign financial assets by a u.s. buyer
d.a u.s. citizen’s repayment of a loan from a foreign bank
9) in the absence of transportation costs, free trade results in the equalization of the
prices of traded goods, as well as resource prices, in the trading nations.
a.true
b.false
10) a joint venture leads to increases in national welfare if the cost-reduction effect is
due to wage concessions and if it more than offsets the market-power effect.
a.true
b.false
11) figure 11.1 illustrates the supply and demand schedules for the swiss franc. assume
that exchange rates are flexible.
figure 11.1. supply and demand schedules of francs
refer to figure 11.1. suppose the exchange rate is $.30 per franc. at this exchange rate
there is an ____ of francs which leads to a ____ in the dollar price of the franc, a (an)
____ in the quantity of francs supplied, and a (an) ____ in the quantity of francs
demanded.
a.excess demand, rise, increase, decrease
b.excess demand, rise, decrease, increase
c.excess supply, fall, decrease, increase
d.excess supply, fall, increase, decrease
12) which of the following is a main central bank function of the international monetary
fund?
a.the conduct of open market operations
b.the issuance of gold certificates
c.the provision of monetary policy for member nations
d.the granting of loans to member nations
13) it is generally agreed that the smoot-hawley act of 1930 led to improvements in u.s.
exports and an overall increase in u.s. output and employment.
a.true
b.false
14) which of the following is a fallacy of international trade?
a.trade is a zero-sum activity
b.exports increase employment in exporting industries
c.import restrictions increase employment in import-competing industries
d.tariffs and quotas reduce trade volume
15) a nation realizes overall balance when it achieves full employment and current
account equilibrium.
a.true
b.false
16) the source (home) location of most of the world’s leading multinational enterprises
is:
a.north america and europe
b.north america and asia
c.europe and south america
d.europe and asia