The value of price elasticity of demand for a normal commodity is negative because it
indicates:
a. the inverse relationship between the price and the quantity demanded for the
commodity.
b. that the value of the consumer surplus is negative for a normal good.
c. that the changes in quantity demanded are much less compared to the changes in
price for a normal good.
d. the direct relationship between price and consumer surplus from the commodity.
Answer:
Which of the following can help explain the rise of intra-industry trade?
a. Recent recessions and increase in the price of oil have led to lower national income
levels.
b. The demand for product variety has increased substantially over time.
c. Countries widely vary in terms of their resource endowments.
d. The developed nations have recently implemented more conservative fiscal policies.
Answer:
Suppose a large country experiences economic growth which results in an increased
willingness to trade. The country’s terms of trade will _____ because the increase in
demand for imports will cause the price of its exports to _____ relative to the price that
it has to pay for its imports.
a. worsen; fall
b. improve; rise
c. improve; fall
d. worsen; rise
Answer:
In a two-country two-good model, if a country has a comparative advantage in the
production of a certain good, it implies that this country:
a. also has an absolute advantage in the production of this good.
b. will start importing this good from the other country.
c. can produce this good at a lower opportunity cost than the other country.
d. uses most of its resources in the production of this good .
Answer:
With respect to each of the following issues, explain whether floating or fixed
exchange-rates would be better and why it would be better.
a. Internal monetary shocks
b. External macroeconomic shocks
c. A need for diversity in macroeconomic goals and policies across countries
Answer:
Which of the following statements about an export subsidy on a particular product is
accurate?
a. An export subsidy can switch the product from being exported to being imported.
b. An export subsidy reduces the amount available in the domestic market of the
exporting country and increase the amount imported by the foreign country.
c. An export subsidy increases the price paid by foreign buyers, relative to the price that
local consumers pay for the product.
d. An export subsidy increases the net national well-being of a large exporting country.
Answer:
Which of the following is true of FDI in China?
a. FDI inflows in China declined substantially during 2007-2009.
b. Three-fifths of the FDI into China is in the service sector.
c. Much of China’s FDI has come from the developing countries located close to it.
d. Foreign affiliated firms account for more than 50 percent of production value added
in China.
Answer:
The figure given below shows the national market for mopeds in a country. Dd and Sd
are the domestic demand and supply curves of mopeds respectively.
The figure given below shows the marginal external benefit curve (MEB) of the country
from the production of domestic mopeds.
The overall impact of the tariff on the nation would be:
a. a loss of $15 million.
b. a loss of $20.75 million.
c. a gain of $13.25 million.
d. a gain of $5.75 million.
Answer:
Identify the correct statement.
a. The overall effects of the Uruguay Round on global pollution are actually small.
b. The actual effects of the Uruguay Round on pollution levels are uniform across all
the countries.
c. Evidence shows that free trade is inherently anti-environment.
d. The composition effect of the Uruguay Round tends to increase production of
environment friendly products in the United States.
Answer:
In a ‘first-best’ world:
a. each economy is self-sufficient enough not to indulge in free trade.
b. free trade is economically efficient.
c. free trade benefits only the consumers of the importing country.
d. free trade benefits only the exporting nations.
Answer:
Under which of the following situations will the infant industry argument for protection
stand to be valid?
a. New firms are unable to obtain funds from the financial owing to inherent
imperfections in the banking system.
b. The benefits from the early business investments accrue to the firms making these
early investments.
c. Firms that produce important military hardware cannot be established without
government support.
d. The more a country exports, the more the price of its exports fall relative to its
imports.
Answer:
The figure given below shows the market for computers in the U.S. The domestic price
line inclusive of the tariff lies above the international price line. Dd and Sd are the
domestic demand and supply curves of computers respectively.
The imposition of a tariff on computers caused the surplus of the U.S. consumers to
_____ by _____.
a. fall; $10 million
b. fall; $40million
c. rise; $76 million
d. fall; $78 million
Answer:
The 2004-2014 rapid growth in global foreign exchange trading can be explained by:
a. large increases in trading by hedge funds, pension funds, and other financial
institutions.
b. increases in volume of global trade in the recent years.
c. volatility in U.S. long term government bond yields.
d. increase in the number of nations adopting floating exchange rate system.
Answer:
Identify the correct statement.
a. In some of the industrialized countries, the income per person declined between 1990
and 2009.
b. Most of the developing countries have been growing at a uniform rate since 1990.
c. The average product per person has grown faster in the developing countries than in
the industrialized countries since 1990.
d. The developing countries are expected to catch up with the average per capita income
in the industrialized countries in near future.
Answer:
In a floating exchange rate system, the dollar per pound exchange rate is determined by:
a. the American government.
b. the British government.
c. the interaction of the demand and supply of pounds in the foreign exchange market.
d. the interaction of the demand for and supply of dollar-denominated assets in the
stock market.
Answer:
Which of the following refers to the net effects on parties who are not directly involved
in a transaction?
a. Invisible hand
b. Incentive distortions
c. Consumption effect
d. Externality
Answer: