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Suppose the dollar per pound exchange rate is $2 per pound while the dollar per Swiss
franc exchange rate is 50 cents per franc. From the given information we can conclude
that the Swiss franc per pound exchange rate is:
a. 1 franc per pound.
b. too low.
c. too high.
d. 4 francs per pound.
Answer:
Which of the following is likely to be the least important factor for firms in determining
production location?
a. Comparative cost advantage
b. Environmental standards
c. Transportation costs
d. External economies of scale
Answer:
Every international exchange of value is entered into the balance-of-payments accounts
_____ time(s).
a. one
b. two
c. three
d. four
Answer:
The LM curve has a:
a. positive slope because a higher interest rate leads to a decrease in the demand for
money and thus a higher level of domestic production is needed to cause people to
continue to hold the same amount of money.
b. negative slope because a lower interest rate leads to an increase in the demand for
bonds and thus a higher level of domestic production is needed to cause people to
continue to hold the same amount of money.
c. negative slope because a lower interest rate leads to a decrease in foreign investments
and thus a higher level of domestic production is needed for equilibrium.
d. positive slope because a higher interest rate leads to a higher incentive to hold money
and thus a higher money supply is needed for equilibrium.
Answer:
At points above the IS curve, there is an _____ and at points below the IS curve there is
an _____.
a. excess demand for goods; excess supply of goods
b. excess demand for money; excess supply of money
c. excess supply of money; excess demand for money
d. excess supply of goods; excess demand for goods
Answer:
The following input-requirements data are for country A, a capital-abundant country
where they produce nothing but bread and wine using only capital and labor as inputs.
Which of the following is most likely to happen if country A engages in free trade with
other countries?
a. The prices of both bread and wine will fall in the domestic market.
b. The price of bread will fall but the price of wine will rise in the domestic market.
c. The prices of both bread and wine will rise in the domestic market.
d. The price of bread will rise but the price of wine will fall in the domestic market.
Answer:
Assume you are a Chinese exporter and expect to receive $250,000 at the end of 60
days. You can remove the risk of loss due to a devaluation of the dollar by:
a. selling dollars in the 60-day forward exchange market.
b. buying dollars now and selling these dollars at the end of 60 days.
c. selling the yuan equivalent in the forward exchange market for 60-day delivery.
d. keeping the dollars in the United States after they are delivered to you.
Answer:
The table given below shows the number of labor hours required to produce 1 gallon of
wine and 1 pound of cheese in the U.S. and France. The opportunity cost of producing
cheese the United States is _____.
a. 1 gallon of wine
b. 4 gallons of wine
c. 0.25 gallons of wine
d. 0.5 gallons of wine
Answer:
The general formula used for calculating the net national loss from a trade barrier as a
percentage of GDP may fail to account for:
a. the production effect of the trade barrier.
b. the consumption effect of the trade barrier.
c. the government revenue generated from the trade barrier.
d. the rent-seeking costs of the local firms.
Answer:
The import tariff rates are typically higher on final consumption goods than on
intermediate goods and raw materials sold to manufacturing firms. This tendency is
known as:
a. the tariff escalation pattern.
b. the terms of trade effect.
c. the spillover effect.
d. the sudden-damage effect.
Answer:
In the balance of payments, the statistical discrepancy is used to:
a. ensure that the sum of all debits matches the sum of all credits.
b. ensure that the value of imports equals the value of exports.
c. show how a balance-of-payments deficit is funded.
d. obtain an accurate account of a balance-of-payments surplus.
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 domestic producers to
_____ by _____.
a. rise; $20 million
b. rise; $800,000
c. rise; $44 million
d. fall; $48 million
Answer:
Let us assume that cloth-making (labor-intensive) and farming (land-intensive) are the
only two sectors of production in a country. If this country is labor-abundant, and if
trade corresponds to the Heckscher-Ohlin theory, which of the following groups will
gain in the short-run, but lose in the long-run, from the opening of trade?
a. Domestic landowners in the farming sector
b. Domestic landowners in the cloth-making sector
c. Foreign landowners in the farming sector
d. Foreign workers in the cloth-making sector
Answer:
The figure given below illustrates the market for British pounds. D and S are the
demand and supply curves of the British pounds respectively.
If the British government wants to peg the dollar per pound exchange rate at $2.50 per
pound, what action would British monetary authorities have to undertake?
a. Sell 1 million pounds and buy 2.5 million dollars
b. Buy 1 million pounds and sell 1 million dollars
c. Buy 1 million pounds and sell 2.5 million dollars
d. Buy 6 million pounds and sell 12 million dollars
Answer:
Which of the following involved industrial countries agreeing to cut their emissions of
greenhouse gases to about 5 percent below their 1990 levels by the years 2008-2012
while developing countries did not make any commitments?
a. The Uruguay Round
b. The CITES
c. The Montreal Protocol
d. The Kyoto Protocol
Answer:
