1) as a way of helping u.s. business firms trade in the world market on a more equal
terms with their organized foreign competitors, the u.s. government permits them to
form export trade associations and export trading companies.
a.true
b.false
2) gold is currently the most widely used asset in the international monetary system.
a.true
b.false
3) the common agriculture policy of the european union has supported european
farmers via:
a.export tariffs and domestic content regulations
b.variable levies and voluntary export agreements
c.content regulations and export subsidies
d.export subsidies and variable levies
4) which trade restriction stipulates the percentage of a product’s total value that must
be produced domestically in order for that product to be sold domestically?
a.import quota
b.orderly marketing agreement
c.local content requirement
d.government procurement policy
5) during the gold standard era, the “rules of the game” suggested that:
a.surplus countries should increase their money supplies
b.deficit countries should increase their money supplies
c.surplus and deficit countries should increase their money supplies
d.surplus and deficit countries should decrease their money supplies
6) low real interest rates in the united states tend to:
a.decrease the demand for dollars, causing the dollar to depreciate
b.decrease the demand for dollars, causing the dollar to appreciate
c.increase the demand for dollars, causing the dollar to depreciate
d.increase the demand for dollars, causing the dollar to appreciate
7) assume the initial dollar/pound exchange rate to be $2 per pound. if the u.s. inflation
rate is 8 percent and the u.k. inflation rate is 3 percent, the exchange rate should move
to $2.10 per pound according to the purchasing-power-parity theory.
a.true
b.false
8) 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. residents receive subsidies to invest in foreign nations
b.u.s. interest rates rise relative to foreign interest rates
c.taxes are reduced on income earned by u.s. residents from their foreign investments
d.expected profits decline on u.s. investments in foreign manufacturing
9) the purpose of “countervailing duties,” as levied by the domestic government, is to
neutralize import tariffs imposed by foreign governments.
a.true
b.false
10) assume boeing inc. (of the united states) and airbus industrie (of europe) rival for
monopoly profits in the canadian aircraft market. suppose the two firms face identical
cost and demand conditions, as seen in figure 6.1.
figure 6.1. strategic trade policy: boeing versus airbus
referring to figure 6.1, the total cost of the airbus subsidy to the european taxpayer
equals:
a.$16 million
b.$20 million
c.$24 million
d.$28 million
11) assume that labor is the only factor of production and that wages in the united states
equal $20 per hour while wages in the united kingdom equal $10 per hour. production
costs would be lower in the united states than the united kingdom if:
a.u.s. labor productivity equaled 40 units per hour while u.k. labor productivity equaled
15 units per hour
b.u.s. labor productivity equaled 30 units per hour while u.k. labor productivity equaled
20 units per hour
c.u.s. labor productivity equaled 20 units per hour while u.k. labor productivity equaled
30 units per hour
d.u.s. labor productivity equaled 15 units per hour while u.k. labor productivity equaled
25 units per hour
12) industrial policies
a.require formal explicit efforts by governments
b.may be implicit
c.have never been used by the u.s. government
d.both a and b