Which of the following arises when the knowledge that IMF rescue packages are
possible leads lenders to be less careful about their international lending practices?
a. Global contagion
b. Moral hazard
c. Debt overhang
d. Debt restructuring
Answer:
Which of the following is true of the developing countries
a. Almost half of the exports by developing countries go to the industrialized countries.
b. Exports of goods and services on average are about only 10 percent of gross
domestic product in developing countries.
c. Exports from the developing countries comprise of about three-fourth of industrial-
country imports.
d. Developing countries are the source of about 60 percent of all world exports.
Answer:
An exchange rate regime in which the government may change the fixed rate in the face
of a significant disequilibrium in the country’s international position is called a(n):
a. pegged exchange rate.
b. fixed exchange rate.
c. adjustable peg.
d. managed float.
Answer:
An increase in the spending multiplier causes the IS curve to:
a. become steeper.
b. become flatter.
c. shift temporarily to having a positive slope.
d. shift to the left.
Answer:
Official intervention in the foreign exchange market to defend a fixed exchange rate
when the value of the country’s currency is under downward pressure causes:
a. international reserve holdings to rise.
b. a downward pressure on the country’s interest rates.
c. an increase in the liabilities of the central bank.
d. the domestic money supply to fall.
Answer:
In comparing growth rates of per capita GDP in developing countries over the period of
1990-2012, the highest growth rates were reported in the _____ countries while the
lowest growth rates have been reported in the _____ countries.
a. European and Central Asian; Sub-Saharan Africa
b. East Asian and the Pacific; South Asian
c. Latin America and the Caribbean; East Asian and the Pacific
d. East Asian and the Pacific; European and Central Asian
Answer:
Which of the following would you expect to lead to improved environmental quality?
a. An export or production subsidy from the French government to French wheat
producers
b. A voluntary export restraint on the part of Japanese auto producers
c. An export subsidy for producers of clean technology for producing paper
d. Freer trade that promotes production of manufactured goods in developing countries
where environmental laws are lax
Answer:
The Buy America Act of 1933 mandates that:
a. the sales taxes on goods manufactured by the local labor force must be lower than the
sales taxes on goods manufactured by the immigrant workers.
b. durable goods produced locally must be priced lower than comparable imported
goods.
c. purchases funded by the U.S. government must favor domestic products.
d. household consumers buying more of local products will be given suitable tax
incentives.
Answer:
Suppose the Japanese government pegs the yen to the U.S. dollar. What could the
Japanese central bank do to prevent depreciation of the yen against the dollar in the
foreign exchange market?
a. It would lower interest rates to discourage exports to the United States.
b. It would increase its official reserve holdings by buying dollars in the foreign
exchange market.
c. It would print new currency notes and exchange them for other currencies in the
foreign exchange market.
d. It would buy yen and sell dollars in the foreign exchange market.
Answer:
An external shock such as a foreign country’s devaluation will shift the:
a. FE curve to the right.
b. LM curve to the right.
c. FE curve to the left.
d. LM curve to the left.
Answer:
Identify the correct statement.
a. International capital-flow shocks are likely to be less disruptive under fixed
exchange-rates.
b. If a country is likely to be buffeted mainly by internal shocks, the country should
choose a fixed exchange-rate.
c. The effects of shocks under floating exchange-rates depend on whether interventions
are sterilized.
d. International trade shocks can be countered by adopting a fixed exchange rate that
helps to improve price competitiveness of the country’s products.
Answer:
Since the late 1990s, to prevent the yuan from appreciating against the U.S. dollar, the
Chinese central bank
a. has been trying to hold euros and British pounds as foreign assets.
b. has been buying dollars and selling yuan in the foreign exchange market.
c. has purchased Chinese government bonds.
d. has been selling foreign assets to replenish it dollar reserves.
Answer:
Under free trade, a large country produces 1 million leather bags per year and imports
another 2 million bags per year at the world price of $60 per bag. Assume that the
country imposes a specific tariff of $5 per bag. As a result, the per-unit price of leather
bags decreases to $58 in the international market and the import of leather bags drops to
1.6 million. The domestic production, on the other hand, increases to 1.1 million.
Calculate the tariff revenue collected by the domestic government.
a. $13.5 million
b. $4 million
c. $10 million
d. $8 million
Answer:
Consider a two-country, two-commodity model. The table given below shows the units
of good X and good Y produced in country A and country B per labor hour. If country A
transfers 1 labor hour from the production of good Y to the production of good X, total
world production of good X will _____ by _____ units.
a. increase; 1
b. decrease; 1.43
c. increase; 0.5
d. decrease; 0.7
Answer:
If domestic production of a product causes pollution that imposes an external cost on
the country, then:
a. exports of the product should be subsidized.
b. exports of the product offset the external costs.
c. exports of the product can make the country worse off.
d. exports are less than they would be otherwise.
Answer:
A trade embargo harms:
a. only the target country.
b. only the country that initiates the embargo.
c. both the target country and the country initiating the embargo.
d. the target country and the nonembargoing countries.
Answer:
Consider a two-country, two-commodity model. The table given below shows the units
of good X and good Y produced in country A and country B per labor hour. Which of
the following statements is true?
a. Country B has an absolute advantage in the production of both good X and good Y.
b. Country A has an absolute advantage in the production of good X.
c. Country A has an absolute advantage in the production of both good X and good Y.
d. Country B has an absolute advantage in the production of good X.
Answer:
In 2010-2011, several EU countries received large bailouts from the EU. What were
those countries?
a. Germany, Italy, and Greece
b. England, Greece, and Ireland
c. Germany, England, and France
d. Ireland, Portugal, and Greece
Answer: