Which of the following was a criterion to participate in the European Monetary Union?
a. The country’s inflation rate must be less than or equal to 1.5 percentage points above
the average inflation rate for the three lowest inflation EU countries.
b. The country’s budget deficit must be lesser than 10 percent of the value of its GDP.
c. The gross government debt must be lesser than 100 percent of its GDP.
d. The country’s exchange rates must be maintained within the ERM bands with no
realignments during at least the previous 10 years.
Answer:
According to the Stolper-Samuelson theorem, an increase in the price of a country’s
imports will:
a. reduce the returns to all factors of production within the country.
b. raise the returns to all factors of production within the country.
c. reduce the returns to the factor of production used relatively intensively in the
import-competing industry.
d. raise the returns to the factor of production used intensively in the import-competing
industry.
Answer:
To maximize profit a perfectly competitive firm supplies a good up to the point at
which:
a. the marginal revenue is higher than the marginal cost.
b. the marginal cost of producing the good is zero.
c. the price of the good equals marginal cost.
d. the average revenue equals average cost.
Answer:
The table given below shows the pre-tariff and post-tariff prices, domestic production
and consumption of copper in the United States. Suppose the U.S. government imposes
a specific tariff of $0.20 per pound on copper imports by the country.
a. Calculate the welfare loss to U.S. consumers of copper from the tariff.
Answer:
The figure given below shows a situation where the producers of good X are forming an
international cartel. Here, MR = Marginal Revenue, MC = Marginal Cost, and P =
Price. The cartel use monopoly pricing for its output.
At the perfectly competitive price, the cartel would see that:
a. MR > MC.
b. MR = MC.
c. MR < MC.
d. P < MR.
Answer:
Official lending and investing are usually done by:
a. multinational enterprises.
b. private individuals when purchasing government bonds.
c. governments or multilateral institutions.
d. commercial banks.
Answer:
The figure given below shows the market for shoes in the U.S. The domestic price line
with tariff lies above the international price line. Dd and Sd are the domestic demand
and supply curves of shoes respectively.
The consumption effect of the tariff on shoes is measured by the area _____.
a. a
b. b
c. c
d. d
Answer:
If there is something extra bad about local consumption of a product, then a tariff can
be good for the country because:
a. the tariff makes all residents richer.
b. the tariff brings down the domestic price of the product.
c. the tariff leads to higher domestic price for the product.
d. the tariff revenue is invested in the production of substitute products.
Answer:
Suppose that U.S. prices rise 4 percent over the next year while prices in Mexico rise 6
percent. According to the purchasing power parity theory of exchange rates, which of
the following should happen?
a. The dollar will depreciate
b. The peso will be worth 1.5 dollars in the foreign exchange market
c. The peso will depreciate
d. The dollar will be worth 1.5 pesos in the foreign exchange market
Answer:
Economists believe that the _____ determines the price level in the long run.
a. money supply
b. asset market approach
c. exchange rate
d. marginal tax rate
Answer:
Fiscal policy consists of:
a. changes in money supply and interest rates.
b. changes in government expenditures and taxes.
c. changes in exchange rate par values.
d. changes in the official settlements balance.
Answer:
Suppose the domestic supply (QS) and demand (QD) for skateboards in the United
States are given by the following set of equations:
QS = ‘“60 + 3P
QD = 390 ‘“ 2P
Calculate the change in producer surplus when the United States engages in free trade
and imports skateboards from the rest of the world at a per unit price of $75.
a. +$2,812.50.
b. -$2,812.50.
c. +$3,375.
d. -$3,375.
Answer:
An increase in the imports of clothing into the United States from India will benefit the
_____ and hurt the _____.
a. U.S. clothing producers; Indian clothing producers
b. Indian consumers; Indian clothing producers
c. the U.S. consumers; Indian clothing producers
d. the U.S. consumers; the U.S. clothing producers
Answer:
The figure given below shows the market for shoes in the U.S. The domestic price line
with tariff lies above the international price line. Dd and Sd are the domestic demand
and supply curves of shoes respectively.
The production effect of the tariff on shoes is measured by the area _____.
a. a
b. b
c. c
d. d
Answer:
Which of the following is one of the fundamental sources of long-run economic
growth?
a. An expansion of foreign GDP
b. An increase in demand for the country’s importable product
c. An improvement in production technologies
d. An expansion in the export of primary commodities
Answer:
Consider the interaction between U.S. dollars and U.K. pounds. When the forward
premium on the dollar is zero, it means:
a. the current spot price of dollars equals the future spot price of dollars.
b. the future spot price of dollars will be equal to the current forward price of dollars.
c. the current forward price of dollars equals the current spot price of dollars.
d. the spot exchange rate value of the pound is moving toward $1 per pound.
Answer: