According to the factor-price-equalization theorem, free trade between any two
countries equalizes:
a. product prices as well as the prices of individual factors of production between the
countries.
b. product prices between the countries but not the prices of individual factors of
production.
c. product prices between the countries and factor prices within each country but not
between the countries.
d. product prices and factor prices within each country but not between the countries.
Answer:
Which of the following was among the policies that the Chinese government began to
implement since 2006?
a. Engaging in ‘bidding wars’ with other countries to attract FDI
b. Phasing out many of the tax incentives which were initially provided to the foreign
firms
c. Reducing the restrictions on foreign acquisitions of Chinese publicly traded
companies.
d. Emphasizing on the quantity of investments of inbound FDI
Answer:
The table given below shows the export and import values of automobiles,
pharmaceuticals, and clothing in country A and country B.
The weighted-average of the intra-industry trade (IIT) shares in country A’s trade in
automobiles, pharmaceuticals and clothing is:
a. 0.625.
b. 0.875.
c. 0.4375.
d. 1.286.
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 B
transfers 1 labor hour from the production of good X to the production of good Y, total
world production of good Y will _____ by _____ units.
a. increase; 0.7
b. decrease; 1
c. decrease; 1.5
d. increase; 0.5
Answer:
An increase in the dollar per euro exchange rate will result in:
a. a decline in the quantity demanded for euro.
b. a decline in the quantity demanded for dollar.
c. an inward shift of the supply curve of euro.
d. an outward shift of the demand curve for dollar.
Answer:
The figure given below shows the market for MP3 players in a small country. Dd and Sd
are the domestic demand and domestic supply curves of the MP3 players before the
imposition of the quota. (Sd + QQ) is the total available domestic supply curve after the
quota has been imposed. The quota on MP3 players will cause domestic producers to:
a. gain $150 million.
b. lose $100 million.
c. gain $110 million.
d. lose $120 million.
Answer:
The LM curve will shift to the right if:
a. the average price level decreases.
b. the money supply decreases.
c. the money demand increases.
d. the interest rate decreases.
Answer:
A country’s demand for foreign currency is derived from:
a. international transactions entering the debit side of its balance of payments accounts.
b. international transactions entering the credit column of its balance of payments
accounts.
c. the government’s attempt to revalue domestic currency.
d. an increase in foreign capital inflows in the domestic country.
Answer:
Suppose the domestic supply (QS) and demand (QD)for MP3 players in the United
States are given by the following set of equations:
QS = ‘“25 + 10P
QD = 875 ‘“ 5P
If the U.S. engages in free trade and the international price of MP3 players is $50, it
would import _____ MP3 players from the rest of the world.
a. 150
b. 250
c. 475
d. 225
Answer:
Those who advocate a return to a real gold standard believe that doing so would:
a. allow countries to pursue independent monetary policies.
b. strengthen the power of fiscal policy in influencing aggregate demand and output.
c. reduce unemployment rates by allowing the countries to adjust their money supply to
the money demand.
d. reduce national and average global rates of inflation by controlling countries’ abilities
to expand their money supplies.
Answer:
Which of the following are in place when government imposes limits on or requires
approvals for payments related to some (or all) international financial activities?
a. Exchange controls
b. Capital controls
c. Official interventions
d. Adjustable pegs
Answer:
The LM curve illustrates all combinations of domestic output levels and interest rates
for which:
a. the domestic product market is in equilibrium.
b. the domestic money market is in equilibrium.
c. there is a zero balance for the country’s official settlements balance.
d. there is full employment.
Answer:
Suppose country X is one of the largest exporter of coffee in the world. A recent
massive cyclone has destroyed much of the coffee crop in country X and has
considerably lowered its exports. Which of the following is a likely consequence of this
disaster?
a. The size of country X’s trade triangle will increase.
b. The price of coffee in the international market will decline.
c. The price of country X’s imports relative to the price of its exports will increase
unambiguously.
d. Country X’s terms of trade will improve.
Answer:
The table given below shows the units of land and labor required to produce a unit of
bread and cheese respectively in country X. Identify the correct statement.
a. Production of bread is relatively labor-intensive in the country.
b. Production of bread is relatively land-intensive in the country.
c. The opportunity cost of producing an extra unit of bread is 2 units of cheese.
d. The domestic price ratio in the country is 2 units of bread per unit of cheese.
Answer:
Under a floating exchange rate regime, following an expansion in the money supply, the
change in the value of domestic currency is most likely to:
a. increase demand for imports.
b. increase demand for exports.
c. lower the real product.
d. initiate foreign capital inflow.
Answer:
The official settlements balance _____ if the IS-LM intersection is _____ the FE curve.
a. is in surplus; on
b. is in surplus; to the right of
c. is in deficit; to the left of
d. has a zero value; on
Answer:
Which of the following is said to occur when a firm lowers its price to limit the decline
in the quantity sold during a period of recession?
a. Persistent dumping
b. Cyclical dumping
c. Predatory dumping
d. Seasonal dumping
Answer:
The figure given below represents the U.S. market for steel imports from Korea. The
Korean government provides an export subsidy of $25 per ton, and Korean firms use
the subsidy to reduce their export price to the United States to $375 per ton.
Consider the combination of the Korean export subsidy and a U.S. countervailing duty
on the imports of steel, both at the rate of $25 per ton. Who among the following is
effectively paying the countervailing duty?
a. The consumers of steel in the U.S.
b. The government of Korea
c. The steel-producers in the U.S.
d. The steel-producers in Korea
Answer:
Action to reverse the effect of official intervention on the domestic money supply is
called:
a. a crawling peg.
b. sterilization.
c. a parallel market.
d. the gold standard.
Answer:
If a small country imposes a tariff on imported motorcycles, the world price of
motorcycles will _____ and the domestic price of motorcycles will _____.
a. rise; fall
b. fall; rise
c. remain constant; rise
d. remain constant; fall
Answer: