1) by the 1990s, china had departed from a capitalistic economy and shifted to a
soviet-type economy encompassing small-scale, labor-intensive industry.
a.true
b.false
2) which of the following is not a major factor that encourages developing nations to
form international commodity agreements?
a.inelastic commodity supply schedules
b.inelastic commodity demand schedules
c.export markets that tend to be unstable
d.secular increases in their terms of trade
3) studies have shown that there is an inverse relationship between
a.local competition and regional competition
b.regional competition and global competition
c.level of trade barriers and economic growth
d.level of education and communications infrastructure
4) a sudden shift from import tariffs to free trade may induce short-term unemployment
in:
a.import-competing industries
b.industries that are only exporters
c.industries that sell domestically as well as export
d.industries that neither import nor export
5) if a nation has an open economy, it means that the nation:
a.allows private ownership of capital
b.has flexible exchange rates
c.has fixed exchange rates
d.conducts trade with other countries
6) the diagram below represents the exchange market position of the united states in
trade with the united kingdom. starting at the equilibrium exchange rate of $3 per
pound, suppose the demand for pounds rises from d0 to d1.
figure 17.1 foreign exchange market
refer to figure 17.1. under a fixed exchange rate system, u.s. monetary authorities would
have to supply 8 million pounds in exchange for dollars to keep the exchange rate at $3
per pound.
a.true
b.false
7) the benefits of international trade accrue in the forms of lower domestic prices,
development of more efficient methods and new products, and a greater range of
consumption choices.
a.true
b.false
8) a current account deficit for the united states necessarily reduces the standard of
living for american households.
a.true
b.false
9) if the trade-weighted dollar moves from an index value to 100 to 110, the dollar
depreciates by 10 percent against the trade-weighted averages of the exchange rates of
the major trading partners of the united states.
a.true
b.false
10) industrial policy attempts to fulfill all of the following objectives except:
a.improving the infrastructure for an industry
b.easing transitions for workers in declining industries
c.supporting troubled industries if the difficulty is temporary
d.fostering industries which offer long-run comparative disadvantage
11) the united states serves as an example of:
a.a common market
b.a common union
c.a monetary union
d.a free trade area
12) figure 9.2 represents the u.s. labor market. assume that labor and capital are the only
factors of production. also assume the initial supply schedule of labor is denoted by s0
and consists entirely of native u.s. workers. the demand schedule of labor is denoted by
d0.
figure 9.2. u.s. labor market
consider figure 9.2. policies that permit mexican workers to freely migrate to the united
states would likely be resisted by:
a.u.s. capital owners
b.native u.s. workers
c.u.s. capital owners and native u.s. workers
d.neither u.s. capital owners nor native u.s. workers
13) in 1990 the united states and its allies imposed trade embargoes on exports/imports
to/from iraq in response to its invasion of kuwait. the embargoes would induce smaller
losses in iraq’s consumer surplus the:
a.lesser its initial dependence on foreign products
b.less elastic iraq’s demand schedule
c.lesser the available output from alternative suppliers
d.more inelastic iraq’s supply schedule
14) international trade in goods and services is sometimes used as a substitute for all of
the following except:
a.international movements of capital
b.international movements of labor
c.domestic production of the same goods and services
d.domestic production of different goods and services
15) if chase manhattan bank quotes bid and offer rates for the swiss franc at
$.5250/$.5260, the bank would realize profits of $1,000 on the purchase and sale of 1
million francs.
a.true
b.false
16) incomplete specialization may be caused by
a.increasing opportunity cost
b.unrestricted trade
c.constant opportunity cost
d.decreasing opportunity cost
17) the expression “importance of being unimportant” suggests that if one nation is
much larger than the other, the larger nation realizes most of the gains from trade while
the smaller nation realizes fewer gains from trade.
a.true
b.false
18) keynesian theory asserts that, under a system of fixed exchange rates, the influence
of income changes in surplus and deficit countries will automatically promote
current-account equilibrium.
a.true
b.false
19) figure 4.1 illustrates the demand and supply schedules for pocket calculators in
mexico, a ‘small” nation that is unable to affect the world price.
figure 4.1. import tariff levied by a ‘small” country
consider figure 4.1. with free trade, the total value of mexico’s imports equal:
a.$220
b.$260
c.$290
d.$300
20) the only members of the general agreement on tariffs and trade and its successor,
the world trade organization, are developing countries rather than developed countries.
a.true
b.false