Suppose that the training, skills, and attitudes received by employees in the computer
gaming development industry have positive spillover effects as workers leave the
industry and move to other jobs. The specificity rule suggests that the best way to
achieve more employment in this industry is to:
a. impose a tariff on the importation of computer games.
b. remove all sales taxes from the purchases of computer games.
c. give computer game developing firms a subsidy tied to their level of employment.
d. tax production of computer games.
Answer:
Which of the following was the main economic policy goal of the countries of the
former Soviet Union?
a. Export promotion
b. National self-sufficiency
c. Privatization
d. Deindustrialization
Answer:
What is most likely to happen when firms in an import-competing infant industry are
offered subsidies?
a. The firms will suffer from diseconomies of scale.
b. The firms will be able to sustain only if they charge a higher price than the foreign
firms.
c. The firms will be able to charge a price equal to the world price and still earn a profit.
d. The firms will face a perfectly inelastic demand curve.
Answer:
Which of the following can best explain the clustering of some industries, such as
banking and finance in New York City and high-technology computer production in
Silicon Valley?
a. External scale economies
b. Perfect competition
c. Intra-industry trade
d. Comparative advantage
Answer:
Briefly explain each of the following terms:
a. Forward exchange rate
b. Foreign exchange swap
c. Arbitrage
d. Triangular arbitrage
Answer:
When a U.S. resident increases her holdings of a foreign financial asset, this item is
recorded as a:
a. credit entry in the U.S. current account.
b. debit entry in the U.S. current account.
c. credit entry in the U.S. capital account.
d. debit entry in the U.S. capital account.
Answer:
The figure given below shows the production-possibility curves of Canada (AB) and
the Rest of the World (CD). The pre-trade price ratio in Canada and the Rest of the
World are given by the lines P1 and P3 respectively. The international price ratio faced
by the countries is represented by the line P2. I1 and I2 are the pre-trade and post-trade
social indifference curves for both Canada and the Rest of the World respectively.
Before Canada entered into a trade with the rest of the world, the total amount of cotton
produced in the world was _____ bales and the total amount of wheat produced in the
world was _____ bushels.
a. 24; 19
b. 24; 16
c. 19; 24
d. 18; 24
Answer:
The figures given below illustrate a situation of a trade embargo. In Figure (a) Dd and
Sd are the domestic demand and supply curves of the embargoing countries. The import
price is P0 and the target country imports the amount Q0 before the embargo is imposed.
As a result of this embargo, the world as a whole loses area _____.
a. a
b. (a + b + c + d)
c. (a + c)
d. (b + c)
Answer:
On July 21st, 2005, the Chinese government changed the value of the yuan from 8.28
yuan per U.S. dollar to 8.11 yuan per U.S. dollar. One effect of this change should have
been
a. an increase in the prices of American goods in the Chinese market.
b. an increase in the dollar price of the Chinese goods.
c. a decline in the average price level in the United States
d. market pressure to return the rate to 8.28 yuan per dollar.
Answer:
Suppose the government of the United States has instituted an expansionary fiscal
policy to boost aggregate output. The United States has a floating exchange rate regime
and there is a high degree of capital mobility.
a. If the exchange rate value of the dollar remains steady, what are the effects of the
expansionary fiscal policy on the U.S. national product and income? What is the effect
on the U.S. unemployment rate? Explain.
Answer:
Under _____ exchange rates, monetary policy is powerful in its effects on internal
balance. This conclusion holds _____.
a. fixed; only with perfect capital mobility
b. floating; only with low capital mobility
c. fixed; with all degrees of capital mobility.
d. floating; with all degrees of capital mobility.
Answer:
Article XX of the World Trade Organization allows trade restrictions:
a. to protect domestic jobs.
b. that are necessary to protect human, animal, or plant life or health.
c. to promote the use of solar energy in the developing countries.
d. in the form of tariffs imposed on capital-intensive commodities.
Answer:
The phenomenon of overshooting is based on the existence of:
a. covered interest parity.
b. irrational investor behavior.
c. sticky prices and the belief that PPP and the monetary approach hold in the long-run.
d. perfectly competitive global markets and flexible prices.
Answer:
The official settlements balance is in _____ if the IS-LM intersection is _____ the FE
curve.
a. surplus; on
b. surplus; to the right of
c. surplus; to the left of
d. deficit; on
Answer:
The _____ posits that trade flows between countries will be larger as the economic sizes
of the two countries are larger and the geographic distance between the two countries is
smaller.
a. Heckscher-Ohlin model
b. theory of absolute advantage
c. gravity model
d. Stolper-Samuelson theorem
Answer: