1) the figure below illustrates the supply and demand schedules of swiss francs under a
system of floating exchange rates.
figure 12.2. the market for swiss francs
refer to figure 12.2. as the profitability of assets in switzerland rises relative to the
profitability of assets in the united states, u.s. residents make additional investments in
switzerland; this leads to an increased demand for francs and a depreciation of the
dollar’s exchange value.
a.true
b.false
2) the offshore assembly provision in the u.s.
a.provides favorable treatment to u.s. trading partners
b.discriminates against primary product importers
c.provides favorable treatment to products assembled abroad from u.s. manufactured
components
d.hurts the u.s. consumer
3) figure 6.5 japanese market for jetliners
consider the japanese market for jetliners as depicted in figure 6.5.suppose lone
producer of jetliners in the world is boeing and boeing faces a constant marginal cost of
$20 million per jetliner but now a european manufacturer, airbus, begins
production.airbus faces the same marginal cost as boeing but the european government
provides airbus with a subsidy of $8 million per jetliner produced.as a result of the
competition, boeing leaves the japanese market leaving airbus as a monopoly.as a result
of the entery of the subsidized producer what will happen to the consumer surplus
gained by japanese airlines from buying jetliners?
a.decrease by $109 million
b.nothing
c.increase by $50 million
d.increase by $109 million
4) which chain of events would promote payments equilibrium for a surplus nation,
according to the price-adjustment mechanism?
a.increasing money supply–increasing domestic prices–rising imports–falling exports
b.increasing money supply–falling domestic prices–rising imports–falling exports
c.decreasing money supply–increasing domestic prices–falling imports–rising exports
d.decreasing money supply–decreasing domestic prices–falling imports–rising exports
5) exhibit 4.1
assume that the united states imports automobiles from south korea at a price of
$20,000 per vehicle and that these vehicles are subject to an import tariff of 20 percent.
also assume that u.s. components are used in the vehicles assembled by south korea and
that these components have a value of $10,000.
refer to exhibit 4.1. in the absence of the offshore assembly provision of u.s. tariff
policy, the price of an imported vehicle to the u.s. consumer after the tariff has been
levied is:
a.$22,000
b.$23,000
c.$24,000
d.$25,000
6) figure 4.4 market for gasoline in a small nation
figure 4.4 represents the market for gasoline in a small nation.the free trade world price
of gasoline is $3.50.suppose this small nation imposes a tariff on gasoline of $.50 per
gallon.the change in producer surplus would be
a.area a + b
b.area a
c.area a + b + f
d.area a + b + f + g + h
7) a “call” option gives general motors the right to sell pounds at a specified price,
while a put option gives general motors the right to buy pounds at a specified price.
a.true
b.false
8) ricardo’s model of comparative advantage assumed all of the following except:
a.in each nation, labor is the only input
b.costs do not vary with the level of production
c.perfect competition prevails in all markets
d.transportation costs rise as distance increases between countries
9) most vertical foreign investment, as implemented by multinational corporations, is
“forward” in nature rather than “backward.”
a.true
b.false
10) for a nation to maximize its productivity in a global economy:
a.only imports are necessary
b.only exports are necessary
c.both imports and exports are necessary
d.neither imports nor exports are necessary
11) the purpose of an exchange stabilization fund is to ensure that the market exchange
rate does not deviate beyond unacceptable levels from the official exchange rate.
a.true
b.false
12) referring to table 10.1, the goods and services balance equals:
a.$5 billion
b.$15 billion
c.$20 billion
d.$25 billion
13) a market-determined decrease in the dollar price of the pound is associated with:
a.revaluation of the dollar
b.devaluation of the dollar
c.appreciation of the dollar
d.depreciation of the dollar
14) figure 13.4. canadian economy under a fixed exchange rate system
refer to figure 13.4. starting at equilibrium income $100 billion, where (s – i)0 intersects
(x – m)0, an autonomous decrease in canadian imports of $10 billion leads to a $20
billion decrease in income and a trade deficit of $5 billion.
a.true
b.false
15) the heckscher-ohlin theory contends that over a period of years a country that
initially is an exporter of a product will become an importer of that product.
a.true
b.false
16) the supply of francs, would shift to the right for all of the following reasons except:
a.an increase in swiss real income
b.an increase in swiss prices
c.an increase in the swiss population
d.an increase in swiss interest rates
17) to prevent the market price of tin from rising above the target price, the manager of
a buffer stock will purchase excess supplies of tin from the market.
a.true
b.false