1) the demand for international reserves tend to increase with the level of world income
and trade activity.
a.true
b.false
2) figure 5.3 illustrates the apple market for sweden, assumed to be a ‘small” country
that is unable to affect the world price. ssweden is the domestic supply and dsweden is
the domestic demand. ssweden+quota is sweden’s supply schedule with an import
quota.
figure 5.3. sweden’s apple market
consider figure 5.3. assume that swedish import companies behave as competitive
buyers while foreign export companies behave as a monopoly seller. compared to free
trade, sweden’s import quota results in domestic welfare:
a.gains totaling $3.20
b.gains totaling $4.80
c.losses totaling $3.20
d.losses totaling $4.80
3) with a specific tariff, the degree of protection afforded domestic producers varies
directly with changes in import prices.
a.true
b.false
4) a closed economy is one in which:
a.imports exactly equal exports, so that trade is balanced
b.domestic firms invest in industries overseas
c.the home economy is isolated from foreign trade
d.saving exactly equals investment at full employment
5) if the swiss demand for dollars is elastic, an appreciation of the dollar against the
franc will lead to a greater quantity of francs being supplied to the foreign exchange
market to obtain dollars.
a.true
b.false
6) current trade rules permit countries to enact measures to protect the health and safety
of their citizens as long as all goods are treated equally, the tobacco companies argue.
a.true
b.false
7) to prevent the market price of tin from falling below the target price, the manager of
a buffer stock would purchase any excess supply of tin that exists at the target price.
a.true
b.false
8) referring to table 13.1, if canada’s income rises by $200 billion, saving would rise by:
a.$10 billion
b.$20 billion
c.$30 billion
d.$40 billion
9) the development of countries like south korea and singapore has been underlaid by
all of the following except:
a.high domestic interest rates
b.r&d and product innovation
c.education and on-the-job training
d.high levels of saving and investment
10) when voluntary export limits are imposed on the world’s chief exporter
a.the exports of the non-restrained suppliers may be stimulated
b.a trade diversion effect may occur
c.both a and b
d.none of the above
11) the figure below depicts the steel market for portugal, a small nation that is unable
to affect the world price. assume that germany and france can supply steel to portugal at
a price of $200 and $300 respectively.
figure 8.2. portugal’s steel market
consider figure 8.2. if portugal forms a customs union with france, the resulting
trade-diversion effect equals $400.
a.true
b.false
12) which analysis considers the extent by which foreign and domestic prices adjust to
a change in the exchange rate in the short run:
a.monetary analysis
b.absorption analysis
c.expenditures analysis
d.pass-through analysis