1) according to the labor theory of value,
a. the value of labor is determined by its value in production
b. the value of a good is determined by the amount of labor with which each unit of
capital in an industry works
c. the price of a good a compared to the price of good b bears the same relationship as
the relative amounts of labor used in producing each good
d. the values of two minerals such as coal and gold with similar production costs may
be very different
2) for the world banks category of low-income countries, gross domestic product has
been growing __________ rapidly in recent years than in developed countries. with
regard to another characteristic of low-income countries, the ratio of their exports of
goods and services to their gdps has __________ in the last 15-20 years.
a. less; been increasing
b. less; been decreasing
c. more; been increasing
d. more; remained about the same
3) in the portfolio balance approach, which one of the following, other things equal,
will cause an increase in the demand for domestic bonds by home country citizens?
a. a decrease in the home country interest rate
b. a increase in the home country price level
c. an increase in the home country real income level
d. a decrease in the expected rate of appreciation of the foreign currency (or a decrease
in the expected rate of depreciation of the home currency)
4) two characteristics of low-income countries as classified by the world bank are that,
in comparison with high-income countries, the low-income countries have a
__________ rate of population growth and a __________ percentage of gdp accounted
for by agriculture.
a. slower; smaller
b. slower; larger
c. faster; smaller
d. faster; larger
5) given the following information for industry x in country a, and assuming that input
y is imported, that one unit of y is required for each unit of x, and that country a is a
small country:
the effective rate of protection (erp) for industry x is __________ percent. however, if
the nominal tariff rate on input y is eliminated (i.e., the 15% rate become 0%), the erp
for industry x would become __________ percent.
a. 20; 25
b. 35; 50
c. 40; 50
d. 35; 25
6) with economic growth (where the growth reflects the net or overall effect of the
production and consumption effects), a countrys offer curve (with the export good on
the horizontal axis)
a. will always shift or pivot outward
b. will shift or pivot outward in the cases where the growth is protrade or ultra-protrade
in nature and will shift or pivot inward in the cases where the growth is antitrade or
ultra-antitrade in nature
c. will shift or pivot inward in the case where the growth is ultra-antitrade in nature
d. will not shift or pivot in the case where the growth is neutral in nature
7) which one of the following sets of exchange rates shows cross-rate equality (or
consistent cross rates)?
a. 50 indian rupees = $1; $2 = 1; 25 indian rupees = 1
b. 1 indian rupee = 1.5 pakistani rupees; 50 pakistani rupees = 1 singapore dollar; 1
singapore dollar = 75 indian rupees
c. 2 swiss francs = $1; 1 swiss franc = ; 1 = $1.50
d. $2 = 1; 1.5 = 1; 1 = $0.75
8) which one of the following, other things equal, would not cause an increase in the
amount of money demanded in country a?
a. an increase in as national income
b. an increase in the price level in country a
c. a fall in interest rates in country a
d. an increase in the rate of expected inflation in a
9) if a country has a current account deficit, this suggests that
a. the country’s spending is less than its income
b. the country must also have a negative merchandise trade balance
c. the country’s capital/financial account must also be in a deficit position
d. the country’s saving is less than its investment
10) the magnification effect refers to the fact that, when a country is opened to trade,
a. the price of the export good rises.
b. real income is magnified even though the ppf does not change.
c. the price of the abundant factor rises faster than does the price of the export good.
d. the price of the scarce factor rises.
11)
in the diagram above, if restrictions on capital flows were removed, capital would move
from__________, and this movement would reduce the return to capital in __________.
a. country i to country ii; country i
b. country i to country ii; country ii
c. country ii to country i; country i
d. country ii to country i; country ii
12) as of january 1, 2007, the number of countries belonging to the european union
increased to a total of __________ countries.
a. 6
b. 15
c. 25
d. 27
13) in comparing the size of central bank reserves relative to world imports in the
1948-1972 period (a relatively fixed exchange rate period) with the same ratio from
1973 onward (a relatively flexible exchange rate period), the ratio has been __________
in the more recent period. this result __________ consistent with the theoretical
expectation of economists.
a. smaller; is not
b. smaller; is
c. larger; is not
d. larger; is
14) which one of the following is not an example of making a trade instrument more
restrictive against imports, other things equal?
a. a decrease in the size of an import quota
b. a shifting of an import good from an administrative classification category with a
high tariff to an administrative classification category with a low tariff
c. a withdrawal of gsp treatment for goods from a particular country
d. a denial of most-favored-nation (mfn) treatment to a country that previously received
such treatment
15) suppose that country a with a flexible exchange rate undertakes expansionary
monetary policy. especially if short-term funds are extremely mobile between countries,
a’s currency will tend to __________ because of this policy, and this result suggests that
a’s monetary policy will be __________ effective in influencing national income than if
a had a fixed exchange rate rather than a flexible exchange rate.
a. appreciate; less
b. appreciate; more
c. depreciate; less
d. depreciate; more
16) the income elasticity of demand for imports (yem) is defined as
a. the change in imports divided by the change in income
b. total imports divided by total income
c. the change in income divided by the change in imports
d. the percentage change in imports divided by the percentage change in income
17) in the monetary approach to the exchange rate, a decrease in income in country i
will, other things equal, lead to an __________ money in country i and therefore to
__________ of country is currency against other currencies.
a. excess supply of; a depreciation
b. excess supply of; an appreciation
c. excess demand for; a depreciation
d. excess demand for; an appreciation
(this question draws on appendix a material.)
other things equal, an increase in the marginal propensity to save will __________ the size
of the autonomous spending multiplier (or the multiplier); other things equal, an increase
in the marginal tax rate __________ the size of the autonomous spending multiplier (or the
multiplier).
a. increase; also will increase
b. increase; will decrease
18) c. decrease; will increase
d. decrease; also will decrease
19) given the production-possibilities-frontier/community-indifference-curve diagram
below, where p is the autarky production point, c is the free trade consumption point, p1
represents autarky prices, and p2 represents free-trade prices, the free-trade production
point is __________ and the autarky consumption point is __________.
a. r; g
b. r; p
c. p; g
d. g; p
20) according to the department of commerce information given in the textbook, the
country which has made the largest amount of foreign direct investment (fdi) in the
united states is __________.
a. canada
b. japan
c. the netherlands
d. the united kingdom