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1)
2) in the three-country world in question #19, which one of the following statements is
true?
a. posttrade prices (terms of trade) of 1 wheat:2.5 clothing (or 1 clothing:0.4 wheat)
would give all the gains from trade to the united states
b. posttrade prices (terms of trade) of 1 wheat:3 clothing (or 1 clothing: wheat) are
possible
c. at posttrade prices (terms of trade) of 1 wheat:1.6 clothing (or 1 clothing:0.625
wheat), england would export wheat and spain and the united states would export
clothing
d. at posttrade prices (terms of trade) of 1 wheat:2.25 clothing (or 1 clothing:0.44
wheat), spain would export clothing and import wheat
3) you are given the following dornbusch-fischer-samuelson (dfs) graph, where a1 = the
labor-time needed per unit of output in any given industry in the home country, a2 = the
labor-time needed per unit of output in any given industry in the foreign country, w1 =
the wage rate in the home country, and w2 = the wage rate in the foreign country. the
exchange rate e is assumed = 1.
figure 1
in this dornbusch-fischer-samuelson graph, moving to the right along the a line
indicates goods in which the __________ country has greater relative efficiency;
further, the introduction of technical progress in the foreign country would, other things
equal, be reflected in __________ shift of the curve.
a. home; an upward
b. home; a downward
c. foreign; an upward
d. foreign; a downward
4) given the following diagram, with flexible exchange rates:
assume that the economy is in domestic equilibrium. during exchange-rate adjustment
process that takes place due to the incipient imbalance in the external sector,
a. the bp curve will shift to the left (or vertically upward)
b. the is curve will shift to the right (or vertically upward)
c. the lm curve will shift to the right (or vertically downward)
d. the lm curve will shift to the left (or vertically upward)
5)
in world of two large countries, if one country imposes a tariff, the welfare of the
tariff-imposing country will definitely improve (assuming no retaliation) if, the
tariff-imposing country
a. is trading, both before and after the imposition of the tariff, in the elastic portion of its
trading partners offer curve
b. is trading, both before and after the imposition of the tariff, in the inelastic portion of its
trading partners offer curve
c. is putting the new tariff on top of an already existing tariff rate that is greater than the
optimum tariff rate
d. puts on a prohibitive tariff
in the context of developing countries external debt, the debt service ratio of a country is
the ratio of annual interest payments on the debt plus scheduled repayment of the debt
(amortization) to the countrys __________.
6) a. exports of goods and services
b. exports of services
c. gross domestic product
d. total external debt
7) which one of the following items is a credit item in a countrys balance-of-payments
accounts?
a. unilateral transfers received from another country
b. decrease in short-term home country assets owned by foreign private citizens
c. imports of goods
d. domestic purchase of a foreign corporations bond
8) in the two-commodity context, you are given the following information pertaining to
country i in the year 2009 and the year 2014:
production of good x in 2009 = 200 units
production of good x in 2014 = 198 units
consumption of good x in 2009 = 160 units
consumption of good x in 2014 = 176 units
production of good y in 2009 = 100 units
production of good y in 2014 = 120 units
consumption of good y in 2009 = 120 units
consumption of good y in 2014 = 131 units
given this information, this country, in 2009, is __________ and, in 2009, the country is
__________.
a. exporting good y and importing good x; exporting 20 units of good y and importing
40 units of good x
b. exporting good y and importing good x; exporting 11 units of good y and importing
16 units of good x
c. exporting good x and importing good y; exporting 40 units of good x and importing
20 units of good y
d. exporting good x and importing good y; exporting 16 units of good x and importing
11 units of good y
9) other things equal, a rise in foreign interest rates leads to __________ in the home
countrys equilibrium level of income and to __________ in the home countrys price
level in the short run.
a. a rise; a fall
b. a rise; no change
c. no change; a fall
d. a rise; a rise
10)
suppose that a partner country autonomously increases its demand for the home countrys
exports. with a fixed exchange system, this increase in export demand __________; with a
flexible exchange rate system, this increase in export demand __________.
a. will shift the home countrys ad curve to the right; also will shift the home countrys ad
curve to the right
b. will shift the home countrys ad curve to the right; will not shift the home countrys ad
curve
c. will not shift the home countrys ad curve; will shift the home countrys ad curve to the
right
d. will not shift the home countrys ad curve; also will not shift the home countrys ad curve
11) (this question pertains to appendix b material.)
assume a two-country world (countries i and ii) where taxes do not depend on income
and where mpsi = 0.2, mpmi = 0.2, mpsii = 0.1, and mpmii = 0.3. in this situation, what
is the numerical value of the autonomous spending multiplier that applies to a hange in
autonomous investment in country i on country is income, taking account of foreign
repercussions?
a. 1.0
b. 2.5
c. 4.0
d. 5.0
12) in the current international monetary system, countries
a. must keep their currency values absolutely fixed
b. must keep their currency values fixed within a certain small deviation from par
values
c. must adopt floating exchange rates
d. have considerable latitude in choosing an exchange rate arrangement
13) if growth in national income is due entirely to growth in the labor force, under the
heckscher-ohlin assumptions,
a. there will be a decline in per capita income
b. there will be an increase in per capita income
c. it is impossible to determine the direction of impact on per capita income without
more information
d. there will be an increase in trade and welfare
14) two indifference curves for an individual consumer __________ intersect; two
community indifference curves for a country __________.
a. cannot; also cannot intersect
b. cannot; can intersect under some circumstances
c. can; can also intersect under some circumstances
d. can; cannot intersect
