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1) if tariffs are used in an attempt to improve country as balance of trade, and if
exchange rates are flexible, the imposition of the tariffs will cause __________ in the
value of as currency relative to other currencies and, as a consequence, as exports will
__________.
a. a decrease; decrease
b. a decrease; increase
c. an increase; decrease
d. an increase; increase
2)
in the diagram above, if restrictions on capital flows were removed and capital was
allowed to flow freely from the low-return country to the high-return country, then
world output would rise by the amount of area __________.
a. eaf
b. efg
c. eag
d. k2eak1
3) (this question pertains to appendix a material.)
in which one of the following situations is the multiplier for a given autonomous
change in investment spending the largest?
a. mps = 0.4, mpm = 0.2, t = 0.25
b. mps = 0.4, t = 0.25 and the economy has no foreign trade
c. mps = 0.25, mpm = 0.1, t = 0.2
d. mps = 0.25, mpm = 0.1, t = 0.2, and the economy has foreign repercussions
4) eurodollars __________ be borrowed by u.s. banks for use in the united states, and,
because of this fact, the conduct of effective monetary policy in the united states is
__________ than would otherwise be the case.
a. cannot; more difficult
b. cannot; easier
c. can; more difficult
d. can; easier
5) (this question pertains to material in appendix a.)
given the convex to-the-origin production-possibilities frontier (ppf):
suppose that two countries each have the exact convex-to-the-origin
production-possibilities frontier (ppf) (i.e., the countries have identical ppfs) and the
two countries also have identical tastes. in this situation,
a. neither of the two countries could never gain from trade with each other
b. one country could gain from trade with the other but they could never both gain from
the trade
c. both countries would go to the same endpoint of the ppf if the two countries engaged
in trade with each other
d. it is possible for the two countries to gain from trade with each other if one country
produces at one endpoint of the ppf and the other country produces at the other endpoint
of the ppf
6) suppose that, in a classical model with two goods, germany can produce 50 units of
steel with one day of labor and 30 units of textiles with one day of labor; switzerland
can produce 45 units of steel with one day of labor and 45 units of textiles with one day
of labor. if the exchange rate is fixed at 1 swiss franc = 1 euro and if the swiss wage rate
is 10 francs per day, then, in trading equilibrium, german wages
a. must be greater than 10 euros per day
b. must be less than 10 euros per day
c. must be equal to 10 euros per day
d. can be above, below, or equal to 10 euros per day cannot be determined without
more information
7) given the following graph showing production-possibilities frontiers for country a
and country b in a situation where both countries are on the same community
indifference curve s1 in autarky:
prior to trade, px/py in country a is __________ px/py in country b, and, when trade
begins, country a will import good __________.
a. greater than; x
b. greater than; y
c. less than; x
d. less than; y
8) if an economy has a marginal propensity to import of 0.3 and the economys
balance-of-trade deficit is 15, how much must the economy contract its gnp if income
contraction is to be the method of removing the balance-of-trade deficit?
a. 4.5
b. 45
c. 50
d. 200
9) if country a depreciates its currency against country bs currency, then, other things
equal,
a. there should be expenditure switching towards as goods by residents of both
countries
b. there should be expenditure switching towards as goods only by as residents
c. there should be expenditure switching towards bs goods by residents of both
countries
d. bs goods become cheaper to country as residents
10) in considering trade creation and trade diversion in the formation of a customs
union between countries and whether the customs union enhances welfare in a home
country joining the union, two general conclusions that seem valid are that the customs
union is more likely to enhance welfare, other things equal, (i) the __________ the
initial tariff rates of the home country on imported goods, and (ii) the __________ the
demand and supply curves of the affected products in the home country.
a. higher; more elastic
b. higher; less elastic
c. lower; more elastic
d. lower; less elastic
