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1) in the large-country case, an export tax
a. leads to an increase in the price of the good in the importing country
b. leads to no change in the price of the good in the importing country
c. is absorbed totally by the exporting country
d. increases consumer welfare in both the exporting and the importing country
2) given the following ricardo-type table showing the amount of labor input required to
produce one unit of output of each of the two goods in each of the two countries:
a. if the united kingdom were a much larger country than the united states, then, other
things equal, the terms of trade would tend to be located more toward the u.s. pre-trade
price ratio than toward the u.k. pre-trade price ratio
b. if world demand (the sum of u.s. demand and u.k. demand) were directed more toward
clothing than toward wheat, other things equal, then the terms of trade would tend to be
located more toward the u.k. price ratio than toward the u.s. pre-trade price ratio
c. a post-trade price ratio (terms of trade) of 1 clothing:0.75 wheat would mean that the
united kingdom did not gain from trade
d. a post-trade price ratio (terms of trade) of 1 wheat:1.2 clothing would give all the gains
from trade to the united states
3) under a flexible-rate system, when the bp curve is flatter than the lm curve, an
autonomous increase in foreign interest rates will have what impacts on the domestic
interest rate and domestic national income?
a. domestic interest rate will increase, domestic national income will decrease
b. domestic interest rate will increase, domestic national income will not change
c. domestic interest rate will increase, domestic national income will increase
d. domestic interest rate will not change, domestic national income will decrease
4) the argument that a tariff can provide temporary protection to an industry so that the
industry can expand, realize economies of scale, and eventually become an export
industry is known as the
a. antidumping argument
b. national defense argument
c. infant industry argument
d. terms of trade argument
5) which one of the following gives rise to a new eurocurrency deposit?
a. a u.s. exporter receives payment from a u.k. importer in u.s. dollars drawn on a new
york bank and places dollars in a london bank
b. a london bank loans out 90 percent of a eurodollar deposit to a firm which then
deposits the eurodollars in a french bank account (in dollars)
c. a french businessman opens up a bank account in zurich, denominated in french
francs
d. all of the above
6) stagflation can result
a. from an increase in the price of foreign-produced inputs
b. from a fall in aggregate demand
c. whenever an economy has completely flexible money wages and prices
d. from a rightward shift of the short-run aggregate supply curve
7) if virtually all speculators buy a currency just before what would be the cyclical low
points in the currencys value without speculative activity, this speculation is likely to be
__________ with respect to its impact on the amplitude of the cycle; if the speculators
sell the currency just before what would otherwise be the high values of the currency
during its fluctuations, this speculation __________ in its impact on the amplitude of
the cycle..
a. destabilizing; also is likely to be destabilizing
b. destabilizing; is likely to be stabilizing
c. stabilizing; is likely to be destabilizing
d. stabilizing; also is likely to be stabilizing
8) in a keynesian model, if mpm = 0.2, mpc = 0.8, and there is no government sector,
what will be the ultimate effect of an autonomous increase in investment of 30 on the
imports of the country, other things equal?
a. increase by 6
b. increase by 15
c. increase by 75
d. decrease by 30
9) given the following classical-type table showing the fixed money prices of each good
in each of the two countries:
if the exchange rate is flexible, the upper limit to the price of the dollar (i.e., the number
of swiss francs per dollar above which there is export of both goods by switzerland) is
a. 5 francs = $1
b. 4 francs = $1
c. 0.25 francs = $1
d. 0.20 francs = $1
10) if the net or overall effect (which is the net result of the production and
consumption effects) of a countrys growth is protrade in nature, then the countrys offer
curve (with the export good on the horizontal axis) will shift or pivot __________; if
the net or overall effect is antitrade in nature, then the countrys offer curve (with the
export good on the horizontal axis) __________.
a. outward (or to the right); will shift or pivot inward (or to the left)
b. outward (or to the right); also will shift or pivot outward (or to the right)
c. inward (or to the left); also will pivot inward (or to the left)
d. inward (or to the left); will shift or pivot outward (or to the right)
11) given the following table showing various combinations of goods x and y that bring
equal satisfaction to an individual consumer:
in this table, as the individual consumes a greater amount of x, a __________ amount of
good y is given up for each additional unit of good x. this pattern suggests that, as more
of good x is consumed and less of good y is consumed, the ratio mux/muy is
__________.
a. larger; increasing, which contradicts economists usual expectations
b. larger; decreasing, which conforms to economists usual expectations
c. smaller; increasing, which contradicts economists usual expectations
d. smaller; decreasing, which conforms to economists usual expectations
12) in the gold standard framework of the period 1880-1914, suppose that the par value
exchange rate is $2.00/£1. if the market exchange rate rises to $2.12/£1 because of a
rise in u.s. demand for british goods, and if it costs $0.05 to ship gold between the two
countries, there would be __________. then, if the rules of the game were being
followed, the money supply in the united states would __________ after this movement
of gold.
a. an inflow of gold to the u.s. treasury from the bank of england; decrease
b. an inflow of gold to the u.s. treasury from the bank of england; increase
c. an outflow of gold from the u.s. treasury to the bank of england; decrease
d. an outflow of gold from the u.s. treasury to the bank of england; increase
13) the is/lm/bp analysis suggests that, if the bp curve is flatter than the lm curve and
the exchange rate is flexible, expansionary fiscal policy will lead to __________ of the
countrys currency, which will make the fiscal policy __________ effective in
influencing national income than if the country had a fixed exchange rate.
a. a depreciation; more
b. a depreciation; less
c. an appreciation
d. an appreciation; less
14) a eurodollar interest rate swap
a. is a type of future rate agreement that extends over several time periods
b. most often involves the exchange of a fixed rate for a floating rate
c. can be retraded on the futures market should either party desire to do so
d. all of the above
15) in general, other things equal, trade creation is more likely to outweigh trade
diversion for a home country forming a customs union with partner countries (i) if the
total number of countries forming the union is __________, and (ii) if the level of
tariffs in the home country prior to the formation of the union is __________.
a. small rather than large; high rather than low
b. small rather than large; low rather than high
c. large rather than small; high rather than low
d. large rather than small; low rather than high
