1) if the capital/labor ratio in import-competing industries in country a is $8,000 per
worker and the capital/labor ratio in as export industries is $4,000 per worker, then
country as leontief statistic is __________.
a. 0.50
b. 0.67
c. 1.00
d. 2.00
an increase in the long-run equilibrium level of income can result from
2) a. improved technology
b. adoption of improved management techniques
c. a larger capital stock
d. all of the above
3) which one of the following balances in a balance-of-payments account has
incorporated all private short-term asset changes before arriving at the measure of
balance?
a. merchandise trade balance
b. balance on current account
c. balance on goods and services
d. official reserve transactions balance
4) in the monetary approach to the balance of payments and the exchange rate,
a. an increase in the demand for money (with a fixed supply) would cause a balance-of-
payments deficit under fixed exchange rates
b. an increase in the supply of money (with a fixed demand) would cause a balance-
of-payments surplus under fixed exchange rates
c. a decrease in the demand for money (with a fixed supply) would cause a balance-of-
payments deficit under fixed exchange rates
d. an increase in the supply of money (with a fixed demand) would cause the domestic
currency to appreciate under flexible exchange rates
5) if, in a two-commodity, two-country classical world, sweden can make a unit of
furniture with 10 days of labor and a unit of steel with 15 days labor, while germany
can make a unit of furniture with 12 days of labor and a unit of steel with 12 days labor,
then
a. sweden has an absolute advantage in steel and germany has an absolute advantage in
furniture
b. sweden has a comparative advantage in steel and germany has a comparative
advantage in furniture
c. the pretrade price ratios indicate that germany will export steel if trade takes place
d. the pretrade price ratio in sweden is 1 furniture:1.5 steel
6) since about 1970, in both developed and developing countries, the ratio of trade to
gdp has __________; over the same time period, in the united states and the european
union, the ratio of imports from developing countries to total imports __________.
a. increased; has decreased
b. increased; also has increased
c. decreased; also has decreased
d. decreased; has increased
7) a major advantage of the system of flexible exchange rates (as opposed to fixed
exchange rates) is commonly thought to be
a. the likelihood that external monetary shocks will not influence domestic national
income under flexible exchange rates
b. the strong possibility that the greater exchange rate risk under flexible rates will
increase the volume of international trade
c. the enhanced effectiveness of monetary policy in influencing national income under
flexible exchange rates
d. the virtuous circle that flexible rates can bring between depreciation and inflation
8) if, in a countrys balance of payments statement, the merchandise trade balance is
$-100, services exports and factor income receipts from abroad in total exceed services
imports and factor income payments abroad by $25, unilateral transfers made exceed
unilateral transfers received by $15, and the long-term financial account has debits
exceeding credits by $30, then the country’s balance on current account is
a. $-120
b. $-90
c. $-75
d. $-60
9) suppose that, other things equal, labor moves from country a to country b. in a
two-factor world (capital and labor), this labor movement will lead to
a. an increase in the total return to owners of capital in country a
b. a decrease in the total return to owners of capital in country a
c. a decrease in the wage rate in country b
d. a decrease in total wages paid in country b
in balance-of-payments accounting, the acquisition of a foreign production facility by a
u.s. firm is a __________ item in the u.s. balance of payments; the deposit of funds in a
foreign bank account by a u.s. citizen __________ item in the u.s. balance of payments.
a. debit; also is a debit
10) b. debit; is a credit
c. credit; is a debit
d. credit; also is a credit
11) other things equal, which one of the following types of growth in a large country
will have the most adverse impact upon that country’s terms of trade?
a. ultra-antitrade growth
b. antitrade growth
c. protrade growth
d. ultra-protrade growth
12) in a keynesian open-economy income model, an increase in autonomous investment
in a country is likely to lead to what impact (if any) on national income in a trading
partner country?
a. an increase
b. a decrease
c. no change
d. an increase, a decrease, or no change cannot be determined without more information
13) suppose that, in a system of floating or market-determined exchange rates, the
equilibrium exchange rate is 80 japanese yen = $1. if there is then a change in
preferences of u.s. consumers such that they now prefer more japanese goods in their
consumption bundle, then, other things equal, the equilibrium exchange rate
__________, which is __________.
a. will move toward a lower price for the dollar (e.g., 75 yen = $1); an appreciation of
the yen relative to the dollar
b. will move toward a lower price for the dollar (e.g., 75 yen = $1); an appreciation of
the dollar relative to the yen
c. will move toward a higher price for the dollar (e.g., 85 yen = $1); an appreciation of
the yen relative to the dollar
d. will move toward a higher price for the dollar (e.g., 85 yen = $1); an appreciation of
the dollar relative to the yen
14) in the current exchange rate arrangements of imf members,
a. a substantial number of countries do not have a freely floating exchange rate
b. the european union countries fix their exchange rates against the u.s. dollar
c. no countries are tied or pegged to the u.s. dollar
d. no developing country allows its currency to float
15) in the economic and monetary union in europe (emu), the member countries
a. tie their currencies to the u.s. dollar
b. use a common currency (the euro)
c. tie their currencies to the sdr
d. have completely flexible exchange rates with each other
16) if a country has a current account deficit, then the country must also have
a. a merchandise trade deficit
b. a financial or capital account surplus
c. a financial or capital account deficit
d. an increase in its net international investment position
17) in which of the following cases can we conclude, without any further information,
that a depreciation of a countrys currency will worsen the countrys trade balance (or
current account balance).
a. demand curve for exports is horizontal; supply curve of imports is horizontal
b. demand curve for exports is vertical; demand curve for imports is vertical
c. demand curve for exports is horizontal; demand curve for imports is horizontal
d. supply curve of exports is horizontal; supply curve of imports is horizontal
18) suppose that a countrys factors of production are completely specific to the
industries in which they are located (i.e., factors in the x industry would contribute
nothing to y output if they were employed in the y industry and factors in the y industry
would contribute nothing to x output if they were employed in the x industry). in
addition, suppose that the country has an autarky px/py that is greater than the world
px/py. in this situation, if the country is opened to international trade, it will
a. export good x and will obtain gains from specialization (a production gain) but not
gains from exchange (a consumption gain)
b. export good x and will obtain gains from exchange (a consumption gain) but not
gains from specialization (a production gain)
c. export good y and will obtain gains from specialization (a production gain) but not
gains from exchange (a consumption gain)
d. export good y and will obtain gains from exchange (a consumption gain) but not
gains from specialization (a production gain)
19) in the portfolio balance model, other things equal, an increase in home country
wealth because of a current account surplus
a. will reduce home country demand for money
b. will reduce home country demand for foreign bonds
c. will have an indeterminate effect on the domestic interest rate (without more
information)
d. will not affect the domestic demand for either foreign or domestic bonds
20) the linder theory of trade suggests that
a. a country with a per capita income of $15,000 is likely to have more intense trade
with a country that has a per capita income of $16,000 than with a country that has a per
capita income of $25,000
b. the most intense trade of low-income, developing countries will be with high-income,
developed countries
c. countries will confine themselves to inter-industry trade
d. the exports of primary products of a country will mainly flow to other countries with
per capita income levels similar to that of the exporting country