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in a situation of stagflation, the use of aggregate demand-oriented macro policy to address
the problem of the rising price level would, at least in the short run, __________ the price
level and __________ the level of output in the economy.
a. increase; increase
1) b. increase; decrease
c. decrease; increase
d. decrease; decrease
2) in the price-specie-flow adjustment mechanism, a country with a balance-of-trade
surplus experiences
a. a gold inflow and a decrease in the price level
b. a gold outflow and an increase in the money supply
c. an increase in the money supply and a decrease in exports
d. a decrease in the money supply and a decrease in imports
3) other things equal, if exchange rates are flexible, and if u.s. consumers increase their
demand for japanese goods at the same time that japanese consumers increase their
demand for u.s. goods, then we would expect the dollar to
a. appreciate relative to the yen
b. depreciate relative to the yen
c. remain unchanged in value relative to the yen
d. appreciate, depreciate, or remain unchanged in value relative to the yen impossible to
determine without more information
as a country moves from autarky to trade, the relative price of the countrys import good
will __________ for home consumers, and the relative price of the countrys export good
__________ for home consumers.
4) a. fall; will rise
b. fall; also will fall
c. rise; also will rise
d. rise; will fall
5) in the neoclassical (or modern) theory, two countries with identical
production-possibilities frontiers (ppfs)
a. can gain from trade with each other if demand conditions (tastes) differ in the two
countries and the identical ppfs demonstrate increasing opportunity costs
b. can gain from trade with each other if demand conditions (tastes) differ in the two
countries and the identical ppfs demonstrate constant opportunity costs
c. can gain from trade with each other even if demand conditions (tastes) are identical
in the two countries as long as the identical ppfs demonstrate constant opportunity costs
d. cannot gain from trade with each other under any circumstances
6) in the production process of a final good industry, the direct factor requirements per
unit of output will be __________ the total factor requirements per unit of output; if the
industry is relatively capital-intensive when classified by direct requirements, it
__________ be relatively capital-intensive when classified by total requirements.
a. greater than; must also
b. greater than; may not necessarily
c. less than; must also
d. less than; may not necessarily
7) in the is/lm/bp analysis, as a countrys currency depreciates (and assuming that the
marshall-lerner conditions holds), the countrys
a. lm curve shifts to the right
b. bp curve shifts to the right
c. is curve shifts to the left
d. lm curve shifts to the left
8) a surge in international bank lending could be potentially economically destabilizing
because
a. it creates the possibility of reduced control of a countrys money supply
b. it directly contributes to destabilizing real investment flows
c. it results in too much control of world investment by a few large industrial countries
d. it results in inefficient use of financial capital, and hence reduces world growth rates
9) the existence of which type of dumping most likely constitutes the weakest argument
for the imposition of an antidumping duty?
a. predatory dumping
b. persistent dumping
c. sporadic dumping
d. none of the above predatory, persistent, and sporadic dumping all generate
equivalent-strength arguments for the imposition of an antidumping duty
10) if id is the domestic interest rate, if is the foreign interest rate, xa is the expected
rate of appreciation of the foreign currency (or the expected rate of depreciation of the
home currency), and financial capital is mobile across countries (and assuming no risk
premium), then equilibrium in international financial asset markets is indicated by the
expression
a. xa = (id/if)
b. xa = id + if
c. if = id + xa
d. id = if + xa
11) in its lending to member countries, the international monetary fund (imf)
a. concentrates on long-term development loans and does not engage in short-term
balance-of-payments loans
b. can lend to a country, at a maximum, only 25 percent of the value of that country's
quota in the imf
c. lends whatever amounts member countries may wish to borrow, and at a zero interest
rate and no service charge on all loans
d. may increase the difficulty of obtaining loans and may insist on internal policy
changes by borrowing countries as the borrowers ask for additional loans
12) as a country moves from autarky to trade, the relative price of the countrys export
good will __________ for home consumers, and the relative price of the countrys
import good __________ for home consumers.
a. fall; will rise
b. fall; also will fall
c. rise; also will rise
d. rise; will fall
13) the diagram below shows the situation of a small country with free-trade in an
imported product (at a price of $10) and the situation with a tariff on the product (at a
price of $11). in this graph, the net welfare loss (or total deadweight loss) to the country
from the imposition of the tariff is __________.
a. $2
b. $6
c. $32
d. $44
14) in the following diagram, offer curve 0a0 of country a is the free-trade offer curve,
and the other four offer curves represent as offer curves under four different tariff rates.
of these four other curves, only one of them can possibly be an offer curve which is
associated with as optimum tariff. which one?
a. 0a1
b. 0a2
c. 0a3
d. 0a4
15) other things equal, a domestic monetary or financial shock (a shift in the lm curve)
tends to produce what relative degree of gdp change for the home country under a
situation of flexible exchange rates compared to a situation of fixed exchange rates?
a. smaller change with flexible rates
b. same change with flexible rates as with fixed rates
c. larger change with flexible rates
d. smaller, same, or larger change with flexible rates cannot be determined without
more information
16) in general, a countrys unweighted-average nominal tariff rate tends to be
__________ than the countrys weighted-average nominal tariff rate. the difference
between the two would be __________ if the goods with the highest tariffs became
imported relatively more heavily.
a. lower; smaller
b. lower; larger
c. higher; smaller
d. higher; larger
17) if a countrys bp curve is flatter than its lm curve, then an external financial shock of
a rise in interest rates abroad would, under flexible exchange rates, lead to __________
in the home countrys national income. if exchange rates were fixed, this external
financial shock would __________ in the home countrys national income.
a. a decrease; lead to an increase
b. a decrease; also lead to a decrease
c. an increase; also lead to an increase
d. an increase; lead to a decrease
18) suppose that, prior to a technological change (innovation) in an industry, at existing
factor prices, it takes 30 units of capital and 100 units of labor to produce 500 units of
good x. (assume that capital and labor are the only two factors of production.) after the
innovation, it takes 25 units of capital and 50 units of labor to produce 500 units of
good x (at the same factor prices as before the innovation). in this situation, the
technological change would be classified as a __________ technological change.
a. capital-saving
b. labor-saving
c. neutral
d. capital-saving and labor-saving
19) in the classical (ricardo) analysis,
a. if a country has an absolute advantage in a good, it also has a comparative advantage
in the good
b. if a country has a comparative advantage in a good, it cannot have an absolute
advantage in the good
c. a country can have a comparative advantage in a good at the same time that it has an
absolute advantage in that good
d. a country with an absolute advantage in all goods cannot gain from trade
20) suppose that, in a classical constant-opportunity-costs framework, country i can
produce 15 units of wheat if it devotes all of its resources to wheat production and 45
units of clothing if it devotes all of its resources to clothing production. in a trading
situation for this country, if the world price ratio is pwheat/pclothing = (or pclothing/pwheat
= 3), country i would
a. export wheat and import clothing
b. export clothing and import wheat
c. be indifferent to trade
d. export either clothing or wheat and import either wheat or clothing cannot be
determined without more information
