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1) given the following ricardo-type table shows the labor input required per unit of
output in each of the two industries in each of the two countries:
suppose that germany is a much larger country in terms of production and income than is
the united kingdom. in this situation, other things equal, when the countries engage in
trade, the posttrade price ratio (terms of trade) would tend to settle __________, and
__________ would therefore tend to have relatively large gains from trade.
a. toward a value of 1 cloth:2 steel; the united kingdom
b. toward a value of 1 cloth:2 steel; germany
c. toward a value of 1 cloth:1.5 steel; the united kingdom
d. toward a value of 1 cloth:1.5 steel; germany
2) you are given the following classical-type table showing the output of 10 days labor
in the production of each of the two commodities in each of the two countries. assume
that the u.k. worker’s wage is £30 per day and that the fixed exchange rate is $2 = £1.
if trade is taking place, what is the lower limit to the u.s. workers wage per day?
a. $30
b. $40
c. $90
d. $120
3) the concept of results-based trade policy
a. is embodied in the new reciprocity approach to policy
b. is consistent with gatt codes and guidelines
c. is encouraged by policymakers who want the government to be less involved in
managing trade
d. is encouraged by those who feel that government allocation of resources is less
efficient than market allocation of resources
4) in the neoclassical model of trade, the movement of a country from autarky to free
trade generally results in __________ specialization in production, __________ the
situation in the classical model.
a. complete; unlike
b. complete; as was also
c. partial; unlike
d. partial; as was also
5) which of the following is considered to be a positive dynamic effect of integration?
a. economies-of-scale effects
b. reduced customs costs
c. trade diversion
d. increased monopoly power of firms
6) if technological change in an industry results, at given relative factor prices, in a
reduction in the amount of both capital and labor used to produce a given amount of
output, but the reduction in labor requirements is greater than the reduction in capital
requirements, this technological change would be called __________ in nature.
a. neutral
b. labor-saving
c. capital-saving
d. both labor-saving and capital-saving
7) suppose that a keynesian import function is expressed as m = 20 + 0.25y. with this
function,
a. if income = 1,000, imports = 250
b. if income = 1,000, the average propensity to import is 0.27
c. the marginal propensity to import is greater at an income level of 1,000 than at an
income level of 800
d. the average propensity to import is greater at an income level of 1,000 than at an
income level of 800
8) 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:
suppose that the u.s. wage rate is $60 per day and that the exchange rate is $2 = £1 (or
£0.5 = $1). in this situation, the lower limit for the u.k. wage rate in order to have
two-way trade would be __________ per day.
a. £18
b. £20
c. £45
d. £50
9) given the following information pertaining to large country a with respect to good x
under free trade and with a tariff in place:
a. loss of $15
b. loss of $45
c. gain of $15
d. gain of $60
10) given the following import function for a country in a keynesian income model:
m = 15 + 0.10y
a. at an income level of 100, imports are 10
b. an increase in the 0.10 to a value of 0.15 would, other things equal, increase the size
of the countrys open-economy multiplier (i.e., autonomous spending multiplier with a
foreign sector)
c. at an income level of 200, the countrys average propensity to import would be 0.175
d. an increase in the 15 to a value of 20 would, other things equal lead to an increase in
the countrys national income
11) suppose that the free-trade offer curve of country i is drawn with country is exports
of good a on the horizontal axis and country is imports of good b on the vertical axis. if
country i now places an import quota of 100 units of good b, country is offer curve
a. will have its normal free-trade appearance up to 100 units on the vertical axis and
then will become a horizontal line back to the vertical axis
b. will have its normal free-trade appearance up to 100 units on the horizontal axis and
then will become a vertical line going upward and parallel to the vertical axis
c. will shift to the left or vertically upward by 100 units at each level of exports of good
a
d. will shift to the right or vertically downward by 100 units at each level of exports of
good a
12) suppose that the net or total effect of the consumption and production effects of a
countrys growth is that the countrys offer curve shifts or pivots outward (i.e., the
country is more willing to trade). in this situation, it can validly be concluded that this
countrys growth can be characterized as __________ (where up = ultra-protrade
growth, p = protrade growth, n = neutral growth, a = antitrade growth, and ua =
ultra-antitrade growth).
a. up, p, n, or a but not ua
b. up, p, or n but not a or ua
c. up or p but not n, a, or ua
d. up but not p, n, a, or ua
13) small groups may gain at the expense of the majority when
a. voters perceive that there are costs associated with voting
b. small group solidarity is high and there is little free-riding within the groups
c. the expected consumer benefits from the policies are small on an individual basis
d. all of the above
14) if a country adopts a currency board arrangement, a result is that the countrys
money supply __________ be increased by the purchase of domestic assets from the
countrys citizens by the countrys central bank; in this arrangement, the countrys money
supply __________ be increased by the purchase of foreign assets from the countrys
citizens by the countrys central bank.
a. can; also can
b. can; cannot
c. cannot; can
d. cannot; also cannot
15) if a country's total output grows by 10 percent and its imports fall by 6 percent
because of the growth, this growth pattern would be classified as __________ growth.
a. ultra-antitrade
b. antitrade
c. protrade
d. ultra-protrade
16) which one of the following situations would represent a small-country case in the
analysis of the elasticities approach to devaluation?
a. demand for exports curve has normal downward slope, supply curve of imports is
horizontal
b. supply curve of imports has normal upward slope, demand curve for exports is
horizontal
c. supply curve of imports is horizontal, demand curve for exports is vertical
d. demand curve for exports is horizontal, supply curve of imports is horizontal
17) the optimal size of international reserves occurs for a country at the point where the
a. total benefit of holding the reserves equals the total cost of holding the reserves
b. marginal benefit of holding the reserves exceeds the marginal cost of holding the
reserves by the greatest amount
c. marginal benefit of holding the reserves equals the marginal cost of holding the
reserves
d. marginal cost of holding the reserves is zero
18) in the asset market or portfolio balance approach, other things equal, a depreciation
of the home currency would be caused by __________ in inflationary expectations in
the home country and by __________ in real income in the home country.
a. an increase; an increase
b. an increase; a decrease
c. a decrease; an increase
d. a decrease; a decrease
