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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:
if the countries engage in trade at posttrade prices (terms of trade) of 1 shirt = 0.5
brandy, then
a. france gets all the gains from trade
b. the united states gets all the gains from trade
c. neither country gains from trade
d. the two countries share equally in the gains from trade
2) other things equal, in a keynesian income model with a foreign sector, the
autonomous spending multiplier that applies to an autonomous increase in the countrys
investment __________.
a. is larger when foreign repercussions are included in the model than when such
repercussions are not included in the model
b. is of the same size when foreign repercussions are included in the model as when
such repercussions are not included in the model
c. is smaller when foreign repercussions are included in the model than when such
repercussions are not included in the model
d. is larger than, is the same as, or is smaller when foreign repercussions are included in
the model in comparison to when such repercussions are not included in the model
cannot be determined without more information
3) which one of the following is not a component of international bank lending?
a. domestic bank loans in domestic currency to nonresidents
b. domestic bank loans in foreign currency to domestic residents
c. domestic bank loans in domestic currency to a multinational corporation located in
the domestic country
d. domestic bank loans in foreign currency to nonresidents
4) given the diagram below, which shows country a in its autarky position at point e
[where the price line labeled p0 is tangent to both country a's production-possibilities
frontier (ppf) and country a's indifference curve s0]:
if country a now is opened to international trade in a situation where the price of bread
relative to the price of meat is lower on the world market than it is in as autarky
position, then __________; with international trade, country a will be __________.
a. country a will face a steeper price line than p0 and will change production to a point
on the ppf that is downward and to the right from point e; exporting meat and importing
bread
b. country a will face a steeper price line than p0 and will change production to a point
on the ppf that is downward and to the right from point e; exporting bread and
importing meat
c. country a will face a flatter price line than p0 and will change production to a point on
the ppf that is upward and to the left from point e; exporting meat and importing bread
d. country a will face a flatter price line than p0 and will change production to a point
on the ppf that is upward and to the left from point e; exporting bread and importing
meat
5) in a setting of flexible exchange rates, suppose that the u.s. citizens decrease their
import purchases from the united kingdom at the same time that british citizens increase
their purchases of stocks and bonds in the united states. the first action (the u.s. imports)
by itself would lead to __________ of the dollar against the pound; the second action
by itself would __________ of the dollar against the pound.
a. an appreciation; lead to a depreciation
b. an appreciation; also lead to an appreciation
c. a depreciation; also lead to a depreciation
d. a depreciation; lead to an appreciation
6) suppose that the nominal tariff rate on final good x is 8 percent and that the weighted
average of the nominal tariff rates on the inputs used in producing good x is 12 percent.
in this situation, the effective rate of protection (erp) for final good industry x
a. must be greater than 12 percent
b. must be between 8 percent and 12 percent
c. must be less than 8 percent and greater than zero percent
d. must be less than 8 percent and can be negative
7) if a country ties its currency to a specific foreign currency and allows its holdings of
that currency to govern the countrys money supply, this arrangement is known as a
a. currency board
b. floating exchange rate
c. monetary union
d. special drawing right
8) in a situation of flexible exchange rates, other things equal, a shift of the is curve to
the left will lead to __________ of the countrys currency if the bp curve is steeper
thanthe lm curve and __________ of the countrys currency if the lm curve is steeper
than the bp curve.
a. an appreciation; also will lead to an appreciation
b. an appreciation; will lead to a depreciation
c. a depreciation; will lead to an appreciation
d. a depreciation; also will lead to a depreciation
9) the world trade organization
a. prevents each member country from adopting its own trade policy objectives
b. is charged with implementing the agreements reached in the uruguay round of trade
negotiations
c. requires its member countries to eliminate all barriers to imports
d. requires its member countries to adopt common labor standards with respect to and
wages working conditions
10) under a system of flexible exchange rates, the portfolio balance approach suggests
that an increase in real income in a home country will lead to __________ of that
countrys
currency; under flexible rates, the monetary approach suggests that an increase in real
income in a home country __________ of that countrys currency.
a. a depreciation; will lead to an appreciation
b. a depreciation; also will lead to a depreciation
c. an appreciation; also will lead to an appreciation
d. an appreciation; will lead to a depreciation
11) if ef = the forward rate on three-months swiss francs, e = the current spot rate on
swiss francs, and e(e) = the expected future rate of the swiss franc in three months, then
the swiss franc is said to be at a forward discount if __________ is negative.
a. ef- e
e
b. e - ef
e
c. e(e) - e
e
d. e(e) - ef
ef
12)
in the graph above, the migration of labor would result in __________ in country is
gross domestic product of the amount of area __________
a. an increase; l1cbal2
b. an increase; l1cfal2
c. a decrease; l1cal2
d. a decrease; l1cfal2
13)
in the diagram above, if restrictions on capital flows were removed and capital was
allowed to flow from the low-return country to the high-return country, then total output
in country ii would rise by area __________.
a. 0'r'3ak1
b. k1aek2
c. k1fek2
d. k1gek2
14) suppose that country as citizens, firms, and governments own $750 billion of assets
in other countries and that foreign citizens, firms, and governments own $850 billion of
assets in country a. this situation indicates that country a has a __________ of
__________.
a. balance-of-payments deficit; $100 billion
b. balance-of-payments surplus; $100 billion
c. net international investment position; minus $100 billion
d. net international investment position; plus $100 billion
15) because of widespread risk aversion in the financial sector in recent years,
commercial banks in the united states have tended to hold __________ excess reserves
than would otherwise have been the case. a result of this bank behavior is that the
money multiplier in the u.s. economy is __________ than would otherwise have been
the case.
a. a larger amount of; smaller
b. a larger amount of; larger
c. a smaller amount of; smaller
d. a smaller amount of; larger
16) in the krugman model, when a country is opened to international trade, the total
output of each firm __________ and the real wage of workers in the country
__________.
a. increases; decreases
b. increases; also increases
c. decreases; also decreases
d. decreases; increases
17) in the following import graph, if horizontal supply line sm shifts to horizontal line
sm because of the imposition of a tariff,
a. the situation must be one of a large importing country
b. the tariff must be a specific tariff
c. the tariff must be an ad valorem tariff
d. the tariff can be either a specific or an ad valorem tariff
18) (this question draws on appendix a material.)
in a keynesian open economy, suppose that the mpc = 0.8, the mpm = 0.10, and t =
0.25. if it is desired to increase national income by 125 through an increase in private
investment, by how much will private investment have to increase in order to generate
the 125 increase in income?
a. 25
b. 31.25
c. 50
d. 62.5
19) in the graph below, without capital movements between countries i and ii, the
capital stock in country i is 0k1 and the capital stock in country ii is k10. the return to
capital in country i is thus __________ and the return to capital in country ii is
__________.
a. 0r1; 0'r'1
b. 0r3; 0'r'1
c. 0r1; 0'r'3
d. 0r2; 0'r'3
20) the macroeconomic view of a trade deficit implies that, other things equal, the
imposition of a tariff will reduce the countrys trade deficit
a. because imports will be reduced and exports cannot possibly change
b. only if the tariff has no impact on the countrys spending or income
c. only if the tariff leads to increased income in the country relative to the countrys
spending
d. only if the tariff leads to increased spending by the country relative to the countrys
income
