_____ purchasing power parity states that a bundle of tradable products will have the
same cost in different countries if the cost is stated in the same currency.
a. Full
b. Partial
c. Relative
d. Absolute
Answer:
Under a floating exchange rate regime with a low degree of capital mobility, if the
domestic government uses an expansionary fiscal policy:
a. the domestic interest rate increases.
b. foreign capital inflows decrease domestic product.
c. the financial account balance deteriorates.
d. the official settlements balance tends to go into surplus.
Answer:
An example of policies designed to protect and encourage new industries serving the
domestic market would be:
a. taxing exports of manufactured goods.
b. subsidizing imports to the domestic market.
c. imposing import tariffs or otherwise restricting imports.
d. removing all trade restrictions and price supports.
Answer:
If country X has higher labor productivity in the production of umbrellas than the rest
of the world, we would say that country X has a(n) _____ in the production of
umbrellas.
a. comparative advantage
b. absolute advantage
c. absolute disadvantage
d. comparative disadvantage
Answer:
Which is NOT a potential cost faced by nations that choose against repaying their
debts?
a. A loss of future creditworthiness
b. A loss of foreign assets
c. Moral hazard
d. Domestic recession
Answer:
The figure below shows an IS-LM-FE model for an economy with fixed exchange
rates. Initially the economy was at point A, a triple intersection. Here, the FE curve is
flatter than the LM curve.
If monetary authorities are unable to sterilize, the interest rate will end up:
a. at i1.
b. above i1.
c. between i1 and i0.
d. at i0.
Answer:
Which of the following can be considered as domestic assets of a country’s central
bank?
a. Bank deposits at the central bank
b. The country’s government bonds held by the central bank
c. Foreign currency assets held by the central bank
d. Currency issued by the central bank
Answer:
Relative to standard competitive trade, trade based on monopolistic competition has
_____ impact on factor incomes.
a. greater
b. lower
c. the same
d. no
Answer:
The Heckscher-Ohlin theory suggests that research and development activity is most
likely to be concentrated in countries which:
a. are capital-abundant.
b. are skilled-labor-abundant.
c. specialize in the production of primary commodities.
d. are more self-reliant.
Answer:
In August 1982, which of the following countries declared that it was unable to service
its foreign debt and thereby triggered a long-lasting crisis in international lending?
a. The United Kingdom
b. The United States
c. Thailand
d. Mexico
Answer:
When a small, initially closed country engages in free trade:
a. it always experiences a balanced growth.
b. it experiences a much slower economic growth.
c. it is not likely to suffer from immiserizing growth.
d. its production-possibility curve shifts inward.
Answer:
The role of international _____ is to direct one nation’s savings into another nation’s
investments.
a. merchandise trade flows
b. services flows
c. unilateral transfers
d. capital flows
Answer:
The Brady Plan helped to end:
a. the 1997 currency crisis.
b. the 1982 debt crisis.
c. the 1991 global recession.
d. the European debt crisis.
Answer:
Which of the following statements is true?
a. Shifts toward freer trade are responsible for the majority of the increase in carbon
dioxide emissions.
b. Free trade is inherently unfair and anti-environment.
c. Relocation of firms to take advantage of lax environmental laws is small.
d. Production of commodities like textiles increases in the industrialized countries due
to free trade.
Answer:
In a two-country two-good model, if a country has an absolute advantage in the
production of a certain good, it implies that:
a. it is not possible that this country can gain by importing this good from the other
country.
b. this country also has a comparative advantage in the production of this good.
c. it has greater resources than the other country.
d. this country has higher labor productivity in the production of this good.
Answer:
The central bank of which of the following countries dominated monetary policy within
the Exchange Rate Mechanism?
a. Germany
b. France
c. The United States
d. The United Kingdom
Answer:
Aggressive competition in the foreign market through exports by a domestic firm due to
a protected home market is known as:
a. cyclical dumping.
b. persistent dumping.
c. strategic dumping.
d. seasonal dumping.
Answer:
Suggest a remedial measure for each of the following externalities if: (1) the whole
world had only one government and (2) a particular nation is harmed and is acting
alone. The individual situations are as follows:
a. Pollution from domestic consumption
b. Pollution from foreign consumption
c. Pollution from world consumption
Answer: