1) to help insulate their economies from inflation, currency depreciation, and capital
flight, developing countries have implemented:
a.regional trading blocs
b.currency boards
c.central banks
d.regional fiscal policies
2) the movement to free international trade is most likely to generate short-term
unemployment in which industries?
a.industries in which there are neither imports nor exports
b.import-competing industries
c.industries that sell to domestic and foreign buyers
d.industries that sell to only foreign buyers
3) figure 13.2. australian economy under a fixed exchange rate system
refer to figure 13.2. starting at equilibrium income $50 billion, where (s-i)0 intersects
(x-m)0, suppose that improving profit expectations lead to an autonomous increase in
australian investment of $5 billion. australian income thus ____ which leads to
australia’s trade account moving to a ____.
a.rises to $60 billion, deficit of $2.5 billion
b.rises to $60 billion, deficit of $5 billion
c.falls to $40 billion, surplus of $2.5 billion
d.falls to $40 billion, surplus of $5 billion
4) as a way of helping american firms trade in the world market, u.s. trade law provides
antitrust exemptions for horizontal combinations of american firms engaged solely in
export trade. such firms are permitted to form:
a.export trade associations
b.domestic international sales corporations
c.export-import banks
d.commodity sales corporations
5) given an upward-sloping supply schedule of pounds and a downward-sloping
demand schedule for pounds, a decrease in the supply schedule causes an appreciation
of the dollar against the pound.
a.true
b.false
6) an increase in the dollar price of other currencies tends to cause:
a.u.s. goods to be cheaper than foreign goods
b.u.s. goods to be more expensive than foreign goods
c.foreign goods to be more expensive to residents of foreign nations
d.foreign goods to be cheaper to residents of the united states
7) figure 6.2 illustrates the calculator market for mexico, assumed to be a small nation
that is unable influence the south korean (world) price. assume the south korean price to
be $60 per calculator.
figure 6.2. effects of an export subsidy
consider figure 6.2. as a result of the south korean subsidy, mexicans find their
consumer surplus:
a.rising by $160
b.rising by $220
c.falling by $160
d.falling by $220
8) figure 13.2. australian economy under a fixed exchange rate system
refer to figure 13.2. starting at equilibrium income $50 billion, where (s-i)0 intersects
(x-m)0, suppose that improving economic conditions abroad lead to an autonomous
increase in australian exports of $5 billion. australian income thus ____ which leads to
australia’s trade account moving to a ____.
a.rises to $60 billion, surplus of $2.5 billion
b.rises to $60 billion, surplus of $5 billion
c.falls to $40 billion, deficit of $2.5 billion
d.falls to $40 billion, deficit of $5 billion
9) the so-called four tigers include australia, south korea, taiwan, and hong kong.
a.true
b.false
10) if we consider the impact on both consumers and producers, then protection of the
steel industry is:
a.in the interest of the united states as a whole, but not in the interest of the state of
pennsylvania
b.in the interest of the united states as a whole and in the interest of the state of
pennsylvania
c.not in the interest of the united states as a whole, but it might be in the interest of the
state of pennsylvania
d.not in the interest of the united states as a whole, nor in the interest of the state of
pennsylvania
11) the general agreement on tariffs and trade and its successor, the world trade
organization, have resulted in:
a.termination of export subsidies applied to manufactured goods
b.termination of import tariffs applied to manufactured goods
c.encouragement of beggar-thy-neighbor policies
d.reductions in trade barriers via multilateral negotiations
12) relatively high interest rates in the united states causes the dollar to ____ in the
____.
a.appreciate, long run
b.depreciate, long run
c.appreciate, short run
d.depreciate, short run
13) figure 9.1 illustrates the market conditions facing sony company and american
company initially operating as competitors in the domestic ball bearing market. each
firm realizes constant long-run costs, mc0=ac0.
figure 9.1. international joint venture
consider figure 9.1. assume venture company’s formation yields new cost reductions,
indicated by mc1=ac1, which result from technological advances. realizing that venture
company results in a deadweight loss of consumer surplus, the net effect of venture
company’s formation on the welfare of the domestic economy is:
a.no change
b.gain of $2
c.gain of $4
d.loss of $2
14) most of the world’s population now lives in countries that are:
a.integrated into world markets
b.becoming integrated into world markets
c.near poverty
d.a and b
15) the purchasing-power-parity theory is used to predict exchange-rate movements in
the short run.
a.true
b.false
16) the diagram below illustrates the international tin market. assume that producing
and consuming countries establish an international commodity agreement under which
the target price of tin is $5 per pound.
figure 7.1. defending the target price in face of changing demand conditions
consider figure 7.1. suppose the demand for tin decreases from d0 to d2. under a buffer
stock system, the buffer-stock manager could maintain the target price by:
a.selling 15 pounds of tin
b.selling 30 pounds of tin
c.buying 15 pounds of tin
d.buying 30 pounds of tin
17) describe the eurocurrency market.
18) is the monetary approach to the balance-of-payments part of the traditional
adjustment theories?
19) is it possible for a low nominal tariff rate to understate the effective rate of
protection? what is tariff escalation?
20) what happens to the balance of payments under a fixed exchange rate system, when
expansionary or contractionary monetary policy is used?
21) what factors influence the extent of trade creation and trade diversion?