Economic 3

Question 1 1 out of 1 points
If a PPP estimate of the dollar/pound exchange rate is $1.61/ and the current spot rate is observed to be $1.68/, you should, viewing the long run, Answer Selected Answer: Correct Answer: expect the dollar to appreciate against the pound. expect the dollar to appreciate against the pound.
Suppose that a speculator notes that the current 3-months forward rate on the euro is $1.26. The speculator expects that, in 3 months, the euro will have a value of $1.30. In this situation, the speculator would _____ euros on the forward market, and this activity _____ for the speculator. Answer Selected Answer: Correct Answer: sell; involves risk buy; involves risk
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 from 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. Answer Selected Answer: Correct Answer: an appreciation; also lead to an appreciation an appreciation; also lead to an appreciation
If the equilibrium value of the pound is $1.60 in time period 1, but U.K. prices double between time periods 1 and 2 while U.S. prices rise by 60 percent, then the (relative) purchasing-powerparity theory would say that the equilibrium value of the pound in time period 2 is Answer Selected Answer: Correct Answer: $1.28. $1.28.
If a speculator observes that the current 3-months forward rate on Swiss francs is 20 = 1 franc, but he/she expects that the spot rate in 3 months will be 30 = 1 franc, then this speculator would now Answer Selected Answer: Correct Answer: sell francs on the forward market. buy francs on the forward market.
In general, other things being equal, trade creation is more likely to outweigh trade diversion for a home country forming a customs union with partner countries (i) if the total number of countries forming the union is _____, and (ii) if the level of tariffs in the home country prior to the formation of the union is _____. Answer Selected Answer: Correct Answer: small rather than large; low rather than high large rather than small; high rather than low
The Big Mac Index Answer Selected Answer: is an absolute PPP index of the international value of the U.S. dollar based
on a single commodity. Correct Answer: is an absolute PPP index of the international value of the U.S. dollar based on
a single commodity.
Suppose that Mexico trades only with Germany and the United States. Additionally, suppose that in 1995 the spot rates were 0.2 euro = 1 peso and $0.10 = 1 peso, and that in 2005 the spot rates were 0.15 euro = 1 peso and $0.12 = 1 peso. If Mexico's trade is 20 percent with Germany and 80 percent with the United States, calculation of the effective exchange rate for Mexico indicates that the peso Answer Selected Answer: Correct Answer: appreciated from 1995 to 2005. appreciated from 1995 to 2005.
In the graph below pertaining to good X for country A (where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place), suppose that country A, from this initial situation, now forms a customs union with country C.
If country A formed a customs union with country C rather than with country B, imports of good X into country A would be the amount _____.
Answer
Selected Answer: Correct Answer:
Q3Q4 Q1Q6
If Japan invests overseas because of its high saving rate (in excess of domestic investment spending), then this investment can cause_____ of the Japanese yen and, thus, a consequent trade _____ for Japan. Answer Selected Answer: Correct Answer: a depreciation; deficit a depreciation; surplus
In which of the following relationships between the expected future spot rate (E[e]) of a foreign currency and the current forward rate (efwd) of a foreign currency would a speculator have an incentive to sell foreign currency in the forward market? Answer Selected Answer: Correct Answer: E(e) < efwd E(e) < efwd
The graph below pertains to good X for country A, where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place.
With the tariffs in place for both countries B and C, imports of good X into country A are represented by distance Answer Selected Answer: Correct Answer: Q3Q4 Q3Q4
A simultaneous increase in U.S. demand for German products and decrease in the desire of German investors to send funds to the United States would, under a flexible exchange rate system and with other things being equal, lead to _____ of the U.S. dollar against the euro and to _____ of the euro against the dollar. Answer Selected Answer: Correct Answer: a depreciation; an appreciation a depreciation; an appreciation
A given exchange rate will be more or less the same in all of the world's financial markets because of Answer Selected Answer: Correct Answer: currency arbitrage. currency arbitrage.
An exporter who is to receive payment in foreign currency in 3 months and who wants to engage in hedging would _____ the foreign currency on the 3-months forward market in order to protect himself/herself from _____ of the foreign currency. Answer Selected Answer: Correct Answer: buy; a depreciation sell; a depreciation
If good X from country C faces a 10 percent tariff in country A and a 20 percent tariff in country B, but if A and B have free trade between each other, then A and B are part of which type of grouping? Answer Selected Answer: economic union
Correct Answer:
free-trade area
In considering trade creation and trade diversion in the formation of a customs union between countries and whether membership in the customs union enhances welfare in a home country, two general rules are that the customs union is more likely to enhance welfare, other things being equal, (i) if the union contains a _____ number of countries and (ii) if costs of production in the partner countries in the case of trade diversion differ _____ from costs of production in the outside world (the nonmember countries). Answer Selected Answer: Correct Answer: small rather than large; greatly large rather than small; only slightly
Other things being 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 Answer Selected Answer: Correct Answer: remain unchanged in value relative to the yen. The answer is impossible to determine without more information.
Suppose that, from the initial situation where country A's tariff was applied to both countries B and C, country A now forms a customs union with country B. With this customs union in place, imports into country A are represented by distance _____.
Answer Selected Answer: country. Correct Answer: union country. Q2Q5, only part of which constitute trade diversion from the noncustoms Q3Q4, all of which constitute trade diversion from the noncustoms union
In the graph below pertaining to good X for country A (where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply
curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place), suppose that country A, from this initial situation, now forms a customs union with country B.
The net welfare effect on country A from the formation of the customs union with country B is _____.
Answer Selected Answer: Correct Answer: areas (a + c) minus area f areas (a + c) minus area f
Which of the following is considered a positive dynamic effect of integration? Answer Selected Answer: Correct Answer: economies-of-scale effects economies-of-scale effects
If U.K. interest rates are higher than Japanese interest rates, then the theory of covered interest arbitrage would suggest that, in the /yen exchange markets, the yen would be at a forward _____ and the pound would _____. Answer Selected Answer: Correct Answer: premium; be at a forward discount premium; be at a forward discount
If two countries remove all tariffs on each other's products and establish a common set of tariffs against the rest of the world, but they take no further steps toward economic integration, these two countries have formed Answer Selected Answer: Correct Answer: a customs union. a customs union.
If country A forms a customs union with country B, then Answer Selected Answer: countries A and B may especially benefit from the union if substantial
economies of scale exist in some of the A and B industries.
Correct Answer:
countries A and B may especially benefit from the union if substantial
In a production-possibilities/indifference curve diagram depicting the movement of a country from a situation of a uniform tariff against all trading partners to a situation of a customs union with one trading partner, Answer Selected Answer: home production of the country's export good will increase and home
production of the country's import good will also increase after the formation of the customs union. Correct Answer: home production of the country's export good will increase, and home
production of the country's import good will decrease after the formation of the customs union. Question 1 2 out of 2 points
If relatively labor-abundant country A has a Leontief statistic greater than 1.0 and relatively capital-abundant country B has a Leontief statistic less than 1.0, this suggests that Answer Selected Answer: theorem. Correct Answer: theorem. both countries are conforming to the prediction of the Heckscher-Ohlin both countries are conforming to the prediction of the Heckscher-Ohlin
If two countries with increasing opportunity costs have identical PPFs but different tastes, Answer Selected Answer: the countries will have different relative commodity prices under autarky,
and each country can gain by exporting the good for which its consumers have the lower relative preference. Correct Answer: the countries will have different relative commodity prices under autarky, and
each country can gain by exporting the good for which its consumers have the lower relative preference.
If increased Heckscher-Ohlin-type trade were the major factor leading to increased income inequality in the United States, then one would expect that the relative prices of skilled laborintensive goods to unskilled labor-intensive goods would have _____ and that nontraded goods industries would have _____ their use of unskilled labor relative to skilled labor. Answer Selected Answer: Correct Answer: risen; increased risen; increased
Suppose that the 3-months interest rate in New York is 4 percent and the 3-months interest rate in London is 3 percent, and that the spot rate is $2.00/ and the 3-months forward rate is $2.10/. In this situation, there is an incentive for short-term interest arbitrage funds to flow Answer Selected Answer: Correct Answer: from London to New York. from New York to London.
In the Bretton Woods international monetary system, a country's currency, unless its par value or parity value were officially changed, could not deviate more than _____ from its par value or parity value. If the country's currency depreciated to its low point in this range, central banks needed to _____ the currency in the exchange markets in order to keep the currency's value within the specified range. Answer Selected Answer: Correct Answer: plus or minus 1 percent; buy plus or minus 1 percent; buy
A simultaneous increase in U.S. demand for German products and decrease in the desire of German investors to send funds to the United States would, under a flexible exchange rate
system and with other things being equal, lead to _____ of the U.S. dollar against the euro and to _____ of the euro against the dollar. Answer Selected Answer: Correct Answer: an appreciation; an appreciation a depreciation; an appreciation
In Europe's Economic and Monetary Union (EMU), the member countries Answer Selected Answer: Correct Answer: use a common currency (the euro). use a common currency (the euro).
Suppose that, in the context of the Edgeworth box diagram in production, there are constant returns to scale in each of the two industries. One good is relatively labor-intensive in its production process, and the other good is relatively capital-intensive in its production process. In considering this Edgeworth box diagram and the PPF that can be derived from it, Answer Selected Answer: Correct Answer: the PPF will show increasing opportunity costs. the PPF will show increasing opportunity costs.
The optimal size of international reserves occurs for a country at the point where the Answer Selected Answer: the reserves. Correct Answer: the reserves. marginal benefit of holding the reserves equals the marginal cost of holding marginal benefit of holding the reserves equals the marginal cost of holding
Given the U.S. wage rate of $40 per day and the exchange rate of 1 = $1, what is the upper limit to the wage rate in the United Kingdom that is consistent with two-way trade between the countries? (Textbook Reference: 4-2) Answer Selected Answer: Correct Answer: 40 per day 40 per day
A major advantage of the system of flexible exchange rates (as opposed to fixed exchange rates) is commonly thought to be Answer
Selected Answer:
the enhanced effectiveness of monetary policy in influencing national
income under flexible exchange rates. Correct Answer: the enhanced effectiveness of monetary policy in influencing national income
under flexible exchange rates.
In the current international monetary system, countries Answer Selected Answer: Correct Answer: have considerable latitude in choosing an exchange rate arrangement. have considerable latitude in choosing an exchange rate arrangement.
Other things being 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 Answer Selected Answer: Correct Answer: The answer is impossible to determine without more information. The answer is impossible to determine without more information.
In the Edgeworth box diagram in production with two goods and two factors of production, Answer Selected Answer: a movement from any point on the production efficiency locus (contract
curve) to any point off the locus must involve less production of both goods. Correct Answer: a movement from any point on the production efficiency locus (contract
curve) to another point on the locus must involve greater production of one good and less production of the other good.
If, because of Japan's high saving rate (in excess of domestic investment spending), Japan invests overseas, then this investment can cause _____ of the Japanese yen and, thus, a consequent trade _____ for Japan. Answer Selected Answer: Correct Answer: a depreciation; surplus a depreciation; surplus
In the price-specie-flow doctrine, a deficit country will _____ gold, and this gold flow will ultimately lead to _____ in the deficit country's exports. Answer Selected Answer: lose; an increase
Correct Answer:
lose; an increase
In Figure 1 pertaining to good X for country A (where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place), suppose that country A, from this initial situation, now forms a customs union with country B.
The net welfare effect on country A from the formation of the customs union with country B is _____.
Answer Selected Answer: Correct Answer: areas (a + c) minus area f areas (a + c) minus area f
If a country's PX/PY in autarky is less than the PX/PY on the world market, as the country moves to trade, the relative price of good Y will _____ for home consumers. Thus, consumers with a strong relative preference for good _____ would tend to oppose the movement to trade. Answer Selected Answer: Correct Answer: decrease; X decrease; X
The post-Bretton Woods international monetary system is generally thought to have been characterized by all except which of the following features? Answer Selected Answer: Real exchange rates have been relatively constant during the period, and so
the system's existence, per se, has not had real economic effects. Correct Answer: Real exchange rates have been relatively constant during the period, and so
the system's existence, per se, has not had real economic effects.
If good X from country C faces a 10 percent tariff in country A and a 20 percent tariff in country B, but if A and B have free trade between each other, then A and B are part of which type of grouping? Answer
free-trade area free-trade area
In the case of economists' definition of dumping, an exporting firm is selling its product at a _____ price in the importing country than in the exporter's home country, and this suggests that demand for the exporter's product is _____ in the exporting country than in the importing country. Answer Selected Answer: Correct Answer: lower; less elastic lower; less elastic
If a speculator observes that the current 3-months forward rate on Swiss francs is 20 = 1 franc, but he/she expects that the spot rate in 3 months will be 30 = 1 franc, then this speculator would now Answer Selected Answer: Correct Answer: buy francs on the forward market. buy francs on the forward market.
In Adam Smith's view, international trade Answer Selected Answer: Correct Answer: all of the above all of the above
If a Big Mac costs $2.50 in the United States and 2 pesos in Argentina, then the implied purchasing-power-parity exchange rate using the Big Mac is _____. If the actual exchange rate in the market is 0.6 pesos = $1, then an economist would say that the Argentine peso is _____ compared with its purchasing-power-parity rate. Answer Selected Answer: Correct Answer: 1.25 pesos = $1; overvalued 0.8 pesos = $1; overvalued
The _____ to testing Heckscher-Ohlin seeks to determine whether a country is a net exporter or net importer of the services of the various factors of production; the expectation is that, if a country has an excess _____ a factor's services, the country will be a net exporter of that factor's services. Answer
factor-content approach; supply of factor-content approach; supply of
If the Heckscher-Ohlin theorem is valid in practice (and assuming that capital and labor are treated as the only two factors in the real world), then the Leontief statistic for a labor-abundant country would be Answer Selected Answer: Correct Answer: greater than 1.0. greater than 1.0.
If two countries have identical production-possibilities frontiers but different tastes, it is possible for each country to gain from trade with the other country Answer Selected Answer: Correct Answer: in the neoclassical model but not in the Classical model. in the neoclassical model but not in the Classical model.
In considering trade creation and trade diversion in the formation of a customs union between countries and whether membership in the customs union enhances welfare in a home country, two general rules are that the customs union is more likely to enhance welfare, other things being equal, (i) if the union contains a _____ number of countries and (ii) if costs of production in the partner countries in the case of trade diversion differ _____ from costs of production in the outside world (the nonmember countries). Answer Selected Answer: Correct Answer: large rather than small; only slightly large rather than small; only slightly
If the U.S. trade pattern is as indicated by the Leontief test, this would suggest that participation in trade rather than in autarky by the United States has _____ the real return to U.S. capital and _____ the real wage of U.S. labor. Answer Selected Answer: Correct Answer: decreased; has increased decreased; has increased
A tariff placed upon a product in order to offset a foreign export subsidy is called Answer
a countervailing duty. a countervailing duty.
The Krugman economies-of-scale strategic trade policy model stresses that protection given to a home firm will, other things being equal, _____ the marginal cost of producing each level of home output and will _____ the marginal cost of producing each level of foreign output. Answer Selected Answer: Correct Answer: decrease; increase decrease; increase
If the U.K. worker's wage is 30 per day (and the fixed exchange rate is $2 = 1), what is the upper limit to the U.S. worker's wage per day? Answer Selected Answer: Correct Answer: $40 $120
The optimum tariff rate for a country is that rate which, assuming no retaliation,
Answer Selected Answer: Correct Answer: maximizes the country's welfare. maximizes the country's welfare.
An early significant agreement in the negotiations of the Doha Development Agenda that is of importance to developing countries occurred in Answer Selected Answer: Correct Answer: pharmaceuticals pricing. pharmaceuticals pricing.
With the tariffs in place for both countries B and C, imports of good X into country A are represented by distance _____.
Answer Selected Answer: Correct Answer: Q3Q4 Q3Q4
If relatively capital-abundant country A opens trade with relatively labor-abundant country B, and if the trade takes place in accordance with the Heckscher-Ohlin theorem, what would be the consequence for factor prices (w/r) in the two countries? Answer Selected Answer: Correct Answer: (w/r) falls in A and rises in B (w/r) falls in A and rises in B
In the current exchange rate arrangements of IMF members, Answer Selected Answer: Correct Answer: a substantial number of countries do not have a freely floating exchange rate. a substantial number of countries do not have a freely floating exchange rate.
In a production-possibilities/indifference curve diagram depicting the movement of a country from a situation of a uniform tariff against all trading partners to a situation of a customs union with one trading partner, Answer Selected Answer: home production of the country's export good will increase and home
production of the country's import good will decrease after the formation of the customs union. Correct Answer: home production of the country's export good will increase and home
production of the country's import good will decrease after the formation of the customs union.
The macroeconomic interpretation of a trade deficit for a country utilizes which one of the following expressions (where Y = national income, C = consumption, I = investment, G = government spending on goods and services, X = exports, and M = imports)? Answer Selected Answer: Correct Answer: Y - (C + I + G) = (X - M) Y - (C + I + G) = (X - M)
Which one of the following is NOT an alleged disadvantage of a flexible exchange rate system? Answer Selected Answer: possibility of destabilizing speculation
Correct Answer:
increased need for international reserves
According to the labor theory of value, Answer Selected Answer: the price of good A compared to the price of good B bears the same
relationship as the relative amounts of labor used in producing each good. Correct Answer: the price of good A compared to the price of good B bears the same
relationship as the relative amounts of labor used in producing each good.
In the Edgeworth box diagram, Answer Selected Answer: a plotting of the output combinations along the diagonal results in the
production-possibilities frontier for this country. Correct Answer: good B is the labor-intensive good, and good A is the capital-intensive good.
In a two-country world, the terms-of-trade impact of a tariff will definitely improve the welfare of the tariff-imposing country (assuming no retaliation) if the tariff-imposing country
Answer Selected Answer: Correct Answer: is situated in the inelastic portion of its trading partner's offer curve. is situated in the inelastic portion of its trading partner's offer curve.
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 from 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. Answer Selected Answer: Correct Answer: an appreciation; also lead to an appreciation an appreciation; also lead to an appreciation
The equilibrium condition for consumer behavior pertaining to goods A and B is Answer Selected Answer: Correct Answer: (MUB/MUA) = (PB/PA). (MUB/MUA) = (PB/PA).
Which of the following sets of countries contains only members of the European Union? Answer Selected Answer: Correct Answer: France, Spain, Switzerland, United Kingdom Belgium, Greece, Italy, Portugal
Under the Bretton Woods system (which was set up at the end of World War II), exchange rates were Answer Selected Answer: Correct Answer: permitted to vary 1 percent above or below parity. permitted to vary 1 percent above or below parity.
In the Uruguay Round of trade negotiations, the talks originally broke down in 1990 primarily because of the strong disagreement between the United States and the European Community with respect to Answer Selected Answer: Correct Answer: subsidies and protection in agriculture. subsidies and protection in agriculture.
An implication of the Heckscher-Ohlin theorem is that Answer Selected Answer: two countries with identical tastes can still have a basis for trade if factor
endowments of the countries differ and if factor intensities of the commodities differ. Correct Answer: two countries with identical tastes can still have a basis for trade if factor
endowments of the countries differ and if factor intensities of the commodities differ.
Other things being 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? Answer Selected Answer: Correct Answer: larger change with flexible rates larger change with flexible rates
Ignoring the negative sign, the slope of a consumer indifference curve at any given point on the curve reflects Answer
Selected Answer: goods. Correct Answer: goods.
the marginal rate of substitution (MRS) of the consumer between the two
the marginal rate of substitution (MRS) of the consumer between the two
It is not uncommon to find a voting industry minority able to put in place trade policies that benefit them at the expense of the majority because Answer Selected Answer: perceived consumer benefits are less than the cost of voting, leading to
consumer absenteeism at the polls. Correct Answer: perceived consumer benefits are less than the cost of voting, leading to
consumer absenteeism at the polls.
In the Dornbusch-Fischer-Samuelson graph above, a uniform improvement in labor productivity in all the home country's industries would shift the A schedule ____ and would lead to the export of a ____ number of goods by the home country.
Answer
upward; greater upward; greater
The macroeconomic view of a trade deficit implies that, other things being equal, the imposition of a tariff will reduce the country's trade deficit Answer Selected Answer: country's spending. Correct Answer: only if the tariff leads to increased income in the country relative to the only if the tariff leads to increased income in the country relative to the
country's spending.
If a country has a currency board arrangement (with a 100-percent reserve system) in place, then the country's money supply can be increased by a _____ by the country's central bank. Answer Selected Answer: Correct Answer: purchase of foreign (external) assets from domestic citizens purchase of foreign (external) assets from domestic citizens
In the Williamson target zone plan, the major industrialized countries would negotiate mutually consistent _____ target exchange rates, and there would be _____ deviation permitted from these target rates. Answer Selected Answer: Correct Answer: nominal effective; no real effective; some
The policy of minimum government interference in or regulation of economic activity, advocated by Adam Smith and the Classical economists, was known as Answer Selected Answer: Correct Answer: laissez-faire. laissez-faire.
In the United States, in approximately the last 2-3 decades, the supply of highly skilled (HS) labor relative to less highly skilled (LS) labor has been rising. At the same time, the ratio of HS labor wages relative to LS labor wages has been _____; therefore, the demand for HS labor relative to LS labor must have been increasing _____ than the supply of HS labor relative to LS labor. Answer
rising; more rapidly rising; more rapidly
Suppose that the wage rate in the United Kingdom is 30 per day, the wage rate in the United States is $40 per day, and the exchange rate is 1 = $1. In this situation, the United Kingdom will _____. (Textbook Reference: 4-2) Answer Selected Answer: Correct Answer: export goods T and X and import good Y. export goods T and X and import good Y.
If the equilibrium value of the pound is $1.60 in time period 1, but U.K. prices double between time periods 1 and 2 while U.S. prices rise by 60 percent, then the (relative) purchasing-powerparity theory would say that the equilibrium value of the pound in time period 2 is Answer Selected Answer: Correct Answer: $1.28. $1.28.
The view that inflation in a country can lead to depreciation of the country's currency and, in turn, further inflation is known as Answer Selected Answer: Correct Answer: the vicious circle hypothesis. the vicious circle hypothesis.
If two countries remove all tariffs on each other's products and establish a common set of tariffs against the rest of the world, but they take no further steps toward economic integration, these two countries have formed Answer Selected Answer: Correct Answer: a customs union. a customs union.
In its lending to member countries, the International Monetary Fund (IMF) Answer Selected Answer: may increase the difficulty of obtaining loans and may insist on internal
policy changes by borrowing countries as the borrowers ask for additional loans. Correct Answer: may increase the difficulty of obtaining loans and may insist on internal
policy changes by borrowing countries as the borrowers ask for additional loans.
If a commodity is classified as labor-intensive at one set of relative factor prices but capitalintensive at another set of relative factor prices, this situation is known as Answer Selected Answer: Correct Answer: factor-intensity reversal. factor-intensity reversal.
If country A forms a customs union with country B, then Answer Selected Answer: countries A and B may especially benefit from the union if substantial
economies of scale exist in some of the A and B industries. Correct Answer: countries A and B may especially benefit from the union if substantial
A situation in which a country announces a parity value for its currency and permits small variations around that value, but also adjusts the parity regularly by small amounts according to various indicators is known as
Answer Selected Answer: Correct Answer: a managed float strategy of "leaning against the wind." a crawling peg.
In which of the following relationships between the expected future spot rate (E[e]) of a foreign currency and the current forward rate (efwd) of a foreign currency would a speculator have an incentive to sell foreign currency in the forward market? Answer Selected Answer: Correct Answer: E(e) < efwd E(e) < efwd
If a PPP estimate of the dollar/pound exchange rate is $1.61/ and the current spot rate is observed to be $1.68/, you should, viewing the long run, Answer Selected Answer: Correct Answer: expect the dollar to appreciate against the pound. expect the dollar to appreciate against the pound.
If a country ties its currency to a specific foreign currency and allows its holdings of that currency to govern the country's money supply, this arrangement is known as a Answer Selected Answer: Correct Answer: floating exchange rate. currency board.
The first U.S. legislation to authorize adjustment assistance for workers displaced by tariff reductions was the Answer Selected Answer: Correct Answer: Trade Expansion Act of 1962. Trade Expansion Act of 1962.
The price-specie-flow mechanism suggested that Answer Selected Answer: price level. Correct Answer: price level. a surplus country would experience an increase in its money supply and its a surplus country would experience an increase in its money supply and its
According to the theory of optimum currency areas, a country would be a good candidate for membership in such an area if it had a _____ degree of factor mobility with other potential member countries of the currency area and if the country were a relatively _____ economy. Answer Selected Answer: Correct Answer: high; open high; open
An exporter who is to receive payment in foreign currency in 3 months and who wants to engage in hedging would _____ the foreign currency on the 3-months forward market in order to protect himself/herself from _____ of the foreign currency. Answer Selected Answer: Correct Answer: sell; a depreciation sell; a depreciation
A Mercantilist policymaker would be in favor of which of the following policies or events pertaining to his/her country? Answer
Selected Answer:
an increase in the percentage of factors of production devoted to adding
value to imported raw materials in order to later export the resulting manufactured goods Correct Answer: an increase in the percentage of factors of production devoted to adding value
to imported raw materials in order to later export the resulting manufactured goods
In the Mercantilist view of international trade (in a two-country world), Answer Selected Answer: country. Correct Answer: country. one country's gain from trade would be associated with a loss for the other one country's gain from trade would be associated with a loss for the other

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economies of scale exist in some of the A and B industries.

countries A and B may especially benefit from the union if substantial

economies of scale exist in some of the A and B industries.

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the enhanced effectiveness of monetary policy in influencing national

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free-trade area free-trade area

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Question 25 2 out of 2 points

Selected Answer: Correct Answer:

factor-content approach; supply of factor-content approach; supply of

Question 26 2 out of 2 points

Question 27 2 out of 2 points

Question 28 2 out of 2 points

Question 29 2 out of 2 points