What are the factors affecting the demand for foreign currency? What will be an ideal response? ANSWER Three factors affect the demand for foreign currency. They are expected return, risk, and liquidity.
Date: September 10th, 2020
Illustrate with a graph the effects of fiscal policy when exchange rates are fixed. What will be an ideal response? ANSWER Draw horizontal BP curve. Fiscal policy shifts IS. Monetary policy must accommodate by shifting LM to match IS in order to maintain fixed exchange rate.
Date: September 10th, 2020
The most common form of price discrimination in international trade is A) dumping. B) non-tariff barriers. C) Voluntary Export Restraints. D) preferential trade arrangements. E) product boycotts. ANSWER A
Date: September 10th, 2020
Explain what is a “vehicle currency.” Why is the U.S. dollar considered a vehicle currency? What will be an ideal response? ANSWER A vehicle currency is one that is widely used to denominate international contracts made by parties who do not reside in the country that issues the vehicle currency. Since in 2004, nearly […]
Date: September 10th, 2020
Which type of industry is likely to see more intraindustry trade? What will be an ideal response? ANSWER High technology
Date: September 10th, 2020
We know that in antiquity, China exported silk because no one in any other country knew how to produce this product. From this information we know that A) China had a comparative advantage in silk. B) China had an absolute advantage, but not a comparative advantage in silk. C) no comparative advantage could exist because […]
Date: September 10th, 2020
The most important participants in foreign exchange markets are ________. Fill in the blank(s) with correct word ANSWER Commercial banks
Date: September 10th, 2020
If output more than doubles when all inputs are doubled, production is said to occur under conditions of A) increasing returns to scale. B) imperfect competition. C) intraindustry trade. D) interindustry trade. ANSWER A
Date: September 10th, 2020
Explain why exchange rate model based on PPP is a long run theory. What will be an ideal response? ANSWER PPP theory is a monetary approach to the exchange rate. It is a long-run theory because it does not allow for price rigidities. It assumes that prices can adjust right away to maintain full […]
Date: September 10th, 2020
Classical and Neoclassical trade theory makes the case that free trade can bring a country to an optimum and economically efficient use of its resources; and hence is an optimal trade-policy, if the objective is maximizing long term economic growth. There are those who argue that the experience of the Asian Miracle countries, such as […]
Date: September 10th, 2020
