The Shipbreakers of Alang utilize much labor and little capital, thereby supporting the applicability of the A) factor proportions explanation of the sources of comparative advantage. B) specific factor theory of comparative advantage. C) monopolistic competition theory of comparative advantage. D) scale economies theory of comparative advantage. E) basis of the non-dumping legislation. ANSWER […]
If the United States and Canada trade hydro-powered electricity for Hollywood films, what type of trade does this represent? What will be an ideal response? ANSWER Interindustry
How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy? What will be an ideal response? ANSWER Currency transactions are growing more rapidly.
The action of arbitrage is A) the process of buying a currency cheap and selling it dear. B) the process of buying a currency dear and selling it cheap. C) the process of buying and selling currency at the same price. D) the process of selling currency at different prices in different markets. E) the […]
With fixed exchange rates, central banks must finance trade deficits, allow a devaluation, or else use trade restrictions to restore equilibrium. Indicate whether the statement is true or false ANSWER TRUE
Under sticky prices A) a fall in the money supply raises the interest rate to preserve money market equilibrium. B) a fall in the money supply reduces the interest rate to preserve money market equilibrium. C) a fall in the money supply keeps the interest rate intact to preserve money market equilibrium. D) a fall […]
Populist policies are not successful even in the immediate short run at stimulating the economy and creating jobs. Indicate whether the statement is true or false ANSWER FALSE
If countries have similar factor endowments and productivities, what type of trade are they most likely to have? What will be an ideal response? ANSWER Intraindustry
The open-economy multiplier is equal to the reciprocal of the marginal propensity to save. Indicate whether the statement is true or false ANSWER FALSE Explanation: It is equal to the reciprocal of the marginal propensity to save plus the marginal propensity to import.
The United States finances current account deficits largely with dollars and, as a result, faces almost no constraint on its ability to run deficits. Indicate whether the statement is true or false ANSWER TRUE
