Suppose the United States’ production possibility frontier was flatter to the widget axis, whereas Germany’s was flatter to the butter axis. We now learn that the German mark sharply depreciates against the U.S. dollar. We now know that A) the United States has no comparative advantage B) Germany has a comparative advantage in butter. C) […]
Under a flexible-price monetary approach to the exchange rate A) when the domestic money supply falls, the price level would eventually fall, increasing the interest rate. B) when the domestic money supply falls, the price level would fall right away, causing a reduction in the interest rate. C) when the domestic money supply falls, the […]
Which of the following statements is TRUE about a vehicle currency? A) It is widely used to denominate contracts made by parties who reside in the country that issues the vehicle currency. B) The dollar is sometimes called a vehicle currency because of its pivotal role in many foreign exchange deals. C) There is much […]
Most theories of comparative advantage explain trade patterns due to international differences in A) demand conditions. B) supply conditions. C) demand and supply conditions. D) tariffs. ANSWER B
The “East Asian Miracle” is A) the ability of so many people to live in such small areas. B) the fact that so many Influenza varieties originate from this region. C) the fact that poor dualistic economies managed to escape the vicious circle of poverty. D) the ability to maintain large positive trade balances with […]
The global financial crisis that began in 2008 was a great illustration of how interdependent national economies are. Indicate whether the statement is true or false ANSWER TRUE
In the model of monopolistic competition, an increase in industry output will cause individual firms’ demand curves to become ________, which will ________ demand for higher-priced goods and ________ demand for lower-priced goods. A) flatter; reduce; increase B) steeper; reduce; increase C) flatter; increase; reduce D) steeper; increase; reduce E) horizontal; reduce; reduce ANSWER […]
What is the largest center for currency trading? What will be an ideal response? ANSWER London
Would each of the following groups be happy or unhappy if the Mexican peso appreciates against the U.S. dollar? Answer the question for each of the following: (a) The U.S. pension funds holding Mexican government bonds (b) U.S. tourists planning a trip to Mexico (c) Mexican exporting manufacturers (d) A Mexican firm trying to buy […]
Under fixed exchange rate, in general A) the domestic and foreign interest rates are equal, R = R . B) R = R + (Ee – E)/E. C) the foreign and domestic interest rates are unequal. D) the expected rate of domestic currency depreciation is high. E) the expected rate of currency depreciation is one. […]
