Is a depreciation of the dollar/euro exchange rate correlated with a decrease in the dollar return on U.S. deposits? What will be an ideal response? ANSWER No. Assume that the Interest Parity is maintained, i.e., R$ = + ( – )/ Holding constant, one would expect a depreciation of the dollar/euro exchange rate (i.e. […]
Describe how Mexico’s development strategy changed from the 1950s to today and how that changed the production location decisions of firms. What will be an ideal response? ANSWER From the 1950s throughout the 1970s Mexico’s development policy emphasized the domestic market and firms found that it was less profitable to export. Domestic production was […]
A weak U.S. dollar leads to a higher volume of U.S. imports. Indicate whether the statement is true or false ANSWER FALSE
When a multinational affiliate replicates production in a foreign country it is called ________ foreign direct investment. A) horizontal B) vertical C) transitional D) bisectional E) direct ANSWER A
The highest component of GNP is A) the current account. B) investment. C) government purchases. D) consumption. E) trade. ANSWER D
If the dollar interest rate is 4 percent, the euro interest rate is 6 percent, then A) an investor should invest only in dollars. B) an investor should invest only in euros. C) an investor should be indifferent between dollars and euros. D) invest only in dollars if the exchange rate is expected to remain […]
The Lost Decade began in 1990 when Colombia announced that it lacked the international reserves it needed to pay the interest and principle due on its foreign debt. Indicate whether the statement is true or false ANSWER FALSE
Leontief showed that U.S. exports were capital intensive relative to U.S. imports. Indicate whether the statement is true or false ANSWER FALSE
Which of the following has been confirmed by empirical tests of the Ricardian model? A) All predictions of the model for a multi-product, multi-country world are highly unrealistic. B) The existence of nontraded goods results in a high degree of specialization among countries. C) International trade has no impact on income distribution. D) The unimportance […]
Which of the following is not a factor which would be relevant to country risk analysis? A) political uncertainty B) external debt C) economic growth D) none of the above. ANSWER D
