Inflationary tendencies and even hyperinflation in many Latin American countries have been exacerbated by the tendency of governments to A) tax too heavily. B) regulate too heavily. C) print money to finance policies to stimulate the economy. D) keep out foreign competition. E) use industrial policies to foster growth. ANSWER C
Please define and give an example of sterilized foreign exchange intervention. What will be an ideal response? ANSWER Sterilized foreign exchange intervention occurs when a central bank carries out equal foreign and domestic asset transactions in opposite directions to nullify the impact on the domestic money supply. An example is a central bank purchasing […]
All the following nations except ________ have recently utilized export-led growth policies. A) Hong Kong B) South Korea C) Argentina D) Singapore E) Taiwan ANSWER C
Which major actor is at the center of the foreign exchange market? A) corporations B) central banks C) commercial banks D) non-bank financial institutions E) individual firms ANSWER C
Tests of the Heckscher-Ohlin model by Bowen, Leamer, and Sveikauskas and by Maskus continue to A) provide strong support for the theory. B) provide weak support for the theory. C) provide evidence against the theory. ANSWER C
What is the primary reason exchange rates were overvalued under ISI? What will be an ideal response? ANSWER Because fixed exchange rates were used and inflation was higher than that of trading partners
With perfect asset substitutability and capital mobility the domestic interest rate is equal to the foreign rate. Indicate whether the statement is true or false ANSWER TRUE
Which of the following is NOT an example of a financial derivative? A) forwards B) bonds C) swaps D) futures E) options ANSWER B
In the mid 1980s, the massive current account deficits were related to massive U.S. government budget deficits. Indicate whether the statement is true or false ANSWER TRUE
The Ricardian model of comparative advantage lends support to the argument that A) trade tends to worsen the conditions of unskilled labor in rich countries. B) trade tends to worsen the conditions of owners of capital in rich countries. C) trade tends to worsen the conditions of workers in poor countries. D) trade tends to […]
