If Juana contracts to buy U.S. office equipment in U.S. dollars and her domestic currency depreciates against the U.S. dollar between the time the contract is signed and the bill is paid, she will wind up paying less for the equipment because she stayed in the spot market. Indicate whether the statement is true or […]
At higher income levels the interest rate must be lower to achieve money market equilibrium. Indicate whether the statement is true or false ANSWER FALSE
Describe the policies that would be associated with Import Substitution Industrialization. What are the primary criticisms of these policies? What will be an ideal response? ANSWER Replacing imported manufactured goods with domestically produced products is the basis of import substitution. Tariffs and other trade restrictions were used, the government created or supported new industrial […]
A current account deficit implies that A) the country is a net lender with the rest of the world. B) the country is running a net capital account surplus. C) foreign investment in domestic securities is at very low levels. D) All of the above. ANSWER B
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 […]
The following is an example of Radio Shack hedging its foreign currency risk A) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to buy yen. B) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange […]
Intraindustry trade can lead to lower prices and job creation in both the exporting and the importing nation. Indicate whether the statement is true or false ANSWER TRUE
When Jeneva went to Costa Rica in July 2008, a U.S. dollar was worth 550 colones. If today a U.S. dollar is worth 650 colones, it means that the U.S. dollar has depreciated against the colone. Indicate whether the statement is true or false ANSWER FALSE
What benefits did an overvalued currency offer a domestic economy in the ISI period? Which sectors were typically harmed by overvalued currencies? What will be an ideal response? ANSWER Overvalued exchange rates made it easier for targeted industries to buy imported capital goods and kept urban workers more allied with political leaders because foreign […]
Which of the following has not been suggested as a reconciliation of Leontief’s findings? A) international differences in tastes B) U.S. tariff structure C) failure to take into account natural resources D) temporary data problems immediately after World War II ANSWER D
