Historically those few developing countries which have succeeded in significantly raising their per-capita income levels A) did not accomplish this with import-substituting industrialization. B) did accomplish this with import-substituting industrialization. C) tended to provide heavy protection to domestic industrial sectors. D) favored industrial to agricultural or service sectors. E) did so to the detriment of […]
Which of the following institutions is the most important participant in foreign currency markets? A) A retail customer B) A commercial bank C) A foreign exchange broker D) A central bank E) None of the above. ANSWER B
Which one of the following statements is the most correct? A) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank’s foreign asset implies an increased home money supply. B) If central banks are not sterilizing and the home country has […]
Refer to the above table. Suppose the U.S. government (but not Europe) offers a $10 million subsidy? What will be an ideal response? ANSWER In this case Airbus would decide not to enter the market since it knows Boeing will, and that therefore its own production will entail a loss of $5 million.
The concept of “economic pessimism” stems from A) the theory and empirical fact which states that developing nations face declining export prices relative to increasing import prices. B) the fact that economic growth in an era of globalization is difficult to attain. C) the fact that smaller countries would not enjoy comparative advantage unless they […]
The LM curve will shift to the right when government expenditures increase. Indicate whether the statement is true or false ANSWER FALSE
A foreign exchange swap A) is a spot sale of a currency. B) is a forward repurchase of the currency. C) is a spot sale of a currency combined with a forward repurchase of the currency. D) is a spot sale of a currency combined with a forward sale of the currency. E) make up […]
Refer to above figure. While selling exports it would also maximize its domestic sales by equating its marginal (opportunity) cost to its marginal revenue of $5. How much steel would the firm sell domestically, and at what price? What will be an ideal response? ANSWER 4 million tons at $10/ton.
Imagine scale economies were not only external to firms, but were also external to individual countries. That is, the larger the worldwide industry (regardless of where firms or plants are located), the cheaper would be the per-unit cost of production. Describe what world trade would look like in this case. ANSWER Presumably each country […]
Given the information in the table above. What is the opportunity cost of Cloth in terms of Widgets in Foreign? What will be an ideal response? ANSWER One half a widget.
