Statistical evidence suggests that A) free trade policies promote economic growth more effectively than do import substitution policies. B) import substituting policies tend to promote effective exploitation of scale economies. C) import substitution tends to lead to relatively low effective rates of protection. D) import substitution is to this day the preferred growth strategy promoted […]
The terms of trade (TOT) is defined as A) (index of export prices)/(index of import prices). B) (home-country currency)/(foreign-country currency). C) . D) E) having a competitive advantage over other nations. ANSWER A
Under the monetary approach to exchange rate theory, money supply growth at a constant rate A) eventually results in ongoing price level deflation at the same rate, but changes in this long-run deflation rate do not affect the full-employment output level or the long-run relative prices of goods and services. B) eventually results in ongoing […]
Points to the left of the IS curve represent excess demand for goods. Indicate whether the statement is true or false ANSWER TRUE
Interindustry trade is not based on comparative advantage since it consists of the export and import of similar countries and mostly between countries that have similar productivity, technology, and factor endowments. Indicate whether the statement is true or false ANSWER FALSE
Forward and spot exchange rates A) are necessarily equal. B) do not move closely together. C) are always such that the forward exchange rate is higher. D) move closely together and are equal on the value date. E) are unrelated to the value date. ANSWER D
Current account surpluses are offset by A) the liquidity balances. B) capital account deficits. C) unilateral transfers. D) balance of trade surpluses. ANSWER B
Leontief reconciled his results by arguing that A) American labor is more efficient than foreign. B) American capital is more efficient than foreign. C) Foreign capital is more efficient than American. D) Foreign labor is more efficient than American. ANSWER A
Indirectly, overvalued exchange rates in Latin America caused A) a capital shortage in agriculture. B) a capital shortage in industry. C) a capital abundance in agriculture. D) a growth in incomes in rural areas. E) an increase in competitive pressures faced by industry. ANSWER A
Leontief found that A) U.S. exports are capital intensive relative to U.S. imports. B) U.S. imports are labor intensive relative to U.S. exports. C) U.S. exports are neither labor nor capital intensive. D) None of the above. ANSWER B
