For most macroeconomists A) gross national income and gross national product are the same. B) gross national income exceeds gross national product. C) gross national product exceeds gross national product. D) it is hard to tell whether gross national income equal gross national product. E) gross national product is much more important than gross national […]
Most analysts in the United States and the international financial community initially perceived the debt crisis as a temporary, short-run liquidity problem so they advised increasing capital flows to Latin America. Indicate whether the statement is true or false ANSWER TRUE
The finding that U.S. exports tend to come from labor-intensive industries, while U.S. imports are produced using relatively capital intensive techniques is known as A) the Leontief paradox. B) the balance of trade enigma. C) the Heckscher-Ohlin paradox. D) the Krugman finding. ANSWER A
Consider the following two cases. In the first, a U.S. firm purchases 18% of a foreign firm. In the second, a U.S. firm builds a new production facility in a foreign country. Both are ________, with the first referred to as ________ and the second as ________. A) foreign direct investment (FDI) outflows; greenfield; brownfield […]
Define the official settlements balance. Is there any difference between the United States and other countries in terms of what this balance measures? How does this affect the ability of the countries to run current account deficits? What will be an ideal response? ANSWER For most countries it measures international reserve changes. For the […]
Voting power in the IMF is determined by a country’s A) political power. B) quota. C) size. D) All of the above. ANSWER B
According to the text, which of the following factors may make the theory of purchasing power parity unrealistic? A) Purchasing power parity works only with traded goods. B) Trading countries may stop exchanging goods once prices between them equalize. C) Shipping, insurance, and transaction costs may reduce the implication of purchasing power parity. D) Prices […]
If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should A) invest only in dollars. B) invest only in euros. C) be indifferent between dollars and euros. D) invest only in dollars if the exchange rate is expected to remain constant. E) invest only in […]
How can regional concentration of firms in an industry lead to external economies of scale? Give examples of these types of industrial clusters in the United States. Are they always beneficial? What will be an ideal response? ANSWER When an industry is highly concentrated in a specific location, this leads to a decrease in […]
How does the two-good, two-country version of the Ricardian model differ from the two-country, many-good model in terms of the determination which goods are produced and exported by each country? What will be an ideal response? ANSWER In the two-good-two-country version of the Ricardian model, comparative advantage is totally determined by physical productivity ratios. […]
