Internal economies of scale means that A) firms are experiencing lower average production costs due to a geographical concentration of firms in their industry that make it cheaper and easier to hire highly specialized workers and inputs. B) firms will have lower profits after international trade begins, because costs will be higher than when they […]
Refer to the above table. Suppose Airbus is set to produce the aircraft before Boeing. Which company will enter the market? What will be an ideal response? ANSWER Airbus will produce and Boeing will not.
The Ricardian proposition that international trade will benefit any country (“gains from trade”) as long as the world terms of trade do not equal its autarkic relative prices is a straightforward and powerful concept. Nevertheless, it is impossible to demonstrate empirically. Why? ANSWER This is because there is no way of knowing exactly what […]
Overvalued exchange rates were a persistent problem under ISI policies. In part, this was a deliberate policy in order to A) increase imports. B) discourage exports. C) help targeted industries sell their exports. D) help targeted industries buy imports. E) increase the competition for targeted industries. ANSWER D
Which of the following type of funds cater to wealthy individuals, are not bound by government regulations, and are actively traded in foreign exchange markets? A) pension funds B) mutual funds C) hedge funds D) exchange funds ANSWER C
An input-output table A) details the flows of goods and services between various sectors of the economy. B) shows purchases by certain industries from other industries. C) shows sales by certain industries to other industries. D) All of the above. ANSWER D
Which of the following would cause the LM curve to shift to the right? A) increased money supply B) a larger U.S. capital account deficit C) a depreciation of the dollar D) lower level of U.S. income ANSWER D
The liabilities side of a central bank’s accounts consists of A) deposits held by private banks. B) currency in circulation. C) deposits held by private banks and currency in circulation. D) deposits held by foreign banks, domestic assets, and currency in circulation. E) foreign assets and domestic assets. ANSWER C
In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions does the principle of purchasing power parity make? A) Only that there are no transportation costs and restrictions on trade. B) Only that the markets are perfectly competitive, i.e., P = MC. C) The factors of production are identical between countries. D) No […]
Proponents of ISI assumed that governments A) were capable of identifying and correcting market failures. B) were capable of identifying and correcting the excesses of economic populists. C) should enact orthodox stabilization plans. D) could control the terms of trade. E) Both A and D. ANSWER A
