Economics

The Ricardian proposition that international trade will benefit any co

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 […]

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Date: September 10th, 2020

Overvalued exchange rates were a persistent problem under ISI policies

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

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Date: September 10th, 2020

The liabilities side of a central bank’s accounts consists of A) depo

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

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Date: September 10th, 2020

In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions

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 […]

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Date: September 10th, 2020

According to Prebisch and other ISI theoreticians, countries should be

According to Prebisch and other ISI theoreticians, countries should begin to shift their comparative advantage away from primary commodity production by first producing A) industrial goods such as pumps and generators. B) complex consumer goods such as autos and appliances. C) advanced industrial goods such as chemical and electronics. D) simple consumer goods such as […]

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Date: September 10th, 2020

An efficient economy would set the marginal product in the traditional

An efficient economy would set the marginal product in the traditional sector A) lower than that in the modern non-traditional sector. B) higher than that in the modern sophisticated sector. C) equal to that in the modern sophisticated sector. D) lower in the relatively capital intensive sector. E) higher in the relatively capital intensive sector. […]

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Date: September 10th, 2020

Based on the case study, “Exchange Rates, Auto Prices, and Currency Wa

Based on the case study, “Exchange Rates, Auto Prices, and Currency Wars,” explain why exchange rates are of critical importance to firms in the automobile industry, and how Japan has benefited from changes in the value of the Yen. What will be an ideal response?   ANSWER See the discussion at the beginning of the […]

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Date: September 10th, 2020