When an individual or firm in the United States requests that a bank sell foreign exchange, the bank will probably A) call a foreign bank and arrange a purchase. B) call the central bank and arrange a purchase. C) call another bank customer with foreign exchange holdings. D) call another domestic bank and arrange a […]
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
We often observe “pseudo-intra-industry trade” between the United States and Mexico. Actually, such trade is consistent with A) comparative advantage associated with Heckscher-Ohlin model. B) oligopolistic markets. C) optimal tariff issues. D) the Ricardian model of trade. E) the specific factors model of trade. ANSWER A
Suppose the dollar is subject to a floating exchange rate system and that R is the number of dollars per unit of foreign exchange. If R increases, then the dollar A) depreciates. B) appreciates. C) is devalued. D) is revalued. E) Both A and C. ANSWER A
The stimulation of a large economy aimed at increasing growth in the rest of the world is commonly known as A) pass-through effect. B) locomotive effect C) investment effect. D) domino effect. ANSWER B
