Assuming relative PPP, fill in the table below: What will be an ideal response? ANSWER Using ( – )/ = ΠUS, t – ΠE, t one gets:
Date: September 10th, 2020
It is generally claimed that state trading, or centrally controlled trading will tend to reach a lower economic welfare than would be reached by allowing market forces to determine trade flow directions and terms of trade. Illustrate a counter-example to this proposition. ANSWER In general, if we begin with any suboptimal distortion, the theory […]
Date: September 10th, 2020
The WTO seems at times to be interfering in domestic policy since A) the line between domestic policies and de factor protectionism is often fuzzy. B) it is a supra-national organization with the power to overturn governments. C) it determines which nations may trade what with whom. D) it punishes naughty nations. E) it exempts […]
Date: September 10th, 2020
The largest trading of foreign exchange occurs in A) New York. B) London. C) Tokyo. D) Frankfurt. E) Singapore. ANSWER B
Date: September 10th, 2020
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
Date: September 10th, 2020
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
Date: September 10th, 2020
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
Date: September 10th, 2020
Industrialized countries typically ________ their floating exchange rates. Developing countries often ________ their floating exchange rates. A) manage; peg B) peg; manage C) allow markets to determine; fix D) fix; manage E) fix; allow markets to determine ANSWER A
Date: September 10th, 2020
It is generally claimed that a movement from autarky to free trade consistent with Ricardian comparative advantage increases the economic welfare of each of the trade partners. However, it may be demonstrated that under certain circumstances, not everyone in each country is made better off. Illustrate such a case. ANSWER (a) If inter-generational, or […]
Date: September 10th, 2020
Which of the following is FALSE about intraindustry trade? A) Economies of scale allow firms to enjoy lower average costs. B) It creates gains from trade. C) It is due to comparative advantage. D) It may involve heightened competition and lower prices for consumers. E) It increases consumer choice. ANSWER C
Date: September 10th, 2020
