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
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 […]
Date: September 10th, 2020
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. […]
Date: September 10th, 2020
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 […]
Date: September 10th, 2020
