Which of the following is TRUE about monopolistic competition? A) One firm serves as the entire industry. B) A small number of firms serve the entire market. C) It is competition among many firms producing similar but differentiated products. D) The pattern of production and trade is difficult to predict. E) It enjoys no economies […]
Which of the following is an example of a regional currency arrangement? A) exchange rate union B) currency cartel associations C) free-trade zones D) most-favored nation status E) agreement on commercial trade ANSWER A
The current account is equal to A) S – I. B) C + I + G + X. C) I + X. D) T – G. ANSWER A
It may be argued that Japan’s explicit promotion of its microchip industry was an excellent example of successful industrial policy. What criteria would you apply to determine whether such a policy is or is not successful? Judging from your own stated criteria, was Japan’s exercise successful? Why or why not? What information would a government […]
Which of the following statements about the financial crisis that began in 2008 is true? A) It was a great illustration of how interdependent national economies are. B) Most economists agree that it originated in China. C) It only lasted 3 weeks. D) It only affected housing markets. ANSWER A
Intra-industry trade will tend to dominate trade flows when which of the following exists? A) small differences between relative country factor availabilities B) large differences between relative country factor availabilities C) homogeneous products that cannot be differentiated D) constant cost industries E) uneven distribution of abundant resources between two countries ANSWER A
The experience of sub-Saharan Africa, as compared to that of “Other Asia” (not including the HPAEs) supports the argument that A) high rates of protection tend to harm economic growth. B) the poorer is the country the easier it is for it to “catch up” economically. C) low rates of protection tend to promote economic […]
With fixed exchange rates, a country A) cannot conduct independent monetary policy. B) can conduct independent monetary policy. C) cannot conduct independent fiscal policy. D) Both A and C. ANSWER A
Suppose Russia’s inflation rate is 200% over one year but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swiss franc’s exchange rate against the Russian ruble? What will be an ideal response? ANSWER (Eruble/franc, t – Eruble/franc, t-1)/Eruble/franc, t-1 = 2 – […]
Discuss the differences between Absolute PPP and Relative PPP. What will be an ideal response? ANSWER Absolute PPP states that the exchange rate between two currencies equals the ratio of their price levels. Relative PPP states that the percentage change in the exchange rate between two currencies over a given period equals the difference […]
