Describe the technology transfer benefit of capital flows and the political power cost of large capital flows into low-income countries. What will be an ideal response? ANSWER Benefits include new technologies, new management techniques, and new ideas. Developing countries often lack access to these without outside help. If it comes as direct investment, it […]
MacDougall showed in his tests that A) relatively higher U.S. labor productivity was associated with relatively higher U.K. export ratios. B) relatively higher U.K. labor productivity was associated with relatively higher U.K. export ratios. C) labor productivity ratios and export ratios were not associated with each other. D) None of the above. ANSWER B
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 […]
________ is necessary to “balance” the BOP statement. A) Reserve inflow B) Statistical discrepancy C) Debit transaction D) Credit transaction ANSWER B
Leontief used an input-output table in order to test the A) classical theory. B) the Heckscher-Ohlin theory. C) the Linder hypothesis. D) All of the above. ANSWER B
This refers to an increase in government spending that produces a reduction in private spending A) crowding out. B) investment disappointment. C) social loss. D) deadweight loss. ANSWER A
Direct investment and security purchases are included in A) current account items. B) capital account items. C) basic balance account items. D) unilateral transfers. ANSWER B
Labor standards in trade are typically opposed by most developing countries who believe that they will be used A) to further neo-imperialist colonial exploitation. B) to charge these countries with crimes against child-labor standards at the Hague. C) as a protectionist tool by import-competing producers in industrial countries. D) as a means of spreading U.S. […]
