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. […]
The United States international investment position is negative. Indicate whether the statement is true or false ANSWER TRUE
Import substitution industrialization in Latin America A) relied on increased exports. B) provided subsidies for exports. C) shifted the bulk of exports away from primary commodities. D) created disincentives to export. E) Answers A and C are correct. ANSWER D
MacDougall compared export ratios and labor productivity ratios for the United States and the United Kingdom in order to test the A) classical theory. B) the Heckscher-Ohlin theory. C) the Linder hypothesis. D) All of the above. ANSWER A
