Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. What will be an ideal response? ANSWER For Example: If the U.S. price level rises by 10% over a year while Europe’s rises by only 5%, relative PPP predicts a 5% depreciation of the dollar against […]
Date: September 10th, 2020
An internal economies of scale is defined as A) one whose size or scale effects are not located in the firm, but in the industry. B) one with falling costs over a specific level of output. C) one with falling costs over a relatively large range of output. D) one with falling costs over a […]
Date: September 10th, 2020
In the year 2012, Shinzo Abe became prime minister of Japan, promising bold policies to improve Japan’s economy. What was the focus of his policies and how did they affect Japan’s trade position? What will be an ideal response? ANSWER What has been called “Abenomics” involved monetary policies designed to reduce the value of […]
Date: September 10th, 2020
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 […]
Date: September 10th, 2020
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
Date: September 10th, 2020
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
Date: September 10th, 2020
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 – […]
Date: September 10th, 2020
The excess of total credits over total debits in the current and private capital accounts is called the A) BOP deficit. B) BOP surplus. C) official settlements account surplus. D) official settlements account deficit. ANSWER C
Date: September 10th, 2020
The proposal that trade agreements should include a system which monitors worker conditions and make the results available to consumers in the rich importing country A) is consistent with the Invisible Hand paradigm. B) is consistent with the market failure approach. C) is consistent with the Ricardian theory of comparative advantage. D) is consistent with […]
Date: September 10th, 2020
If the goods’ money prices do not change, a depreciation of the dollar against the pound A) makes British sweaters cheaper in terms of American jeans. B) makes British sweaters more expensive in terms of American jeans. C) makes American jeans more expensive in terms of British sweaters. D) doesn’t change the relative price of […]
Date: September 10th, 2020
