A product is produced in a monopolistically competitive industry with scale economies. If this industry exists in two countries, and these two countries engage in trade with each other, then we would expect A) each country will export different varieties of the product to the other. B) the country in which the price of the […]
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
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 […]
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 […]
Discuss the relationship between PPP and the Law of One Price. What will be an ideal response? ANSWER The law of one price applies to individual commodities while PPP applies to the general price level. Proponents of PPP argue that its validity in the long run doesn’t require the law of one price to […]
One reason that a large share of the trade between high-income industrial economies is intraindustry trade is because A) it is more advantageous than interindustry trade. B) high-income industrial economies produce in the first stage of the product cycle. C) high-income industrial economies are wealthier than developing countries. D) high-income industrial economies have dissimilar resource […]
The United States international investment position is negative. Indicate whether the statement is true or false ANSWER TRUE
For the United States, U.S. direct foreign investment abroad is more significant than foreign investment in U.S. securities and currency. Indicate whether the statement is true or false ANSWER FALSE
In a two country and two product Ricardian model, a small country is likely to benefit more than the large country because A) the large country will wield greater political power, and hence will not yield to market signals. B) the small country is less likely to trade at price equal or close to its […]
If foreign countries simultaneously stimulate their economies rather than follow independent policies A) world interest rates would rise and the pressure for exchange rate change would fall. B) world interest rates would rise and the pressure for exchange rate change would rise. C) world interest rates would fall and the pressure for exchange rate change […]
