Let us define the real wage as the purchasing power of one hour of labor. In the Ricardian 2X2 model, if two countries under autarky engage in trade then A) the real wage will not be affected since this is a financial variable. B) the real wage will increase only if a country attains full […]
Date: September 10th, 2020
If the United States follows an expansionary monetary policy relative to Japan and Germany, which of the following is not likely to occur? A) U.S. interest rates will rise relative to Japan and Germany B) a larger U.S. capital account deficit C) a depreciation of the dollar D) lower level of U.S. income ANSWER […]
Date: September 10th, 2020
When one applies the Heckscher-Ohlin model of trade to the issue of trade-related income redistributions, one must conclude that North South trade, such as U.S.-Mexico trade A) must help low skill workers on both sides of the border. B) is likely to hurt high-skilled workers in the U.S. C) is likely to hurt low-skilled workers […]
Date: September 10th, 2020
Intraindustry trade is characterized by what two features of the industry and market? A) Diseconomies of scale and homogeneous products B) Non-tariff barriers and large-scale foreign investment C) Quota auctions and low effective rates of protection D) Economies of scale and differentiated products E) Government subsidies and industrial policy ANSWER D
Date: September 10th, 2020
Capital inflows that take the form of direct investment may be particularly beneficial if they bring new technologies, new management techniques, and new ideas to the host country. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
Which four nations account for most of the population and economic activity in Latin America? What will be an ideal response? ANSWER Brazil; Mexico; Colombia; Argentina
Date: September 10th, 2020
Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade. What will be an ideal response? ANSWER In the classical model, differences in technology between the two countries lead to differences in autarky prices. If one were to replace that assumption with the HO assumption of identical technologies, […]
Date: September 10th, 2020
An industry is characterized by scale economies and exists in two countries. In order for consumers of its products to enjoy both lower prices and more variety of choice A) the two countries must engage in international trade with each other. B) each country’s marginal cost must equal that of the other country. C) the […]
Date: September 10th, 2020
The high correlation between rapid growth in exports and rapid economic growth observed in several East Asia countries in recent decades A) proves that export promoting trade policy leads to relatively rapid economic growth. B) proves that a free-trade orientation of trade policy results in rapid economic growth. C) proves that exports help growth, whereas […]
Date: September 10th, 2020
External balance refers to A) an economy which is on its LM curve. B) an economy which is on its IS curve. C) an economy which is on its BP curve. D) All of the above. ANSWER C
Date: September 10th, 2020
