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 […]
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 […]
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
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 […]
If the goods’ money prices do not change, an appreciation 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) doesn’t change the relative price of sweaters and jeans. D) makes American jeans cheaper in terms of […]
Latin America has more trade agreements than any other region, and it has some of the oldest as well. Indicate whether the statement is true or false ANSWER TRUE
To help developing countries expand their industrial base, some industrial countries have reduced tariffs on designated manufactured imports from developing countries below the levels applied to imports from industrial countries. This policy is called A) export-led growth. B) generalized system of preferences. C) Most Favored Nation. D) reciprocal trade agreement. E) outsourcing. ANSWER B
Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model. What does this process predict about which groups should be in favor of or opposed to free international trade? What will be an ideal response? ANSWER Free international trade leads in each country to the […]
