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 […]
Assume that labor is the only factor of production and that wages in the United States equal $20 per hour while wages in Japan are $10 per hour. Production costs would be lower in the United States as compared to Japan if A) U.S. labor productivity equaled 40 units per hour and Japan’s 15 units […]
France is capital abundant and Italy is labor abundant. Shoes are labor intensive and wheat is capital intensive. Draw diagrams to illustrate the pre- and post-trade equilibria for each of the two countries including the production points, the consumption points, the international price, and the volumes of exports and imports for each. Be sure to […]
________ is the largest international debtor in the world. A) Brazil B) Mexico C) Italy D) The United States ANSWER D
