Which of the following statements is the MOST accurate? The law of one price states A) in competitive markets free of transportation costs and official barriers to trade, identical goods sold in different countries must sell for the same price when their prices are expressed in terms of the same currency. B) in competitive markets […]
Comparative advantage has mixed results when it comes to predicting a country’s trade patterns. Which of the following is FALSE? A) There are many potential products an economy might export that use the same comparative advantage. B) A large share of international trade is not based on comparative advantage. C) Comparative advantage has proven completely […]
Under Purchasing Power Parity A) E$/E = PUS/PE. B) E$/E = PE/PES. C) E$/E = PUS + PE. D) E$/E = PUS – PE. E) E$/P = PUS/PE. ANSWER A
Wage inequality has been on the rise in virtually all high-income industrial economies since the 1970s. The causes are probably numerous, but the leading explanation for the greatest share of the increase in inequality is A) the growth of trade with developing countries. B) the growth of trade with other high income industrial countries. C) […]
There are debt relief programs currently available for highly indebted poor countries. Indicate whether the statement is true or false ANSWER TRUE
If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F, then A) country H but not country F will gain from trade. B) country H and country F will both gain from trade. C) neither country H nor F will gain from trade. […]
As populations age, public spending tends to increase. Indicate whether the statement is true or false ANSWER TRUE
A reason why it is difficult for developing countries to maintain a cartel is that A) the elasticity of demand for a cartel’s output decreases over time. B) producers in the cartel have an economic incentive to cheat. C) economic profits discourage other producers from entering the industry. D) producers in the cartel have the […]
Even if some people are hurt by international trade, the HO model predicts that free international trade improves the standard of living for the country as a whole. Indicate whether the statement is true or false ANSWER TRUE
Complete crowding out occurs when A) monetary policy has no effect on income. B) fiscal policy has no effect on income. C) monetary policy has no effect on interest rates. D) fiscal policy has no effect on interest rates. ANSWER B
