International trade based on external scale economies in both countries is likely to be carried out by A) a relatively large number of price competing firms. B) a relatively small number of price competing firms. C) a relatively small number of imperfect competitors. D) monopolists in each country. E) a large number of oligopolists in […]
In the Ricardian model, if a country’s trade is restricted, this will cause all EXCEPT which? A) limited specialization and the division of labor B) reduced volume of trade and reduced gains from trade C) nations to produce inside their production possibilities curves D) a country to produce some of the product of its comparative […]
The world of flexible exchange rates and perfect capital mobility is often called the A) Keynesian model. B) Mundell-Fleming model. C) Monetarist model. D) Melvin model. ANSWER B
The best economic case one can make for an active industrial policy involves A) the national security argument. B) the technological spillover argument. C) the environment preservation argument. D) the high value added argument. E) raising the national income. ANSWER E
Explain the Law of One Price. Give an example. What will be an ideal response? ANSWER The law of one price states that in competitive markets free of transportation costs and trade barriers, identical goods sold in different countries must sell for the same price when expressed in terms of the same currency. = […]
It is important to compare debt levels of low- and middle-income countries to exports because countries must earn foreign exchange in order to service their debts. Indicate whether the statement is true or false ANSWER TRUE
The relocation of service industry functions to another country is called what? What will be an ideal response? ANSWER Offshoring
Emigration is when people leave a country because of supply push factors. Indicate whether the statement is true or false ANSWER FALSE
If the factor price equalization theorem is true then, eventually, U.S. wages will fall to the level found today in the least developed countries of the world. Indicate whether the statement is true or false ANSWER FALSE Explanation: Technology differences exist, negating HO predictions.
Which of the following is not a necessary condition for a flat BP curve? A) perfect capital mobility B) perfect asset substitutability C) fixed exchange rates D) floating exchanges rates E) Both C and D ANSWER E
