Which of the following is NOT true about the national income identity given by the equation: A) If CA is positive, national saving finances the purchase of our goods by foreign users. B) If CA is negative, our investment exceeds our national savings. C) A negative CA may imply that foreigners have confidence in the […]
One drawback to a single currency is that A) the exchange rate is more volatile. B) bond markets are larger and therefore harder to control. C) exporters and importers have fewer choices about how they will receive and make payments. D) individual nations cannot use monetary policy to stabilize the economy. E) foreign currency is […]
The Dutch Disease refers to a deadly outbreak of influenza that destroyed all international trade for the Netherlands in the 1960s. Indicate whether the statement is true or false ANSWER FALSE
The Ricardian model demonstrates that A) trade between two countries will benefit both countries. B) trade between two countries may benefit both regardless of which good each exports. C) trade between two countries may benefit both if each exports the product in which it has a comparative advantage. D) trade between two countries may benefit […]
If domestic savings is less than domestic investment, then A) a trade deficit occurs. B) the government runs a budget deficit. C) there will be a negative foreign investment. D) a trade surplus must result. E) Both A and C. ANSWER E
Typically, the most important determinant of private investment in an economy is A) the inflow of foreign investment. B) the size of the capital account surplus. C) the size of the current account deficit. D) the outflow of private investment. E) the amount of domestic savings. ANSWER E
It is possible that trade based on external scale economies may leave a country worse off than it would have been without trade. Explain how this could happen. What will be an ideal response? ANSWER One answer is that the terms of trade effects may dominate any other factors.
The simultaneous export and import of widgets by the United States is an example of A) intra-industry trade. B) increasing returns to scale. C) imperfect competition. D) inter-industry trade. E) the effect of a monopoly on international trade. ANSWER A
Economic growth could make a country worse off. Indicate whether the statement is true or false ANSWER TRUE
When did the European Union become a common market? What will be an ideal response? ANSWER 1-Jan-93
