In 1975, wage levels in South Korea were roughly 5% of those in the United States. It is obvious that if the United States had allowed Korean goods to be freely imported into the United States at that time, this would have caused devastation to the standard of living in the United States, because no […]
Describe the environmental Kuznets curve. What will be an ideal response? ANSWER This curve shows the effect of increased per capita income on environmental damage. It has an inverted U shape that indicates that increased per capita income first increases and then decreases environmental damage.
Which of the following is NOT a situation providing a potential advantage for Mexico that makes it competitive compared to China in trade with the United States? A) The product line requires quick turn-around time from or to delivery. B) The need to manage a just-in-time inventory system C) Wages are low and the production […]
An American firm that buys foreign exchange because its managers expect the dollar to depreciate is A) increasing the supply of foreign exchange. B) increasing the demand for foreign exchange. C) speculating. D) Both A and B. E) Both B and C. ANSWER E
Analyze the following statement “the global financial crisis of 2008-2009 was a great illustration of how interdependent national economies are.” What will be an ideal response? ANSWER True. The global financial crisis that started in 2008, although commonly blamed on the U.S. quickly spread to all economies in the world. Although overt global policy […]
Latin American economies have become relatively more closed to international trade since 1985. Indicate whether the statement is true or false ANSWER FALSE
Intraindustry trade is most common in the trade patterns of A) developing countries of Asia and Africa. B) developed countries of Western Europe. C) all countries. D) None of the above. ANSWER B
What is the expected dollar rate of return on euro deposits if today’s exchange rate is $1.10 per euro, next year’s expected exchange rate is $1.166 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? A) 10% B) 11% C) -1% D) 0% E) 15% ANSWER B
Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. What will be an ideal response? ANSWER Expected inflation is given by the following equation: Πe = (Pe – P)/P where Pe is the expected price level in a country a year […]
Many countries in sub-Saharan Africa have very low labor productivities in many sectors, for example in manufacturing and agriculture. They often despair of even trying to attempt to build their industries unless it is done in an autarkic context, behind protectionist walls because they do not believe they can compete with more productive industries abroad. […]