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. […]
The current account can be defined as exports plus imports. Indicate whether the statement is true or false ANSWER FALSE
The figure above represents the demand and cost functions facing a Brazilian Steel producing monopolist. If it were unable to export, and was constrained by its domestic market, what quantity would it sell at what price? What will be an ideal response? ANSWER It would sell 5 (million tons) at a price of $8/ton.
