Under some circumstances, trade could stifle the development of new industries and reduce global efficiency. All of the following describe conditions that could lead to that situation EXCEPT A) an initial head start gives a scale advantage to already existing firms in one country. B) diseconomies of scale make it impossible for new firms to […]
What are the predictions for the long run equilibrium of the Monetary Approach? What will be an ideal response? ANSWER Money supplies: Given the equations, = PUS/PE PUS = MUSS/L(R$, YUS) PE = MES/L( , YE) one can show that an increase in the U.S. money supply MUSS causes a proportional increase in the […]
What was the Plaza Agreement about? What will be an ideal response? ANSWER A coordinated intervention aimed at dollar depreciation.
Intraindustry trade can be explained in part by A) transportation costs within and between countries. B) problems of data aggregation and categorization. C) increasing returns to scale. D) All of the above. ANSWER D
All else equal and given the current system of exchange rates, if the United States enters a period of exceptionally strong growth, A) the pressure on the dollar is to revalue. B) the pressure on the dollar is to devalue. C) the pressure on the dollar is to depreciate. D) the pressure on the dollar […]
National saving minus investment equals the current account. Indicate whether the statement is true or false ANSWER TRUE
Present and explain the Fundamental Equation of the Monetary Approach. What will be an ideal response? ANSWER Assume = PUS/PE and that domestic price levels depend on domestic money demands and supplies: PUS = MUSS/L(R$, YUS) PE = MES/L( , YE) Therefore, the exchange rate is fully determined in the long run by the […]
Explain the purpose of the following figure. What will be an ideal response? ANSWER To show that spot and forward exchange rates are in general close to each other.
Working conditions for clothing workers in Bangladesh are very poor. If countries refuse to buy clothing from Bangladesh in order to encourage change, the effect is likely to be that A) firms will be forced to comply and workers will be better off. B) firms will refuse to comply, but workers will be better off. […]
The Baker Plan for addressing the debt crisis was based on the assumption that A) most countries would eventually default on their debt. B) forgiveness of some of the debt was inevitable. C) renewed lending by U.S. and European banks would undermine push for economic reforms. D) hyperinflation would eventually reduce the real value of […]
