Question 1 1 out of 1 points

If a country's PX/PY in autarky is less than the PX/PY on the world market, as the country moves to trade, the relative price of good Y will _____ for home consumers. Thus, consumers with a strong relative preference for good _____ would tend to oppose the movement to trade. Answer Selected Answer: Correct Answer: decrease; X decrease; X

Question 2 1 out of 1 points

If, for a consumer, MUA/PA is greater than MUB/PB, then the consumer Answer Selected Answer: MUA. Correct Answer: MUA. has an incentive to consume relatively more A, which will decrease his/her has an incentive to consume relatively more A, which will decrease his/her

Question 3 1 out of 1 points

If skilled labor is physically more abundant relative to unskilled labor in country A than in country B, yet skilled labor is relatively higher priced compared with unskilled labor in country

A than in country B, this phenomenon could be accounted for by

Answer Selected Answer: Correct Answer: demand reversal. demand reversal.

Question 4 1 out of 1 points

If two countries with increasing opportunity costs have identical PPFs but different tastes, the countries will have Answer Selected Answer: different relative commodity prices under autarky, and each country can gain

by exporting the good for which its consumers have the lower relative preference. Correct Answer: different relative commodity prices under autarky, and each country can gain

by exporting the good for which its consumers have the lower relative preference.

Question 5 0 out of 1 points

If country A is defined as relatively capital-abundant in relation to country B by the price (or economic) definition of factor abundance, then the price of labor relative to the price of capital is ______ in country A than in country B, and the Heckscher-Ohlin theorem would suggest that country A would export relatively ______- intensive goods to country B. Answer

Selected Answer: Correct Answer:

higher; labor higher; capital

Question 6 1 out of 1 points

Which one of the following is NOT an assumption made in the Heckscher-Ohlin analysis? Answer Selected Answer: Correct Answer: imperfect competition imperfect competition

Question 7 0 out of 1 points

A production isoquant shows the various combinations Answer Selected Answer: trade. Correct Answer: good. of two factors of production that can produce the same amount of output of a of exports that a country's firms are willing to produce at various terms of

Question 8 1 out of 1 points

Which of the following does NOTcontribute to a basis for trade between two countries? Answer

Selected Answer: Correct Answer:

different absolute factor endowments but the same relative endowments different absolute factor endowments but the same relative endowments

Question 9 1 out of 1 points

Two indifference curves for an individual consumer _____ intersect; two community indifference curves for a country _____. Answer Selected Answer: Correct Answer: cannot; can intersect under some circumstances cannot; can intersect under some circumstances

Question 10 1 out of 1 points

In the neoclassical model of trade, the movement of a country from autarky to free trade generally results in _____ specialization in production, _____ the situation in the Classical model. Answer Selected Answer: Correct Answer: partial; unlike partial; unlike

Question 11 1 out of 1 points

Suppose that we are in a two-factor, two-country world where the factors of production are labor (L) and land (T), the returns to the factors are the wage rate (w) and the rental rate on land (t), and the countries are country A and country B. In this situation, country A is land-abundant relative to country B by the physical definition of relative factor abundance if ______, and country A is land-abundant relative to country B by the price (or economic) definition if ______. Answer Selected Answer: Correct Answer: (L/T)A < (L/T)B; (w/t)A > (w/t)B (L/T)A < (L/T)B; (w/t)A > (w/t)B

Question 12 1 out of 1 points

If two countries have identical production-possibilities frontiers but different tastes, it is possible for each country to gain from trade with the other country Answer Selected Answer: Correct Answer: in the neoclassical model but not in the Classical model. in the neoclassical model but not in the Classical model.

Question 13 1 out of 1 points

Suppose that, in the context of the Edgeworth box diagram in production, there are constant returns to scale in each of the two industries. One good is relatively labor-intensive in its production process, and the other good is relatively capital-intensive in its production process. In considering this Edgeworth box diagram and the PPF that can be derived from it,

Answer Selected Answer: Correct Answer: the PPF will show increasing opportunity costs. the PPF will show increasing opportunity costs.

Question 14 1 out of 1 points

An implication of the Heckscher-Ohlin theorem is that Answer Selected Answer: two countries with identical tastes can still have a basis for trade if factor

endowments of the countries differ and if factor intensities of the commodities differ. Correct Answer: two countries with identical tastes can still have a basis for trade if factor

endowments of the countries differ and if factor intensities of the commodities differ.

Question 15 1 out of 1 points

If good A costs $10 per unit in country A and $12 per unit in country B, and if transport costs between A and B for the good are $3 per unit, an economist would say that Answer Selected Answer: Correct Answer: the good will be a nontraded good. the good will be a nontraded good.

Question 16 1 out of 1 points

The magnification effect refers to the fact that, when a country is opened to trade, Answer Selected Answer: good. Correct Answer: good. the price of the abundant factor rises faster than does the price of the export the price of the abundant factor rises faster than does the price of the export

Question 17 1 out of 1 points

The Stolper-Samuelson theorem suggests that, when a country is opened to international trade, the relative price of the country's abundant factor of production will ______, and the relative price of the country's scarce factor of production will ______. Answer Selected Answer: Correct Answer: rise; fall rise; fall

Question 18 1 out of 1 points

In the Edgeworth box diagram for production, Answer Selected Answer: a movement from autarky to trade can be associated with a movement along

the contract curve (or production efficiency locus).

Correct Answer:

a movement from autarky to trade can be associated with a movement along

the contract curve (or production efficiency locus).

Question 19 1 out of 1 points

The equilibrium condition for producers (i.e., the condition that exists when the isocost line is tangent to an isoquant) is Answer Selected Answer: Correct Answer: (MPPL/MPPK) = (w/r). (MPPL/MPPK) = (w/r).

Question 20 1 out of 1 points

If relatively capital-abundant country A opens trade with relatively labor-abundant country B, and if the trade takes place in accordance with the Heckscher-Ohlin theorem, what would be the consequence for factor prices (w/r) in the two countries? Answer Selected Answer: Correct Answer: (w/r) falls in A and rises in B (w/r) falls in A and rises in B

Question 21 1 out of 1 points

Suppose that a country's factors of production are completely specific to the industries in which they are located (i.e., factors in the X industry would contribute nothing to Y output if they were in the Y industry, and factors in the Y industry would contribute nothing to X output if they were in the X industry). In addition, suppose that the country has an autarky PX/PY that is greater than the world PX/PY. In this situation, if the country is opened to international trade, it will Answer Selected Answer: export good Y and will obtain gains from exchange (a consumption gain) but

not gains from specialization (a production gain). Correct Answer: export good Y and will obtain gains from exchange (a consumption gain) but

not gains from specialization (a production gain).

Question 22 1 out of 1 points

If a country's PX/PY in autarky is less than the PX/PY on the world market, then this country has a comparative advantage in the _____ good, and, if the country now engages in international trade and moves along its production-possibilities frontier, its production of the X good will _____. Answer Selected Answer: Correct Answer: X; increase X; increase

Question 23 1 out of 1 points

The equilibrium condition for consumer behavior pertaining to goods A and B is Answer Selected Answer: Correct Answer: (MUB/MUA) = (PB/PA). (MUB/MUA) = (PB/PA).

Question 24 0 out of 1 points

Ignoring the negative sign, the slope of a consumer indifference curve at any given point on the curve reflects Answer Selected Answer: production. Correct Answer: goods. the marginal rate of substitution (MRS) of the consumer between the two the marginal rate of technical substitution (MRTS) between the factors of

Question 25 1 out of 1 points

If a commodity is classified as labor-intensive at one set of relative factor prices but capitalintensive at another set of relative factor prices, this situation is known as Answer Selected Answer: Correct Answer: factor-intensity reversal. factor-intensity reversal.

Question 1 0 out of 1 points

If the demand for traded goods is price-inelastic, the price-specie-flow mechanism will result in Answer Selected Answer: Correct Answer: gold movements between countries that remove trade deficits and surpluses. gold movements between countries that worsen trade deficits and surpluses.

Question 2 1 out of 1 points

Suppose that, in a Classical constant opportunity costs framework, country A can produce 15 units of wheat if it devotes all of its resources to wheat production and 45 units of clothing if it devotes all of its resources to clothing production. In a trading situation for this country, if the world price ratio is Pwheat/Pclothing = 1/3 (or Pclothing/Pwheat = 3), country A would Answer Selected Answer: Correct Answer: export clothing and import wheat. export clothing and import wheat.

Question 3 0 out of 1 points

If a country's relative price of X (compared to Y) in autarky is greater than the same relative prices on the world market, then the country has a comparative advantage in good ________, and it will __________. Answer Selected Answer: X; export X and import Y

Correct Answer:

Y; export Y and import X

Question 4 0 out of 1 points

In the Dornbusch-Fischer-Samuelson graph above, a uniform improvement in labor productivity in all the home country's industries would shift the A schedule ____ and would lead to the export of a ____ number of goods by the home country.

Answer Selected Answer: Correct Answer: upward; smaller upward; greater

Question 5 0 out of 1 points

In the Classical (Ricardian) analysis, Answer Selected Answer: if a country has a comparative advantage in a good, it cannot have an

absolute advantage in the good. Correct Answer: a country can have a comparative advantage in a good at the same time that it

has an absolute advantage in that good.

Question 6 1 out of 1 points

During the price-specie-flow adjustment process to a trade imbalance, if demands for goods are inelastic, then, when the price level _____ in the country with the trade deficit, the value of that country's exports will _____ as the price-specie-flow process takes place. Answer Selected Answer: Correct Answer: falls; decrease falls; decrease

Question 7 0 out of 1 points

Suppose that, with constant opportunity costs, Spain can produce 1,000 units of clothing if it devotes all of its resources to clothing production and 5,000 units of wheat if it devotes all of its resources to wheat production. If Spain is opened to trade at a world price ratio of 1 wheat:0.3 clothing, Spain will export _____; if the world price ratio is 1 wheat:5 clothing, Spain will _____. Answer Selected Answer: Correct Answer: clothing; also export clothing wheat; also export wheat

Question 8 0 out of 1 points

Which of the following policies would NOT be consistent with the Mercantilist balance-of-trade doctrine?

Answer Selected Answer: Correct Answer: import duties on final products payment of high wages to labor

Question 9 0 out of 1 points

Suppose that, in a Classical model with two goods, Germany can produce 50 units of steel or 30 units of textiles with 1 day of labor, whereas Switzerland can produce 45 units of steel or 45 units of textiles with 1 day of labor. If the exchange rate is fixed at 1 Swiss franc = 1 euro and if the Swiss wage rate is 10 francs per day, then, in trading equilibrium, German wages Answer Selected Answer: Correct Answer: must be equal to 10 euros per day. can be above, below, or equal to 10 euros per day - the answer cannot be

determined without more information.

Question 10 0 out of 1 points

As a country moves from autarky to trade, the relative price of the country's import good will _____ for home consumers, and the relative price of the country's export good _____ for home consumers. Answer Selected Answer: Correct Answer: fall; also will fall fall; will rise

Question 11 0 out of 1 points

In Adam Smith's view, international trade Answer Selected Answer: Correct Answer: was based on absolute cost differences. all of the above

Question 12 0 out of 1 points

The following Classical-type table shows the number of days of labor input required to obtain one unit of output of each of the three commodities in each of the two countries: good T good X good Y United Kingdom 4 days 5 days 3 days United States 4 days 4 days 2 days

Based on the information provided in the table above, if the U.S. wage rate of $40 per day and the exchange rate of 1 = $1, what is the upper limit to the wage rate in the United Kingdom that is consistent with two-way trade between the countries?

Answer Selected Answer: Correct Answer: 32 per day 40 per day

Question 13 0 out of 1 points

The assumption of constant costs of production in the Classical model results in a _____ production-possibilities frontier and, in the case of a small country, ______ specialization in production when trade takes place. Answer Selected Answer: Correct Answer: concave-to-the-origin; complete linear; complete

Question 14 0 out of 1 points

In the Dornbusch-Fischer-Samuelson model depicted in the figure above, a shift in tastes and preferences towards home country goods will cause the _____ schedule to pivot to the _____ and relative wages in the foreign country to ______.

Answer Selected Answer: Correct Answer: C; right; rise C; left; fall

Question 15 1 out of 1 points

The paradox of Mercantilism reflected that fact that Answer Selected Answer: Correct Answer: rich countries were comprised of large numbers of poor people. rich countries were comprised of large numbers of poor people.

Question 16 1 out of 1 points

The policy of minimum government interference in or regulation of economic activity, advocated by Adam Smith and the Classical economists, was known as Answer Selected Answer: Correct Answer: laissez-faire. laissez-faire.

Question 17 0 out of 1 points

According to the labor theory of value, Answer Selected Answer: the value of a good is determined by the amount of labor with which each

unit of capital in an industry works. Correct Answer: the price of good A compared to the price of good B bears the same

relationship as the relative amounts of labor used in producing each good.

Question 18 0 out of 1 points

A Mercantilist policymaker would favor which of the following policies or events pertaining to his/her country? Answer Selected Answer: Correct Answer: a minimum wage bill to protect workers' standard of living an increase in the percentage of factors of production devoted to adding value

to imported raw materials in order to later export the resulting manufactured goods

Question 19 1 out of 1 points

In the Dornbusch-Fischer-Samuelson model above, a rise in labor productivity in the home country would cause real national income to _____ in the home country and _____ in the foreign country.

Answer Selected Answer: Correct Answer: increase; also to increase increase; also to increase

Question 20 0 out of 1 points

In the Mercantilist view of international trade (in a two-country world), Answer

Selected Answer:

both countries could gain from trade at the same time, and the terms of trade

would be of no consequence for the distribution of the gains. Correct Answer: country. one country's gain from trade would be associated with a loss for the other

Question 21 0 out of 1 points

In a Ricardo-type model, if Portugal can produce twice as much wine per day as England but only 1.5 times as much cloth per day as England, then, if Portuguese wages are 30 euros per day, the upper limit to English wages per day is _____. (Assume 1 euro = 1.) Answer Selected Answer: Correct Answer: 45 20

Question 22 1 out of 1 points

If, in a two-commodity, two-country Classical world, Sweden can make a unit of furniture with 10 days of labor and a unit of steel with 15 days labor, whereas Germany can make a unit of furniture with 12 days of labor and a unit of steel with 12 days labor, then Answer Selected Answer: Correct Answer: the pretrade price ratios indicate that Germany will export steel. the pretrade price ratios indicate that Germany will export steel.

Question 23 1 out of 1 points

The price-specie-flow mechanism suggested that Answer Selected Answer: price level. Correct Answer: price level. a surplus country would experience an increase in its money supply and its a surplus country would experience an increase in its money supply and its

Question 24 0 out of 1 points

In the price-specie-flow doctrine, a deficit country will _____ gold, and this gold flow will ultimately lead to _____ in the deficit country's exports. Answer Selected Answer: Correct Answer: lose; a decrease lose; an increase

Question 25 0 out of 1 points

The following Classical-type table shows the number of days of labor input required to obtain one unit of output of each of the three commodities in each of the two countries: good T good X good Y United Kingdom 4 days 5 days 3 days

United States 4 days 4 days 2 days

Based on the information in the above table, suppose that the wage rate in the United Kingdom is 30 per day, the wage rate in the United States is $40 per day, and the exchange rate is 1 = $1. In this situation, the United Kingdom will _____.

Answer Selected Answer: Correct Answer: export good T and import goods X and Y export goods T and X and import good Y

Question 1 1 out of 1 points

Suppose that the nominal tariff rate on final good X is 8 percent and that the weighted average of the nominal tariff rates on the inputs used in producing good X is 12 percent. In this situation, the effective rate of protection (ERP) for final good industry X Answer Selected Answer: Correct Answer: must be less than 8 percent and can be negative. must be less than 8 percent and can be negative.

Question 2 1 out of 1 points

Which one of the following could NOT theoretically be offered to help explain the Leontief paradox? Answer

Selected Answer: Correct Answer:

a relatively strong U.S. demand for relatively labor-intensive goods a relatively strong U.S. demand for relatively labor-intensive goods

Question 3 1 out of 1 points

Other things being equal, which one of the following will cause an increase in the effective rate of protection (ERP) in the automobile industry? Answer Selected Answer: automobiles Correct Answer: automobiles a decrease in the nominal tariff rates on imported inputs used in making a decrease in the nominal tariff rates on imported inputs used in making

Question 4 1 out of 1 points

Since about 1970, in both developed and developing countries, the ratio of trade to GDP has _____; over the same time period, in the United States and the European Union, the ratio of imports from developing countries to total imports _____. Answer Selected Answer: Correct Answer: increased; also has increased increased; also has increased

Question 5 1 out of 1 points

Which one of the following is NOT an example of making a trade instrument more restrictive against imports, other things being equal? Answer Selected Answer: a shifting of an import good from an administrative classification category

with a high tariff to an administrative classification category with a low tariff Correct Answer: a shifting of an import good from an administrative classification category

with a high tariff to an administrative classification category with a low tariff

Question 6 1 out of 1 points

If the Heckscher-Ohlin theorem is valid in practice (and assuming that capital and labor are treated as the only two factors in the real world), then the Leontief statistic for a labor-abundant country would be Answer Selected Answer: Correct Answer: greater than 1.0. greater than 1.0.

Question 7 1 out of 1 points

If relatively labor-abundant country A has a Leontief statistic greater than 1.0 and relatively capital-abundant country B has a Leontief statistic less than 1.0, this suggests that Answer

Selected Answer: theorem. Correct Answer: theorem.

both countries are conforming to the prediction of the Heckscher-Ohlin

both countries are conforming to the prediction of the Heckscher-Ohlin

Question 8 0 out of 1 points

Suppose that the offshore assembly provisions (OAP) of country A are extended to final good X that is imported as well as produced domestically. This action will most likely Answer Selected Answer: Correct Answer: stimulate production in country A of final good X. stimulate production in country A of components to final good X.

Question 9 1 out of 1 points

In the large-country case, an export tax Answer Selected Answer: Correct Answer: leads to an increase in price in the importing country. leads to an increase in price in the importing country.

Question 10 1 out of 1 points

If the U.S. trade pattern is as indicated by the Leontief test, this would suggest that participation in trade rather than in autarky by the United States has _____ the real return to U.S. capital and _____ the real wage of U.S. labor. Answer Selected Answer: Correct Answer: decreased; has increased decreased; has increased

Question 11 1 out of 1 points

The situation in the United States (and other developed countries) whereby an import good faces a lower tariff if the good comes from a developing country than if the good comes from a developed country is known as Answer Selected Answer: Correct Answer: GSP treatment. GSP treatment.

Question 12 1 out of 1 points

The imposition of an export tax by a home country will lead to _____ in home country consumer surplus and will _____ in home country producer surplus. Answer Selected Answer: Correct Answer: an increase; lead to a decrease an increase; lead to a decrease

Question 13 0 out of 1 points

In the case of nonhomogeneous goods, the imposition of an import tariff Answer Selected Answer: Correct Answer: produces a transfer from consumers to producers in the domestic market. taxes the domestic product as well as the import product.

Question 14 1 out of 1 points

In the general equilibrium graph with a production-possibilities frontier (PPF) and consumer indifference curves, Answer Selected Answer: Correct Answer: a tariff reduces both real income and the gains from exchange. a tariff reduces both real income and the gains from exchange.

Question 15 0 out of 1 points

Suppose that a country's unweighted-average (nominal) tariff rate (call it tU) and weightedaverage (nominal) tariff rate (call it tW) are calculated both with and without the inclusion of prohibitive tariffs, and that the country does in fact have some prohibitive tariffs. In this situation, the tU that includes the prohibitive tariffs _____ the same as the tU that excludes the

prohibitive tariffs, and the tW that includes the prohibitive tariffs _____ the same as the tW that excludes the prohibitive tariffs. Answer Selected Answer: Correct Answer: would not be; would be would be; would not be

Question 16 1 out of 1 points

If increased Heckscher-Ohlin-type trade were the major factor leading to increased income inequality in the United States, then one would expect that the relative prices of skilled laborintensive goods to unskilled labor-intensive goods would have _____ and that nontraded goods industries would have _____ their use of unskilled labor relative to skilled labor. Answer Selected Answer: Correct Answer: risen; increased risen; increased

Question 17 1 out of 1 points

An import quota specifies the _____ amount of a good that can be imported into a country; a step to becoming more protectionist would involve _____ in the quota. Answer Selected Answer: Correct Answer: maximum; a reduction maximum; a reduction

Question 18 1 out of 1 points

If the capital/labor ratio in import-competing industries in country A is $8,000 per worker and the capital/labor ratio in A's export industries is $4,000 per worker, then country A's Leontief statistic is Answer Selected Answer: Correct Answer: 2.00. 2.00.

Question 19 1 out of 1 points

In the production process of a final good industry, the direct factor requirements per unit of output will be _____ the total factor requirements per unit of output; if the industry is relatively capital-intensive when classified by direct requirements, it _____ be relatively capital-intensive when classified by total requirements. Answer Selected Answer: Correct Answer: less than; may not necessarily less than; may not necessarily

Question 20 0 out of 1 points

In the United States, in approximately the last 2-3 decades, the supply of highly skilled (HS) labor relative to less highly skilled (LS) labor has been rising. At the same time, the ratio of HS labor wages relative to LS labor wages has been _____; therefore, the demand for HS labor relative to LS labor must have been increasing _____ than the supply of HS labor relative to LS labor. Answer Selected Answer: Correct Answer: falling; less rapidly rising; more rapidly

Question 21 1 out of 1 points

Which of the following is NOT an example of a nontariff barrier to the free flow of goods and services in accordance with comparative advantage? Answer Selected Answer: Correct Answer: specific duty of $1.00 per unit on each imported item specific duty of $1.00 per unit on each imported item

Question 22 1 out of 1 points

The United States now gives China permanent most-favored-nation (MFN) treatment [or normal trade relations (NTR)]. This means that the tariff schedules applicable to U.S. imports from China Answer

Selected Answer:

have the same tariff rates as the rates applicable to other countries to which

the United States grants MFN treatment. Correct Answer: have the same tariff rates as the rates applicable to other countries to which

the United States grants MFN treatment.

Question 23 1 out of 1 points

Suppose that, in a real-world situation, a labor-abundant country's tariffs and nontariff barriers are levied relatively more heavily on labor-intensive goods than on capital-intensive goods. In this situation, a Leontief two-factor test would, other things being equal, be _____ the country's adherence to the Heckscher-Ohlin trade pattern, compared with a situation in which trade barriers were absent. Answer Selected Answer: Correct Answer: biased toward confirming biased toward confirming

Question 24 1 out of 1 points

If demand reversal is the explanation for the Leontief paradox, this would imply that the demand by the United States for labor-intensive goods is relatively _____; therefore, U.S. wages would be relatively _____ compared to wages in U.S. trading partners. Answer Selected Answer: low; low

Correct Answer:

low; low

Question 25 1 out of 1 points

In the large-country case, the imposition of an import quota Answer Selected Answer: can result in a net gain for the importing country if the government employs

an auction quota system to allocate the restricted imports. Correct Answer: can result in a net gain for the importing country if the government employs

an auction quota system to allocate the restricted imports. Question 1 0 out of 1 points

The Krugman economies-of-scale strategic trade policy model stresses that protection given to a home firm will, other things being equal, _____ the marginal cost of producing each level of home output and will _____ the marginal cost of producing each level of foreign output. Answer Selected Answer: Correct Answer: decrease; also decrease decrease; increase

Question 2 1 out of 1 points

In the Uruguay Round of trade negotiations, the talks originally broke down in 1990 primarily because of the strong disagreement between the United States and the European Community with respect to Answer Selected Answer: Correct Answer: subsidies and protection in agriculture. subsidies and protection in agriculture.

Question 3 1 out of 1 points

The use of a bilateral, item-by-item approach best characterizes which period of trade negotiations? Answer Selected Answer: Correct Answer: Reciprocal Trade Agreement negotiations Reciprocal Trade Agreement negotiations

Question 4 1 out of 1 points

In late 2003, the Bush administration unilaterally placed temporary import quotas on several textile items imported from Answer Selected Answer: Correct Answer: China. China.

Question 5 1 out of 1 points

The general policy rule that states that the appropriate policies for alleviating a problem are those policies aimed directly at the source of the problem is called Answer Selected Answer: Correct Answer: the specificity principle. the specificity principle.

Question 6 1 out of 1 points

Recent investigations of the political economy of trade policy have revealed that Answer Selected Answer: industries that would incur relatively large labor adjustment costs appear to

be relatively heavily protected. Correct Answer: industries that would incur relatively large labor adjustment costs appear to be

relatively heavily protected.

Question 7 1 out of 1 points

The existence of which type of dumping most likely constitutes the weakest argument for the imposition of an antidumping duty? Answer Selected Answer: persistent dumping

Correct Answer:

persistent dumping

Question 8 1 out of 1 points

Which of the following is generally thought to have established the highest tariffs in U.S. history? Answer Selected Answer: Correct Answer: Tariff Act of 1930 (Smoot-Hawley Tariff) Tariff Act of 1930 (Smoot-Hawley Tariff)

Question 9 1 out of 1 points

A tariff placed upon a product in order to offset a foreign export subsidy is called Answer Selected Answer: Correct Answer: a countervailing duty. a countervailing duty.

Question 10 1 out of 1 points

The optimum tariff rate for a country is that rate which, assuming no retaliation, Answer Selected Answer: Correct Answer: maximizes the country's welfare. maximizes the country's welfare.

Question 11 0 out of 1 points

An early significant agreement in the negotiations of the Doha Development Agenda that is of importance to developing countries occurred in Answer Selected Answer: Correct Answer: antidumping provisions. pharmaceuticals pricing.

Question 12 0 out of 1 points

The World Trade Organization Answer Selected Answer: Correct Answer: requires its member countries to eliminate all barriers to imports. is charged with implementing the agreements reached in the Uruguay Round

of trade negotiations.

Question 13 0 out of 1 points

The concept of results-based trade policy is Answer Selected Answer: Correct Answer: consistent with GATT codes and guidelines. embodied in the new reciprocity approach to policy.

Question 14 1 out of 1 points

The first U.S. legislation to authorize adjustment assistance for workers displaced by tariff reductions was the Answer Selected Answer: Correct Answer: Trade Expansion Act of 1962. Trade Expansion Act of 1962.

Question 15 1 out of 1 points

The macroeconomic interpretation of a trade deficit for a country utilizes which one of the following expressions (where Y = national income, C = consumption, I = investment, G = government spending on goods and services, X = exports, and M = imports)? Answer Selected Answer: Correct Answer: Y - (C + I + G) = (X - M) Y - (C + I + G) = (X - M)

Question 16 1 out of 1 points

It is not uncommon to find a voting industry minority able to put in place trade policies that benefit them at the expense of the majority because Answer

Selected Answer:

perceived consumer benefits are less than the cost of voting, leading to

consumer absenteeism at the polls. Correct Answer: perceived consumer benefits are less than the cost of voting, leading to

consumer absenteeism at the polls.

Question 17 0 out of 1 points

In the case of economists' definition of dumping, an exporting firm is selling its product at a _____ price in the importing country than in the exporter's home country, and this suggests that demand for the exporter's product is _____ in the exporting country than in the importing country. Answer Selected Answer: Correct Answer: higher; less elastic lower; less elastic

Question 18 1 out of 1 points

The argument that a tariff can provide temporary protection to an industry so that the industry can expand, realize economies of scale, and eventually become an export industry is known as the Answer Selected Answer: Correct Answer: infant industry argument. infant industry argument.

Question 19 1 out of 1 points

If tariffs are used in an attempt to improve country A's balance of trade, and if exchange rates are flexible, the imposition of the tariffs will cause _____ in the value of A's currency relative to other currencies and, as a consequence, A's exports will _____. Answer Selected Answer: Correct Answer: an increase; decrease an increase; decrease

Question 20 1 out of 1 points

In a two-country world, the terms-of-trade impact of a tariff will definitely improve the welfare of the tariff-imposing country (assuming no retaliation) if the tariff-imposing country Answer Selected Answer: Correct Answer: is situated in the inelastic portion of its trading partner's offer curve. is situated in the inelastic portion of its trading partner's offer curve.

Question 21 1 out of 1 points

Suppose that a country's producer subsidy equivalent (PSE) in agriculture is positive and the country's consumer subsidy equivalent (CSE) for agricultural goods is negative. This situation

suggests that existing policies are working to _____ farmers and _____ consumers of farm goods. Answer Selected Answer: Correct Answer: subsidize; to tax subsidize; to tax

Question 22 0 out of 1 points

The graph above shows the demand and marginal revenue curves facing a foreign monopoly supplier of a good to the home country, as well as the firm's horizontal marginal cost curve when there is no tariff by the home country (MC) and the marginal cost curve when a specific tariff is imposed by the home country (MC + T). Assume that average cost (AC) equals marginal cost. In this situation, the price to home country consumers after the tariff has been imposed is ____________ . Answer Selected Answer: Correct Answer: $14 $27

Question 23 1 out of 1 points

Small groups may gain at the expense of the majority when

Answer Selected Answer: Correct Answer: all of the above all of the above

Question 24 1 out of 1 points

The macroeconomic view of a trade deficit implies that, other things being equal, the imposition of a tariff will reduce the country's trade deficit Answer Selected Answer: country's spending. Correct Answer: only if the tariff leads to increased income in the country relative to the only if the tariff leads to increased income in the country relative to the

country's spending.

Question 25 1 out of 1 points

The successful Uruguay Round of trade negotiations transformed the then-existing sponsoring agency into the _____, which began operation in _____. Answer Selected Answer: Correct Answer: WTO; 1995 WTO; 1995

Question 1 1 out of 1 points

If a PPP estimate of the dollar/pound exchange rate is $1.61/ and the current spot rate is observed to be $1.68/, you should, viewing the long run, Answer Selected Answer: Correct Answer: expect the dollar to appreciate against the pound. expect the dollar to appreciate against the pound.

Question 2 0 out of 1 points

Suppose that a speculator notes that the current 3-months forward rate on the euro is $1.26. The speculator expects that, in 3 months, the euro will have a value of $1.30. In this situation, the speculator would _____ euros on the forward market, and this activity _____ for the speculator. Answer Selected Answer: Correct Answer: sell; involves risk buy; involves risk

Question 3 1 out of 1 points

In a setting of flexible exchange rates, suppose that the U.S. citizens decrease their import purchases from the United Kingdom at the same time that British citizens increase their purchases of stocks and bonds from the United States. The first action (the U.S. imports) by itself would lead to _____ of the dollar against the pound; the second action by itself would _____ of the dollar against the pound. Answer

Selected Answer: Correct Answer:

an appreciation; also lead to an appreciation an appreciation; also lead to an appreciation

Question 4 1 out of 1 points

If the equilibrium value of the pound is $1.60 in time period 1, but U.K. prices double between time periods 1 and 2 while U.S. prices rise by 60 percent, then the (relative) purchasing-powerparity theory would say that the equilibrium value of the pound in time period 2 is Answer Selected Answer: Correct Answer: $1.28. $1.28.

Question 5 0 out of 1 points

If a speculator observes that the current 3-months forward rate on Swiss francs is 20 = 1 franc, but he/she expects that the spot rate in 3 months will be 30 = 1 franc, then this speculator would now Answer Selected Answer: Correct Answer: sell francs on the forward market. buy francs on the forward market.

Question 6 0 out of 1 points

In general, other things being equal, trade creation is more likely to outweigh trade diversion for a home country forming a customs union with partner countries (i) if the total number of countries forming the union is _____, and (ii) if the level of tariffs in the home country prior to the formation of the union is _____. Answer Selected Answer: Correct Answer: small rather than large; low rather than high large rather than small; high rather than low

Question 7 1 out of 1 points

The Big Mac Index Answer Selected Answer: is an absolute PPP index of the international value of the U.S. dollar based

on a single commodity. Correct Answer: is an absolute PPP index of the international value of the U.S. dollar based on

a single commodity.

Question 8 1 out of 1 points

Suppose that Mexico trades only with Germany and the United States. Additionally, suppose that in 1995 the spot rates were 0.2 euro = 1 peso and $0.10 = 1 peso, and that in 2005 the spot rates were 0.15 euro = 1 peso and $0.12 = 1 peso. If Mexico's trade is 20 percent with Germany

and 80 percent with the United States, calculation of the effective exchange rate for Mexico indicates that the peso Answer Selected Answer: Correct Answer: appreciated from 1995 to 2005. appreciated from 1995 to 2005.

Question 9 0 out of 1 points

In the graph below pertaining to good X for country A (where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place), suppose that country A, from this initial situation, now forms a customs union with country C.

If country A formed a customs union with country C rather than with country B, imports of good X into country A would be the amount _____.

Answer Selected Answer: Correct Answer: Q3Q4 Q1Q6

Question 10 0 out of 1 points

If Japan invests overseas because of its high saving rate (in excess of domestic investment spending), then this investment can cause_____ of the Japanese yen and, thus, a consequent trade _____ for Japan. Answer Selected Answer: Correct Answer: a depreciation; deficit a depreciation; surplus

Question 11 1 out of 1 points

In which of the following relationships between the expected future spot rate (E[e]) of a foreign currency and the current forward rate (efwd) of a foreign currency would a speculator have an incentive to sell foreign currency in the forward market? Answer Selected Answer: Correct Answer: E(e) < efwd E(e) < efwd

Question 12 1 out of 1 points

The graph below pertains to good X for country A, where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A

from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place.

With the tariffs in place for both countries B and C, imports of good X into country A are represented by distance Answer Selected Answer: Correct Answer: Q3Q4 Q3Q4

Question 13 1 out of 1 points

A simultaneous increase in U.S. demand for German products and decrease in the desire of German investors to send funds to the United States would, under a flexible exchange rate system and with other things being equal, lead to _____ of the U.S. dollar against the euro and to _____ of the euro against the dollar. Answer Selected Answer: Correct Answer: a depreciation; an appreciation a depreciation; an appreciation

Question 14 1 out of 1 points

A given exchange rate will be more or less the same in all of the world's financial markets because of

Answer Selected Answer: Correct Answer: currency arbitrage. currency arbitrage.

Question 15 0 out of 1 points

An exporter who is to receive payment in foreign currency in 3 months and who wants to engage in hedging would _____ the foreign currency on the 3-months forward market in order to protect himself/herself from _____ of the foreign currency. Answer Selected Answer: Correct Answer: buy; a depreciation sell; a depreciation

Question 16 0 out of 1 points

If good X from country C faces a 10 percent tariff in country A and a 20 percent tariff in country B, but if A and B have free trade between each other, then A and B are part of which type of grouping? Answer Selected Answer: Correct Answer: economic union free-trade area

Question 17 0 out of 1 points

In considering trade creation and trade diversion in the formation of a customs union between countries and whether membership in the customs union enhances welfare in a home country, two general rules are that the customs union is more likely to enhance welfare, other things being equal, (i) if the union contains a _____ number of countries and (ii) if costs of production in the partner countries in the case of trade diversion differ _____ from costs of production in the outside world (the nonmember countries). Answer Selected Answer: Correct Answer: small rather than large; greatly large rather than small; only slightly

Question 18 0 out of 1 points

Other things being equal, if exchange rates are flexible, and if U.S. consumers increase their demand for Japanese goods at the same time that Japanese consumers increase their demand for U.S. goods, then we would expect the dollar to Answer Selected Answer: Correct Answer: remain unchanged in value relative to the yen. The answer is impossible to determine without more information.

Question 19 0 out of 1 points

The graph below pertains to good X for country A, where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively, with a tariff in place.

Suppose that, from the initial situation where country A's tariff was applied to both countries B and C, country A now forms a customs union with country B. With this customs union in place, imports into country A are represented by distance _____.

Answer Selected Answer: country. Correct Answer: union country. Q2Q5, only part of which constitute trade diversion from the noncustoms Q3Q4, all of which constitute trade diversion from the noncustoms union

Question 20 1 out of 1 points

In the graph below pertaining to good X for country A (where DA is the demand for X by A's consumers, SA is the supply curve of X from A's home producers, SB is the horizontal supply curve of X to country A from country B, SC is the horizontal supply curve of X to country A from country C, and S'B and S'C are the horizontal supply curves from B and C, respectively,

with a tariff in place), suppose that country A, from this initial situation, now forms a customs union with country B.

The net welfare effect on country A from the formation of the customs union with country B is _____.

Answer Selected Answer: Correct Answer: areas (a + c) minus area f areas (a + c) minus area f

Question 21 1 out of 1 points

Which of the following is considered a positive dynamic effect of integration? Answer Selected Answer: Correct Answer: economies-of-scale effects economies-of-scale effects

Question 22 1 out of 1 points

If U.K. interest rates are higher than Japanese interest rates, then the theory of covered interest arbitrage would suggest that, in the /yen exchange markets, the yen would be at a forward _____ and the pound would _____.

Answer Selected Answer: Correct Answer: premium; be at a forward discount premium; be at a forward discount

Question 23 1 out of 1 points

If two countries remove all tariffs on each other's products and establish a common set of tariffs against the rest of the world, but they take no further steps toward economic integration, these two countries have formed Answer Selected Answer: Correct Answer: a customs union. a customs union.

Question 24 1 out of 1 points

If country A forms a customs union with country B, then Answer Selected Answer: countries A and B may especially benefit from the union if substantial

economies of scale exist in some of the A and B industries. Correct Answer: countries A and B may especially benefit from the union if substantial

economies of scale exist in some of the A and B industries.

Question 25 0 out of 1 points

In a production-possibilities/indifference curve diagram depicting the movement of a country from a situation of a uniform tariff against all trading partners to a situation of a customs union with one trading partner, Answer Selected Answer: home production of the country's export good will increase and home

production of the country's import good will also increase after the formation of the customs union. Correct Answer: home production of the country's export good will increase, and home

production of the country's import good will decrease after the formation of the customs union. Question 1 1 out of 1 points

In Europe's Economic and Monetary Union (EMU), the member countries Answer Selected Answer: Correct Answer: use a common currency (the euro). use a common currency (the euro).

Question 2 1 out of 1 points

The optimal size of international reserves occurs for a country at the point where the Answer Selected Answer: the reserves. marginal benefit of holding the reserves equals the marginal cost of holding

Correct Answer: the reserves.

marginal benefit of holding the reserves equals the marginal cost of holding

Question 3 0 out of 1 points

The view that inflation in a country can lead to depreciation of the country's currency and, in turn, further inflation is known as Answer Selected Answer: Correct Answer: the purchasing power-parity-problem. the vicious circle hypothesis.

Question 4 0 out of 1 points

According to the theory of optimum currency areas, a country would be a good candidate for membership in such an area if it had a _____ degree of factor mobility with other potential member countries of the currency area and if the country were a relatively _____ economy. Answer Selected Answer: Correct Answer: low; open high; open

Question 5 1 out of 1 points

The post-Bretton Woods international monetary system is generally thought to have been characterized by all except which of the following features? Answer Selected Answer: Real exchange rates have been relatively constant during the period, and so

the system's existence, per se, has not had real economic effects. Correct Answer: Real exchange rates have been relatively constant during the period, and so

the system's existence, per se, has not had real economic effects.

Question 6 1 out of 1 points

Other things being equal, a domestic monetary or financial shock (a shift in the LM curve) tends to produce what relative degree of GDP change for the home country under a situation of flexible exchange rates compared to a situation of fixed exchange rates? Answer Selected Answer: Correct Answer: larger change with flexible rates larger change with flexible rates

Question 7 0 out of 1 points

Proponents of fixed exchange rates would find the most support for their position in which of the following empirical results regarding the relationship between exchange rate variations and the volume of international trade? (Assume that the empirical tests adequately account for other factors that influence the trade volume.)

Answer Selected Answer: of trade Correct Answer: trade a negative relationship between exchange rate variations and the volume of no discernible relationship between exchange rate variations and the volume

Question 8 0 out of 1 points

A major advantage of the system of flexible exchange rates (as opposed to fixed exchange rates) is commonly thought to be Answer Selected Answer: the strong possibility that the greater exchange rate risk under flexible rates

will increase the volume of international trade. Correct Answer: the enhanced effectiveness of monetary policy in influencing national income

under flexible exchange rates.

Question 9 0 out of 1 points

If a country's currency's external value is tied or pegged to the currency values of the country's leading trading partners, this arrangement is known as a Answer Selected Answer: Correct Answer: managed float. peg against a "basket" of currencies, or a composite.

Question 10 0 out of 1 points

Two of the convergence criteria pertaining to initial membership in the EMU were that a country's ratio of government debt to GDP must be _____ and that a country's ratio of government budget deficit to GDP must _____. Answer Selected Answer: Correct Answer: 3 percent or less; be 60 percent or less 60 percent or less; be 3 percent or less

Question 11 0 out of 1 points

In its lending to member countries, the International Monetary Fund (IMF) Answer Selected Answer: lends whatever amounts member countries may wish to borrow at a zero

interest rate and with no service charge on all loans. Correct Answer: may increase the difficulty of obtaining loans and may insist on internal

policy changes by borrowing countries as the borrowers ask for additional loans.

Question 12 0 out of 1 points

In comparing the size of central bank reserves relative to world imports in the 1960-1972 (and relatively fixed exchange rate) period with the same ratio from 1973 onward (a relatively flexible

exchange rate period), the ratio has been _____ in the more recent period. This result _____ consistent with the theoretical expectation of economists. Answer Selected Answer: Correct Answer: larger; is not smaller; is

Question 13 1 out of 1 points

In theory, business cycles are _____ likely to be transmitted from one country to another under a system of fixed exchange rates than under a system of flexible exchange rates. Economists also generally accept that, theoretically monetary policy is _____ useful for dampening business cycle activity under a system of fixed exchange rates than under a system of flexible exchange rates. Answer Selected Answer: Correct Answer: more; less more; less

Question 14 1 out of 1 points

Under the Bretton Woods system (which was set up at the end of World War II), exchange rates were Answer Selected Answer: permitted to vary 1 percent above or below parity.

Correct Answer:

permitted to vary 1 percent above or below parity.

Question 15 0 out of 1 points

In the Bretton Woods international monetary system, a country's currency, unless its par value or parity value were officially changed, could not deviate more than _____ from its par value or parity value. If the country's currency depreciated to its low point in this range, central banks needed to _____ the currency in the exchange markets in order to keep the currency's value within the specified range. Answer Selected Answer: Correct Answer: plus or minus 1 percent; sell plus or minus 1 percent; buy

Question 16 0 out of 1 points

If a country's BP curve is flatter than its LM curve, then an external financial shock of a rise in interest rates abroad would, under flexible exchange rates, lead to _____ in the home country's national income. If exchange rates were fixed, this external financial shock would _____ in the home country's national income. Answer Selected Answer: Correct Answer: an increase; also lead to an increase an increase; lead to a decrease

Question 17 0 out of 1 points

In the current exchange rate arrangements of IMF members, Answer Selected Answer: dollar. Correct Answer: a substantial number of countries do not have a freely floating exchange rate. the European Union countries fix their exchange rates against the U.S.

Question 18 0 out of 1 points

Suppose that, using a system of multiple exchange rates, India wishes to discourage investors from sending their funds overseas relative to employing the funds in production for export. If the exchange rate for exports were set at 33 Indian rupees = $1.00, then which of the following exchange rates for capital transactions potentially would be appropriate for implementing the strategy? Answer Selected Answer: Correct Answer: 1 Indian rupee = $0.03 1 Indian rupee = $0.02

Question 19 0 out of 1 points

If virtually all speculators buy a currency just before what would be the cyclical low point in the currency's value without speculative activity, this speculation is likely to be _____ with respect

to its impact on the cycle's amplitude; if the speculators sell the currency just before what would otherwise be the high values of the currency during its fluctuations, this speculation is _____ in its impact. Answer Selected Answer: Correct Answer: destabilizing; likely to be stabilizing stabilizing; also likely to be stabilizing

Question 20 0 out of 1 points

If a country adopts a currency board arrangement, a result is that the country's money supply _____ be increased through the purchase of domestic assets from the country's citizens by the country's central bank; in this arrangement, the country's money supply _____ be increased through the purchase of foreign assets from the country's citizens by the country's central bank. Answer Selected Answer: Correct Answer: can; cannot cannot; can

Question 21 1 out of 1 points

If a country has a currency board arrangement (with a 100-percent reserve system) in place, then the country's money supply can be increased by a _____ by the country's central bank. Answer Selected Answer: purchase of foreign (external) assets from domestic citizens

Correct Answer:

purchase of foreign (external) assets from domestic citizens

Question 22 0 out of 1 points

The IS/LM/BP analysis suggests that an external real sector shock, such as a rise in national income abroad will cause, under fixed exchange rates, a _____ shift in a home country's BP curve (assuming that short-term financial capital is not perfectly mobile), a _____ in the home country's balance of payments, and _____ in the home country's national income. Answer Selected Answer: Correct Answer: rightward; deficit; a decrease rightward; surplus; an increase

Question 23 0 out of 1 points

The Asian crisis of 1997-1998 involved movement of short-term financial capital _____ countries such as Thailand and Malaysia, with a consequent _____ of their currencies, which in turn caused _____ in the trade balances of other countries of the world. Answer Selected Answer: Correct Answer: out of; appreciation; a deterioration out of; depreciation; a deterioration

Question 24 0 out of 1 points

Under the Bretton Woods agreement, Answer Selected Answer: Correct Answer: gold was demonetized as an international reserve asset. a country joining the IMF was assigned a quota to be paid in gold and the

country's own currency.

Question 25 0 out of 1 points

In the current international monetary system, countries Answer Selected Answer: Correct Answer: must adopt floating exchange rates. have considerable latitude in choosing an exchange rate arrangement.