Question # 1

If the home country government grants a subsidy on a domestically produced good domestic producers lend to.

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Capture the entire subsidy in the form of higher profits

Increases their level of production

Reduce wages paid to domestic workers

Consider the subsidy as an increase in production cost

An important feature of a___ is that the holder has the right , but not the obligation, to buy or sell currency

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Swap

Foreign exchange arbitrage

Foreign exchange option

Futures market contract

A country transactions with the rest of the world are recorded in the

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Balance of international indebtedness

Balance of financial transactions

Balance of payments

Income statement

To be considered a good candidate for an export cartel a commodity should.

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Be a manufactured good

Be a primary product

Have a high price elasticity of supply

Have a low price elasticity of demand

International trade forces domestic firms to become more completive in terms of.

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The introduction of new products

Product design and quality

Product price

All of the above

A widely used indicator to differentiate developed countries from developing countries is.

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International trade per captia

Real income per capita

Unemployment per capita

Calories per capita

Debit (-) items in the balance of payments correspond to anything that.

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Involve receipts from foreigners

Involves payments to foreigners

Increase the domestic money supply

Decrease the demand for foreign exchange

The institutional framework developed in 1974 to promote trade liberalization is known as.

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WTO

GATT

IMF

World bank

The national security argument for protection is more likely to be valid when

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The purpose is to maintain protection for an indefinite time period.

The industry is characterized by increasing returns to scale.

the economy operates during a recession

The protected industry provides invaluable goods during periods of war

In the classical model of Ricardo the direction of trade is determined by

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Absolute advantage

Comparative advantage

Physical advantage

Which way the wind blows

The difference between a country's balances of payments and its balance of international indebtedness.

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Is equal of official reserve transactions

Occurs because of foreign exchange fluctuations

Reflects statistical discrepancies

Reflects the difference between flow and stock concepts

Investors engage in ____ when they move funds into foreign currencies in order to take advantage of interest rates abroad the are higher than domestic interest rates.

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Currency arbitrage

Interest arbitrage

Short positions

Long positions

according to factor price equalization theorem, if country A is labor abundant then once trade opens.

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Wages and rents should fall in A

Wages and rents should rise in A

Wages should rise and rents should fall in A

Wages should fall and rents should rise in A

Mercantilism.

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Is the philosophy of free international trade.

Was a system of export promotion and barriers to imports practiced by government .

Was praised by Adam Smith in the Wealth of Nations

Both a and c

increase foreign competition tend to.

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Intensify inflationary pressure at home

Induce falling output per worker hour for domestic workers

Place constraints on the wages of domestic workers

Increase profits of domestic import competing industries.

Trade based on comparative advantage assures that.

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Only the strongest suvrive

Some people are rich and others are poor

Each item is produced using the least amount of time needed to produce it

Each item is produced at as low a cost possible in terms of other things given up

Credit (+) items in the balance of payments correspond to anything that.

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Involves receipts from foreigners

Involves payments to foreigners

Increases the domestic money supply

Decrease the demand for foreign exchange

When imports from a higher cost supplier with in customs union replace imports from a lower cost supplier outside the custom union, there exists.

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Trade creation

Trade diversion

Dynamic welfare effects

Comprehensive welfare efffects

If export's are a constant proportion of GNP such that E = 18 GNP, find the level of imports that would represent a zero trade balance when GNP = 10,000

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180

555

1,800

5,555

Import substitution is an example of

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The principle of comparative advantage

The pricnipal of absolute advantage

An outward looking growth strategy

An inward looking growth strategy

If import licenses are auctioned off to domestic importers in a competitive market their scarcity value accurse to.

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Foreign corporations

Foreign workers

Domestic corporations

The domestic government

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