Question # 1

A current account surplus implies that

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The country is a net lender to the rest of the world

The country is running a net capital account surplus

Foreign investment in domestic securities is at very low levels

All of the above

A main advantage of specialization results from

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Economics of large scale production

The specializing country behaving as a monoploidy.

smaller production runs resulting in lower unit costs

High wages paid to foreign workers

If the international terms of trade settle at a level that is between each country's opportunity cost.

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There is no basis for gainful trade for either country

Both countries gain from trade

Only one country gains from trade

One country gains and the other country loses from trade

In the calculation of gross domestic product net exports are.

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The sum of merchandise trade and services

The current account plus long term capital

The value of merchandise exports minus imports

Short term capital plus the basic balance

The earliest statement of the principle of comparative advantage in associated with

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Adam Smith

David Ricardo

E . Heckscher

Bertil Ohlin

A nation with a current account deficit will be

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Lending more money to other nations

Experiencing a surplus in exports of goods and services

Reducing its indebtedness to other nations

Going further into debt with other nations

Which exchange rate mechanism is intended to insulates the balance of payments from short term capital movements while providing exchange rate stability for commercial transactions.

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Dual exchange rates

Managed floating exchange rates

Adjustable pegged exchange rates

Crawling pegged exchange rates.

The product cycle theory of trade is essentially a

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Static short run trade theory

Dynamic, long run trade theory

Zero sum theory of trade

Negative sum theory of trade

The reduction or covering of foreign exchange risk is called.

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Hedging

Speculation

Intervention

Arbitrage

The factor endearment model of international trade was developed by.

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Adam Smith

David Ricardo

John Stuart Mill

Eli Heckscher and Beril Ohlin

The Hecksher Ohlin theory explains comparative advantage as the result of difference in countries.

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Relative abundance of various resources.

Relative costs of labor

Economies of large scale production.

Research and development expenditures.

The organization that currently establishes rules of conduct for firms engaging in international trade is the.

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World Bank

International Trade commission

Department of Justice

World Trade Organization

The difference between what consumers have to pay for a particular and what they are willing to pay is known as.

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Consumer surplus

Producer surplus

Dead weight costs

Dead weight surplus

When the price of foreign currency the exchange is above the equilibrium level.

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an excess supply of that currency exists in the foreign exchange market.

an excess demand for that currency exists in the foreign exchange market

The supply of foreign exchange shifts outward to the right

the supply of foreign exchange shifts backward to the left

Which exchange rate mechanism calls for frequent redefining of the par value by small amounts to remove payments disequilibrium.

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Dual exchange rates

Adjustable pegged exchange rates

Managed floating exchange rates

Crawling pegged exchange rates.

The most widely traded currency in the foreign exchange market is the.

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Euro

Chinses yuan

British pound

U.S. Dollar

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

Which exchange rate system does not require monetary reserves for official exchange rate intervention.

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Floating exchange rates

Pegged exchange rates

Managed floating exchange rates

Dual exchange rates

Poor developing countries typically impose ______ tariffs than rich advanced nations on imports.

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Lower

Higher

About the same height

None of the above

Debit entries on the balance of payments are the entries that would.

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Mean a loss of foreign exchange

Bring foreign exchange into the country

Indicate a surplus exists

Exist at the bottom line a after all accounts are totaled.

Which trade policy results in the government levying both a specific tariff and an advalorem tariff on imported goods.

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Compound tariff

Nominals tariff

Effective tariff

Revenue tariff

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