1.The Mercantilists did not advocate:
a. free trade
b. stimulating the nation's exports
c. restricting the nations' imports
d. the accumulation of gold by the nation
2.According to Adam Smith, international trade was based on:
a. absolute advantage
b. comparative advantage
c. both absolute and comparative advantage
d. neither absolute nor comparative advantage
3.What proportion of international trade is based on absolute advantage?
a. All
b. most
c. some
d. none
4.The commodity in which the nation has the smallest absolute disadvantage is the commodity
of its:
a. absolute disadvantage
b. absolute advantage
c. comparative disadvantage
d. comparative advantage
5.If in a two-nation (A and B), two-commodity (X and Y) world, it is established that nation
A has a comparative advantage in commodity X, then nation B must have:
a. an absolute advantage in commodity Y
b. an absolute disadvantage in commodity Y
c. a comparative disadvantage in commodity Y
d. a comparative advantage in commodity Y
6.If with one hour of labor time nation A can produce either 3X or 3Y while nation B can
produce either 1X or 3Y (and labor is the only input):
a. nation A has a comparative disadvantage in commodity X
b. nation B has a comparative disadvantage in commodity Y
c. nation A has a comparative advantage in commodity X
d. nation A has a comparative advantage in neither commodity
7. With reference to the statement in Question 6:
a. Px/Py=1 in nation A
b. Px/Py=3 in nation B
c. Py/Px=1/3 in nation B
d. all of the above
8. With reference to the statement in Question 6, if 3X is exchanged for 3Y:
a. nation A gains 2X
b. nation B gains 6Y
c. nation A gains 3Y
d. nation B gains 3Y
9.With reference to the statement of Question 6, the range of mutually beneficial trade
between nation A and B is:
a. 3Y < 3X < 5Y
b. 5Y < 3X < 9Y
c. 3Y < 3X < 9Y
d. 1Y < 3X < 3Y
10. If domestically 3X=3Y in nation A, while 1X=1Y domestically in nation B:
a. there will be no trade between the two nations
b. the relative price of X is the same in both nations
c. the relative price of Y is the same in both nations
d. all of the above
11. Ricardo explained the law of comparative advantage on the basis of:
a. the labor theory of value
b. the opportunity cost theory
c. the law of diminishing returns
d. all of the above
12. Which of the following statements is true?
a. The combined demand for each commodity by the two nations is negatively sloped
b. the combined supply for each commodity by the two nations is rising stepwise
c.the equilibrium relative commodity price for each commodity with trade is given by the
intersection of the demand and supply of each commodity by the two nations
d. all of the above
13. A difference in relative commodity prices between two nations can be based upon a
difference in:
a. factor endowments
b. technology
c. tastes
d. all of the above
14. In the trade between a small and a large nation:
a. the large nation is likely to receive all of the gains from trade
b. the small nation is likely to receive all of the gains from trade
c. the gains from trade are likely to be equally shared
d. we cannot say
15. The Ricardian trade model has been empirically
a. verified
b. rejected
c. not tested
d. tested but the results were inconclusive
Multiple-Choice Questions Ch.3
1.A production frontier that is concave from the origin indicates that the nation incurs
increasing opportunity costs in the production of:
a. commodity X only
b. commodity Y only
c. both commodities
d. neither commodity
2. The marginal rate of transformation (MRT) of X for Y refers to:
a. the amount of Y that a nation must give up to produce each additional unit of X
b. the opportunity cost of X
c. the absolute slope of the production frontier at the point of production
d. all of the above
3. Which of the following is not a reason for increasing opportunity costs:
a. technology differs among nations
b. factors of production are not homogeneous
c. factors of production are not used in the same fixed proportion in the production of all
commodities
d. for the nation to produce more of a commodity, it must use resources that are less and
less suited in the production of the commodity
4. Community indifference curves:
a. are negatively sloped
b. are convex to the origin
c. should not cross
d. all of the above
5. The marginal rate of substitution (MRS) of X for Y in consumption refers to the:
a.amount of X that a nation must give up for one extra unit of Y and still remain on the
same indifference curve
b. amount of Y that a nation must give up for one extra unit of X and still remain on the
same indifference curve
c.amount of X that a nation must give up for one extra unit of Y to reach a higher
indifference curve
d.amount of Y that a nation must give up for one extra unit of X to reach a higher
indifference curve
6. Which of the following statements is true with respect to the MRS of X for Y?
a. It is given by the absolute slope of the indifference curve
b. declines as the nation moves down an indifference curve
c. rises as the nation moves up an indifference curve
d. all of the above
7. Which of the following statements about community indifference curves is true?
a. They are entirely unrelated to individuals' community indifference curves
b. they cross, they cannot be used in the analysis
c. the problems arising from intersecting community indifference curves can be
overcome by the application of the compensation principle
d. all of the above.
8. Which of the following is not true for a nation that is in equilibrium in isolation?
a. It consumes inside its production frontier
b. it reaches the highest indifference curve possible with its production frontier
c. the indifference curve is tangent to the nation's production frontier
d. MRT of X for Y equals MRS of X for Y, and they are equal to Px/Py
9. If the internal Px/Py is lower in nation 1 than in nation 2 without trade:
a. nation 1 has a comparative advantage in commodity Y
b. nation 2 has a comparative advantage in commodity X
c. nation 2 has a comparative advantage in commodity Y
d. none of the above
10. Nation 1's share of the gains from trade will be greater:
a. the greater is nation 1's demand for nation 2's exports
b. the closer Px/Py with trade settles to nation 2's pretrade Px/Py
c. the weaker is nation 2's demand for nation 1's exports
d. the closer Px/Py with trade settles to nation 1's pretrade Px/Py
11. If Px/Py exceeds the equilibrium relative Px/Py with trade
a. the nation exporting commodity X will want to export more of X than at equilibrium
b. the nation importing commodity X will want to import less of X than at equilibrium
c. Px/Py will fall toward the equilibrium Px/Py
d. all of the above
12. With free trade under increasing costs:
a. neither nation will specialize completely in production
b. at least one nation will consume above its production frontier
c. a small nation will always gain from trade
d. all of the above
13. Which of the following statements is false?
a.The gains from trade can be broken down into the gains from exchange and the gains
from specialization
b. gains from exchange result even without specialization
c. gains from specialization result even without exchange
d. none of the above
14. The gains from exchange with respect to the gains from specialization are always:
a. greater
b. smaller
c. equal
d. we cannot say without additional information
15. Mutually beneficial trade cannot occur if production frontiers are:
a. equal but tastes are not
b. different but tastes are the same
c. different and tastes are also different
d. the same and tastes are also the same.
Multiple Choice Questions Ch.4
1. Which of the following statements is correct?
a. The demand for imports is given by the excess demand for the commodity
b. the supply of exports is given by the excess supply of the commodity
c. the supply curve of exports is flatter than the total supply curve of the commodity
d. all of the above
2. At a relative commodity price above equilibrium
a. the excess demand for a commodity exceeds the excess supply of the commodity
b. the quantity demanded of imports exceeds the quantity supplied of exports
c. the commodity price will fall
d. all of the above
3. The offer curve of a nation shows:
a. the supply of a nation's imports
b. the demand for a nation's exports
c. the trade partner's demand for imports and supply of exports
d. the nation's demand for imports and supply of exports
4. The offer curve of a nation bulges toward the axis measuring the nation's
a. import commodity
b. export commodity
c. export or import commodity
d. nontraded commodity
5. Export prices must rise for a nation to increase its exports because the nation:
a. incurs increasing opportunity costs in export production
b. faces decreasing opportunity costs in producing import substitutes
c. faces decreasing marginal rate of substitution in consumption
d. all of the above
6. Which of the following statements regarding partial equilibrium analysis is false?
a. It relies on traditional demand and supply curves
b. it isolates for study one market
c. it can be used to determine the equilibrium relative commodity price but not the
equilibrium quantity with trade
d. none of the above
7. Which of the following statements regarding partial equilibrium analysis is true?
a.The demand and supply curves are derived from the nation's production frontier and
indifference map
b. It shows the same basic information as offer curves
c. It shows the same equilibrium relative commodity prices as with offer curves
d. all of the above
8. In what way does partial equilibrium analysis differ from general equilibrium analysis?
a. The former but not the latter can be used to determine the equilibrium price with trade
b.the former but not the latter can be used to determine the equilibrium quantity with trade
c.the former but not the latter takes into consideration the interaction among all markets
in the economy
d. the former gives only an approximation to the answer sought.
9. If the terms of trade of a nation are 1.5 in a two-nation world, those of the trade partner are:
a. 3/4
b. 2/3
c. 3/2
d. 4/3
10. If the terms of trade increase in a two-nation world, those of the trade partner:
a. deteriorate
b. improve
c. remain unchanged
d. any of the above
11. If a nation does not affect world prices by its trading, its offer curve:
a. is a straight line
b. bulges toward the axis measuring the import commodity
c. intersects the straight-line segment of the world's offer curve
d. intersects the positively-sloped portion of the world's offer curve
12. If the nation's tastes for its import commodity increases:
a. the nation's offer curve rotates toward the axis measuring its import commodity
b. the partner's offer curve rotates toward the axis measuring its import commodity
c. the partner's offer curve rotates toward the axis measuring its export commodity
d. the nation's offer curve rotates toward the axis measuring its export commodity
13. If the nation's tastes for its import commodity increases:
a. the nation's terms of trade remain unchanged
b. the nation's terms of trade deteriorate
c. the partner's terms of trade deteriorate
d. any of the above
14. If the tastes for a nation import commodity increases, trade volume:
a. increases
b. declines
c. remains unchanged
d. any of the above
15. A deterioration of a nation's terms of trade causes the nation's welfare to:
a. deteriorate
b. improve
c. remain unchanged
d. any of the above
Multiple-Choice Questions ch.5
1. The H-O model extends the classical trade model by:
a. explaining the basis for comparative advantage
b. examining the effect of trade on factor prices
c. both a and b
d. neither a nor b
2. Which is not an assumption of the H-O model
a. the same technology in both nations
b. constant returns to scale
c. complete specialization
d. equal tastes in both nations
3. With equal technology nations will have equal K/L in production if:
a. factor prices are the same
b. tastes are the same
c. production functions are the same
d. all of the above
4. We say that commodity Y is K-intensive with respect to X when:
a. more K is used in the production of Y than X
b. less L is used in the production of Y than X
c. a lower L/K ratio is used in the production of Y than X
d. a higher K/L is used in the production of X than Y
5. When w/r falls, L/K
a. falls in the production of both commodities
b. rises in the production of both commodities
c. can rise or fall
d. is not affected
6. A nation is said to have a relative abundance of K if it has a:
a. greater absolute amount of K
b. smaller absolute amount of L
c. higher L/K ratio
d. lower r/w
7. A difference in relative commodity prices between nations can be based on a difference in:
a. technology
b. factor endowments
c. tastes
d. all of the above
8. In the H-O model, international trade is based mostly on a difference in:
a. technology
b. factor endowments
c. economies of scale
d. tastes
9. According to the H-O-S model, trade reduces international differences in:
a. relative but not absolute factor prices
b. absolute but not relative factor prices
c. both relative and absolute factor prices
d. neither relative nor absolute factor prices
10. According to the H-O-S model, international trade will:
a. reduce international differences in per capita incomes
b. increases international differences in per capita incomes
c. may increase or reduce international differences in per capita incomes
d. lead to complete specialization
11. The H-O model is a general equilibrium model because it deals with:
a. production in both nations
b. consumption in both nations
c. trade between the two nations
d. all of the above
12. The H-O model is a simplification of the a truly general equilibrium model
because it deals with:
a. two nations
b. two commodities
c. two factors of production
d. all of the above
13. The Leontief paradox refers to the empirical finding that U.S.
a. import substitutes are more K-intensive than exports
b. imports are more K-intensive than exports
c. exports are more L-intensive than imports
d. exports are more K-intensive than import substitutes
14. From empirical studies, we conclude that the H-O theory:
a. must be rejected
b. must be accepted without reservations
c. can be accepted while awaiting further testing
d. explains all international trade
15. For factor reversal to occur, two commodities must be produced with:
a. sufficiently different elasticity of substitution of factors
b. the same K/L ratio
c. technologically-fixed factor proportions
d. equal elasticity of substitution of factors
Multiple-Choice Questions Ch. 6:
1. Relaxing the assumptions on which the Heckscher-Ohlin theory rests:
a. leads to rejection of the theory
b. leaves the theory unaffected
c. requires complementary trade theories
d. any of the above.
1.Which of the following assumptions of the Heckscher-Ohlin theory, when relaxed, leave
the theory unaffected?
a. Two nations, two commodities, and two factors
b. both nations use the same technology
c. the same commodity is L-intensive in both nations
d. all of the above
2.Which of the following assumptions of the Heckscher-Ohlin theory, when relaxed,
require new trade theories?
a. Economies of scale
b. incomplete specialization
c. similar tastes in both nations
d. the existence of transportation costs
3.International trade can be based on economies of scale even if both nations have identical:
a. factor endowments
b. tastes
c. technology
d. all of the above
5. A great deal of international trade:
a. is intra-industry trade
b. involves differentiated products
c. is based on monopolistic competition
d. all of the above
6. The Heckscher-Ohlin and new trade theories explains most of the trade:
a. among industrial countries
b. between developed and developing countries
c. in industrial goods
d. all of the above
4.The theory that a nation exports those products for which a large domestic market exists
was advanced by:
a. Linder
b. Vernon
c. Leontief
d. Ohlin
8. Intra-industry trade takes place:
a. because products are homogeneous
b. in order to take advantage of economies of scale
c. because perfect competition is the prevalent form of market organization
d. all of the above
1.If a nation exports twice as much of a differentiated product that it imports, its intra-
industry (T) index is equal to:
a. 1.00
b. 0.75
c. 0.666
d. 0.25
10. Trade based on technological gaps is closely related to:
a. the H-O theory
b. the product-cycle theory
c. Linder's theory
d. all of the above
11. Which of the following statements is true with regard to the product-cycle theory?
a. It depends on differences in technological changes over time among countries
b. it depends on the opening and the closing of technological gaps among countries
c. it postulates that industrial countries export more advanced products to less
advanced countries
d. all of the above
12. Transport costs:
a. increase the price in the importing country
b. reduces the price in the exporting country
c. both of the above
d. neither a nor b.
13. Transport costs can be analyzed:
a. with demand and supply curves
b. production frontiers
c. offer curves
d. all of the above
14. The share of transport costs will fall less heavily on the nation:
a. with the more elastic demand and supply of the traded commodity
b. with the less elastic demand and supply of the traded commodity
c. exporting agricultural products
d. with the largest domestic market
15. A footloose industry is one in which the product:
a. gains weight in processing
b. loses weight in processing
c. both of the above
d. neither a nor b.
Multiple-choice Questions Ch.8
1. Which of the following statements is incorrect?
a.An ad valorem tariff is expressed as a percentage of the value of the traded
commodity
b. a specific tariff is expressed as a fixed sum of the value of the traded commodity.
c. export tariffs are prohibited by the U.S. Constitution
d. The U.S. uses exclusively the specific tariff
2. A small nation is one:
a. which does not affect world price by its trading
b. which faces an infinitely elastic world supply curve for its import commodity
b.whose consumers will pay a price that exceeds the world price by the amount of the
tariff
d. all of the above
3. If a small nation increases the tariff on its import commodity, its:
a. consumption of the commodity increases
b. production of the commodity decreases
c. imports of the commodity increase
d. none of the above
4.The increase in producer surplus when a small nation imposes a tariff is measured by the
area:
a. to the left of the supply curve between the commodity price with and without the
tariff
b. under the supply curve between the quantity produced with and without the tariff
c. under the demand curve between the commodity price with and without the tariff
d. none of the above.
5. If a small nation increases the tariff on its import commodity:
a. the rent of domestic producers of the commodity increases
b. the protection cost of the tariff decreases
c. the deadweight loss decreases
d. all of the above
6. Which of the following statements is incorrect with respect to the rate of effective
protection?
a. for given values of ai and ti, g is larger the greater is t
b. for a given value of t and ti, g is larger the greater is ai
c. g exceeds, is equal to or is smaller than t, as ti is smaller than, is equal to or is
larger than t
d. when aiti exceeds t, the rate of effective protection is positive
7. With ai=50%, ti=0, and t=20%, g is:
a. 40%
b. 20%
c. 80%
d. 0
8. The imposition of an import tariff by a small nation:
a. increases the relative price of the import commodity for domestic producers and
consumers
b. reduces the relative price of the import commodity for domestic producers and
consumers
c. increases the relative price of the import commodity for the nation as a whole
d. any of the above is possible
9. The imposition of an import tariff by a small nation:
a. increases the nation's welfare
b. reduces the nation's welfare
c. leaves the nation's welfare unchanged
d. any of the above is possible
10. According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation:
a. increases the real return of the nation's abundant factor
b. increases the real return of the nation's scarce factor
c. reduces the real return of the nation's scarce factor
d. any of the above is possible
11. The imposition of an import tariff by a nation results in:
a. an increase in relative price of the nation's import commodity
b. an increase in the nation's production of its importable commodity
c. reduces the real return of the nation's abundant factor
d. all of the above
12. The imposition of an import tariff by a nation can be represented by a rotation of the:
a. nation's offer curve away from the axis measuring the commodity of its comparative
advantage
b.the nation's offer curve toward the axis measuring the commodity of its comparative
advantage
c.the other nation's offer curve toward the axis measuring the commodity of its
comparative advantage
d.the other nation's offer curve away from the axis measuring the commodity of its
comparative advantage
13. The imposition of an import tariff by a large nation:
a. increases the nation's terms of trade
b. reduces the volume of trade
c. may increase or reduce the nation's welfare
d. all of the above
14. The imposition of an optimum tariff by a large nation:
a. improves its terms of trade
b. reduces the volume of trade
c. increases the nation's welfare
d. all of the above
15. The optimum tariff for a small nation is:
a. 100%
b. 50%
c. 0
d. depends on elasticities
Multiple-choice Questions Ch. 9:
1. An import quota:
a. increases the domestic price of the imported commodity
b. reduces domestic consumption
c. increases domestic production
d. all of the above
2. An increase in the demand of the imported commodity subject to a given import quota:
a. reduces the domestic quantity demanded of the commodity
b. increases the domestic production of the commodity
c. reduces the domestic price of the commodity
d. reduces the producers' surplus
3. Adjustment to any shift in the domestic demand or supply of an importable commodity
occurs:
a. in domestic price with an import quota
b. in the quantity of imports with a tariff
c. through the market mechanism with an import tariff but not with an import quota
d. all of the above
4. An international cartel refers to:
a. dumping
b. an organization of exporters
c. an international commodity agreement
d. voluntary export restraints
5. The temporary sale of a commodity at below cost or at a lower price abroad in order to
drive foreign producers out of business is called:
a. predatory dumping
b. sporadic dumping
c. continuous dumping
d. voluntary export restraints
6. The type of dumping which would justify antidumping measures by the country subject
to the dumping is:
a. predatory dumping
b. sporadic dumping
c. continuous dumping
d. all of the above
7. A fallacious argument for protection is:
a. the infant industry argument
b. protection for national defense
c. the scientific tariff
d. to correct domestic distortions
8. Which of the following is true with respect to the infant-industry argument for protection:
a. it refers to temporary protection to establish a domestic industry
b.to be valid, the return to the grown-up industry must be sufficiently high also to repay
for the higher prices paid by domestic consumers of the commodity during the infancy
period
c. is inferior to an equivalent production subsidy to the infant industry
d. all of the above
9. Which of the following is false with respect to strategic trade policy?
a. it postulates that a nation can gain by an activist trade policy
b. it is practiced to some extent by most industrial nations
c. it can easily be carried out
d. all of the above
10. Industrial policy refers to:
a.an activist policy by the government of an industrial country to stimulate the
development of an industry
b.the granting of a subsidy to a domestic industry to stimulate the development of an
industry
c. the granting of a subsidy to a domestic industry to counter a foreign subsidy
d. all of the above
11. Game theory refers to:
a. a method of choosing the optimal strategy in conflict situations
b. the granting of a subsidy to correct a domestic distortion
c. the theory of tariff protection
d. none of the above
12. Trade protection in the United States is usually provided to:
a. low-wage workers
b. well-organized industries with large employment
c. industries producing consumer products
d. all of the above
13. The most-favored-nation principle refers to:
a. extension to all trade partners of any reciprocal tariff reduction negotiated by the
U.S. with any of its trade partners
b. multilateral trade negotiation
c. the General Agreement on Tariffs and Trade
d. the International Trade Organization
14. On which of the following principles does GATT rest?
a. nondiscrimination
b. elimination of nontariff barriers
c. consultation among nations in solving trade disputes
d. all of the above
15. Which of the following was not negotiated under the Uruguay Round?
a. reduction of tariffs on industrial goods
b. replacement of quotas with tariffs
c. reduction of subsidies on industrial products and on agricultural exports
d. liberalization in trade in most services
Multiple-choice Questions for Ch. 13
1. Which of the following is false?
a. A credit transaction leads to a payment from foreigners
b. A debit transaction leads to a payment to foreigners
c. A credit transaction is entered with a negative sign
d. Double-entry bookkeeping refers to each transaction entered twice.
2. Which of the following is a debit?
a. The export of goods
b. The export of services
c. Unilateral transfers given to foreigners
d. Capital inflows
3. Capital inflows:
a. refer to an increase in foreign assets in the nation
b. refer to a reduction in the nation's assets abroad
c. lead to a payment from foreigners
d. all of the above
4. When a U.S. firm imports goods to be paid in three months the U.S. credits:
a. the current account
b. unilateral transfers
c. capital
d. official reserves
5.The receipt of an interest payment on a loan made by a U.S. commercial bank to a foreign
resident is entered in the U.S. balance of payments as a:
a. credit in the capital account
b. credit in the current account
c. credit in official reserves
d. debit in unilateral transfers
6. The payment of a dividend by an American company to a foreign stockholder represents:
a. a debit in the U.S. capital account
b. a credit in the U.S. capital account
c. a credit in the U.S. official reserve account
d. a debit in the U.S. current account
7 .When a U.S. firm imports a good from England a pays for it by drawing on its pound
sterling balances in a London Bank, the U.S. debits its current account and credits its:
a. official reserve account
b. unilateral transfers account
c. services in its current account
d. capital account
8. When the U.S. ships food aid to a developing nation, the U.S. debits:
a. unilateral transfers
b. services
c. capital
d. official reserves
9. When the resident of a foreign nation (1) sells a U.S. stock and (2) deposits the proceeds in
a U.S. bank, the U.S.:
a. credits capital for (1) and debits capital for (2)
b. credits the current account and debits capital
c. debits capital and credits official reserves
d. debits capital for (1) and credits capital for (2)
1.When a U.S. resident (1) purchases a foreign treasury bill and pays by (2) drawing down his
bank balances abroad:
a. debits short-term capital and credits official reserves
b. debits capital for (1) and credits capital for (2)
c. debits official reserves and credits capital
d. credits short-term capital and debits official reserves
11. From the U.S. point of view, drawing on (reducing) foreign bank balances in a New York
bank represents a:
a. capital inflow
b. capital outflow
c. outflow of official reserves
d. debit in the current account
11. Which is not an official reserve asset of the U.S.?
a. U.S. holdings of Special Drawing Rights
b. The U.S. reserve position in the International Monetary Fund
c. Foreign official holdings of U.S. dollars
d. Official holdings of foreign currencies by U.S. monetary authorities
13. The capital account of the U.S. includes:
a. the change in U.S. assets abroad and foreign assets in the U.S.
b. the change in U.S. assets abroad and foreign assets in the U.S., other than official
reserve assets
c. all financial assets
d. all but current account transactions
14. Accommodating items are:
a. transactions in official reserve assets
b. the items below the line
c. needed to balance international transactions
d. all of the above
15. Which of the following is false?
a. a net debit balance in the current and capital accounts measures the surplus in the
nation's balance of payments
b. a balance of payments deficit must be settled by a net credit in the official reserve
account
b.a deficit in the balance of payments can be measured by the excess of credits over
debits in the official reserve account
d. a net debit balance in the official reserve account refers to a surplus
Multiple-choice Questions for Ch. 14
1. Which is not a function of the foreign exchange market?
a. to transfer funds from one nation to another
b. to finance trade
c. to diversify risks
d. to provide the facilities for hedging
2. An increase in the pound price of the dollar represents:
a. an appreciation of the dollar
b. a depreciation of the dollar
c. an appreciation of the pound
d. a devaluation of the dollar
3. A change from $1=£1 to $2=£1 represents
a. depreciation of the dollar
b. an appreciation of the dollar
c. a depreciation of the pound
d. none of the above
4. A shortage of pounds under a flexible exchange rate system results in:
a. a depreciation of the pound
b. a depreciation of the dollar
c. an appreciation of the dollar
d. no change in the exchange rate
5. An effective exchange rate is a:
a. spot rate
b. forward rate
c. flexible exchange rates
d. weighted average of the exchange rates between the domestic currency and the
nation's most important trade partners
6. The exchange rate is kept within narrow limits in different monetary centers by:
a. hedging
b. exchange arbitrage
c. interest arbitrage
d. speculation
7. If SR=$2/£1 and the three-month FR=$1.98/£1:
a. the pound is at a three-month forward discount of 1%
b. the pound is at a forward discount of 1% per year
c. the pound is at a three-month forward premium of 1%
d. the dollar is at a three-month forward discount of 1%
8. Hedging refers to:
a. the acceptance of a foreign exchange risk
b. the covering of a foreign exchange risk
c. foreign exchange speculation
d. foreign exchange arbitrage
9. A U.S. importer scheduled to make a payment of £100,000 in three months can hedge
his foreign exchange risk by:
a. purchasing $100,000 in the forward market for delivery in three months
b. selling £100,000 in the spot market for delivery in three months
c. purchasing £100,000 in the forward market for delivery in three months
d. selling £100,000 in the spot market for delivery in three months
10. If the three-month FR=$2/£1 and a speculator anticipates that SR=$2.03/£1 in three
months, he can earn a profit by:
a. selling pounds forward
b. purchasing pounds forward
c. selling dollars forward
d. purchasing dollars forward
11. Destabilizing speculation refers to the:
a. sale of the foreign currency when the exchange rate falls or is low
b. purchase of the foreign currency when the exchange rate falls or is low
c. sale of the foreign currency when the exchange rate rises or is high
d. all of the above
1.A capital outflow from New York to London under covered interest arbitrage can take place
if the interest differential in favor of London is:
a. smaller than the forward discount on the pound
b. equal to the forward discount on the pound
c. larger than the forward discount on the pound
d. none of the above.
2.According to the theory of covered interest arbitrage, if the interest differential in favor of
the foreign country exceeds the forward discount on the foreign currency, there will be a:
a. capital inflow under covered interest arbitrage
b. capital outflow under covered interest arbitrage
c. no capital flow under a covered interest arbitrage
d. any of the above
3.When the interest differential in favor of the foreign country is equal to the forward
premium on the foreign currency, we:
a. are at covered interest arbitrage parity
b. are not at covered interest arbitrage parity
c. may or may not be at covered interest arbitrage parity
d. we cannot say without additional information
15. The currency of the nation with the lower interest rate is usually at a
a. forward premium
b. forward discount
c. covered interest arbitrage parity
d. any of the above
Multiple-choice Questions for Ch. 15
1. Which is correct with respect to the absolute PPP theory?
a. It postulates that the exchange rate between two currencies is equal to the ratio of the
price levels in the two nations
b. it does not take into consideration transportation costs or other obstructions to the flow
of international trade
c. can be very misleading
d. all of the above
2. The relative purchasing power-parity theory postulates that:
a. The equilibrium exchange rate is equal to the ratio of the price level in the two nations
b. the change in the exchange rate over a period of time should be proportional to the
relative change in the price level in the two nations over the same time period
c. the change in the exchange rate over a period of time should be proportional to the
absolute change in the price level in the two nations over the same time period
d. the exchange rate at a period of time should be proportional to the relative prices in
the two nations
3. The relative PPP theory gives better results:
a. in the long run than in the short run
b. when structural changes take place
c. the greater is the level of commodity aggregation
d. in tests including developed and developing countries
4. The monetary approach to the balance of payments:
a. views the balance of payments as an essentially monetary phenomenon
b. rests on the purchasing power-parity theory
c. postulates that money plays the crucial role in the long run both as a disturbance and
adjustment in the nation's balance of payments
d. all of the above
5. If a nation's money GDP is 100 and the velocity of circulation of money is 4, the quantity
demanded of money in the nation is:
a. 20
b. 25
c. 50
d. 100
6. The monetary base of the nation refers to the:
a. domestic credit created by the nation's monetary authorities or the domestic assets
backing of the nation's money supply
b. international reserves of the nation
c. domestic credit created by the nation's monetary authorities or the domestic assets
backing of the nation's money supply plus the international reserves of the nation
d. legal reserve requirements in the nation
7. If the legal reserve requirement of the nation is 25%, the money multiplier in the nation is:
a. 2
b. 4
c. 5
d. 6
5.According to the monetary approach to the balance of payments, a deficit in the nation's
balance of payments results from:
a. an excess in the nation's stock of money supply that is not eliminated or corrected by
the nation's monetary authorities
b. an excess in the stock of money demanded in the nation that is not satisfied by domestic
monetary authorities
c. an excess in the stock of money demanded in the other nation that is not satisfied by the
other nation's monetary authorities
d. an excess of imports over exports in the nation
6.If the increase in a nation's money supply grows less rapidly than its GNP, the nation will face a:
a. once-and-for-all balance of payments deficit
b. once-and-for-all balance of payments surplus
c. continuous balance of payments deficit
d. continuous balance of payments surplus
7. According to the monetary approach to the balance of payments a non-reserve currency
nation:
a. has no control over its money supply in the long-run under fixed exchange rates
b. has no control over its money supply in the short-run under fixed exchange rates
c. has no control over its money supply in the long-run under flexible exchange rates
d. retains complete control over its money supply in the long-run
11. According to the monetary approach to the balance of payments, a surplus nation will have
to give up in the long-run its goal of:
a. price stability
b. fixed exchange rate
c. price stability or fixed exchange rate
d. price stability and fixed exchange rate
12. Which of the following statements is true with respect to the monetary approach to the
balance of payments:
a.the interest differential in favor of the dollar equals the expected rate of appreciation
of the pound
b. the interest differential in favor of the dollar equals the expected rate of depreciation
of the dollar
c. the interest differential in favor of the pound equals the expected rate of depreciation
of the pound
d. all of the above
13. The monetary approach assumes that the following assumption holds:
a. domestic and foreign bonds are perfect substitutes
b. covered interest arbitrage holds
c. expectations do not affect the future spot exchange rate.
d. the risk premium is positive
14. The asset market or portfolio balance approach:
a. can be regarded as an extension of the monetary approach
b. deals with money and other domestic and foreign financial assets
c. can more readily be extended than the monetary approach to deals with the real sector
d. all of the above
15. According to the asset market or portfolio balance approach, an increase in the expected
appreciation of the foreign currency leads domestic residents to increase:
a the demand for domestic money
b. the demand for the domestic bond
c. the demand for the foreign bond
d. the risk premium
16. According to the asset market or portfolio balance approach, a reduction in the risk
premium on the foreign bond leads domestic residents to increase the demand for the:
a. domestic money
b. domestic bond
c. foreign bond
d. all of the above
17. According to the asset market or portfolio balance approach, an increase in domestic real
income or GDP leads domestic residents to increase the demand for the:
a domestic money
b. domestic bond
c. foreign bond
d. all of the above
18. According to the asset market or portfolio balance approach, an increase in domestic wealth
leads domestic residents to increase the demand for the:
a domestic money
b. domestic bond
c. foreign bond
d. all of the above
19. Which of the following is false with regard to exchange rate dynamics:
a. seeks to explain exchange rate fluctuations over time
b. results because the real sector adjusts instantaneously to disturbances
c. in the short run, the exchange rate overshoots its long-run equilibrium
d. results from the stock adjustment in financial assets
20. An unexpected increase in the U.S. money supply leads to:
a. an immediate reduction in the U.S. interest rate
b. an immediate larger dollar depreciation
c. a gradual appreciation of the dollar over time
d. all of the above
国际经济学
第二章
1. a. 2. a .3.c.4. d. 5.d. 6. c.7. d. 8.b. 9.c.0. d. 11. a. 12. d. 13. d. 14. b.15.a.
第三章
1c. 2. d. 3. a. 4.d. 5. b. 6. d. 7. c. 8. a. 9. c. 10.b. 11.d. 12. d. 13. c. 14. d. 15. d.
第四章
1. d. 2. c. 3. d. 4. b. 5.D 6.C 7.D 8. D 9.B 10.A 11.C 12.D 13.B 14. A 15.D
第五章
1.C 2.C 3.A 4.C 5.B 6.D 7.D 8.B 9.C 10.C 11.D 12.D 13.A 14.C 15.A
第六章
1.C 2.C 3.A 4.D 5.D 6.D 7.A 8.B 9.C 10.B 11.D 12.C 13.D 14.D 15.A 16.D
第八章
1.C 2.D 3.D 4.A 5.A 6.# 7.A8.A 9.B 10.B 11.D 12.A 13.D 14.D 15.C
第九章
1.D 2.B 3.D 4.B 5.A 6.A 7.C 8.D
第十三章
1.C 2.C 3.D 4.C 5.B 6.D 7.D 8.A 9.D 10.B 11.B 12C 13.B 14.D 15.A
第十四章
1.C 2.A 3.A 4.B 5.D 6.B 7.A 8.B 9.C 10.# 11.B 12.A 13.C 14.B 15.A 16.A
第十五章
1.D 2.B 3.A 4.D 5.B 6.C 7.B 8.A 9.B 10.A 11.D 12.A 13.A 14.D 15.C 16.C 17.A 18.D 19.B 20.D
Copyright © 2019-2025 51dongshi.net 版权所有
违法及侵权请联系：TEL:177 7030 7066 E-MAIL:11247931@qq.com 本站由北京市万商天勤律师事务所王兴未律师提供法律服务
