Deck 11: International Markets and General Equilibrium

Question 1

The real exchange rate between two currencies measures:

A) the relative price levels in these two countries.
B) how many units of one currency can be exchanged for one unit of the other currency.
C) how many units of representative baskets of goods and services in one country can be exchanged for one unit of the representative baskets of goods and services in the other country.
D) how much appreciation of one currency against the other currency.

Answer 1

C

Question 2

In the specific factors model,with trade,the owners of factors specific to the importing sector are ________,while the owners of factors specific to the exporting sector are ________.

A) benefited; harmed
B) harmed; benefited
C) harmed; not affected
D) not affected; benefited

Answer 2

B

Question 3

In the specific factors model,because of the diminishing returns to labor,which of the following statement is true?

A) Production possibilities frontier is a straight line.
B) Production possibilities frontier is bowed out from the origin.
C) Production possibilities frontier is bowed in toward the origin.
D) Production possibilities frontier can have any shape.

Answer 3

B

Question 4

When the dollar declines in the value against the rupiah,dollars are experiencing ________.

A) depreciation
B) appreciation
C) inflation
D) deflation

Question 5

When the Indonesian exchange rate decreases from 10,000 rupiahs per dollar to 9,500 rupiahs per dollar,the rupiahs is said to ________.

A) depreciate
B) appreciate
C) inflate
D) deflate

Question 6

Suppose Indonesia is a shoe exporter,then in the graph for Indonesian market for shoes,the Local Export Price (LEP)is ________ the autarky price.

A) above
B) below
C) equal to
D) they cannot be compared without more information.

Question 7

In the specific factors model,at the general equilibrium,if the wage per worker is $10 an hour and the price of food is $2,000 per ton,the marginal product of labor of food production is ________.

A) 20,000
B) 0.005
C) 1
D) 200

Question 8

When the real exchange rate is above the purchasing power parity level,this country's currency is said to be ________.

A) over-valued
B) under-valued
C) appreciated
D) depreciated

Question 9

When purchasing power parity holds,it implies that the real exchange rate equal to ________.

A) 1
B) 0
C) 100
D) nominal exchange rate.

Question 10

Taxes imposed on imports are called ________.

A) excise tax
B) luxury tax
C) trade tax
D) tariff

Question 11

In the specific factors model,an increase in the world price of food will lead to:

A) an increase in the real earnings of land.
B) a decrease in the real earnings of land.
C) no change in the real earnings of land.
D) a decrease in the nominal wage in the food sector.

Question 12

Which of the following is not the driving force behind globalization?

A) reductions in air cargo rates.
B) spread of cell phones,internet and other technologies.
C) global warming.
D) many countries have liberalized their trade policies.

Question 13

If the world price of coffee table in dollars is $100 and the Indian nominal exchange rate is 500 rupees per dollar,then the world price of coffee table as measured in Indian rupees will be ________.

A) 5 rupees.
B) 50,000 rupees
C) 500 rupees
D) 100 dollars

Question 14

Which of the following is true describing the change in the nature of international trade in recent decades?

A) Developing countries have increased the share of manufactures in exports.
B) Many developed county firms have outsources their productions.
C) Developing countries have been increasingly trading with each other,in addition to trading with the developed countries.
D) All of the above.

Question 15

Which of the following would be an exchange rate?

A) one dollar can be exchanged for four quarters.
B) one dollar can be exchanged for one candy bar.
C) one dollar can be exchanged for 100 yens.
D) one textbook can be exchanged for 10 large pizzas.

Question 16

In the world market for shoes,recovery from economic crisis in Europe will shift the global ________ schedule for shoes to the ________.

A) demand; right
B) demand; left
C) supply; right
D) supply; left

Question 17

What resources is specific in the textile sector in the specific factors model?

A) labor
B) land
C) capital
D) entrepreneurial ability

Question 18

The specific factors model is considered as a model of general equilibrium in the "short-run" because ________.

A) labor cannot move from one sector to another
B) labor can move from one sector to another
C) capital can move from one sector to another
D) capital and land are each specific to one sector

Question 19

In the specific factors model,at the general equilibrium,the slope of the Production possibilities frontier (PPF)is

A) equal to the ratio between the marginal products of labor in each sector.
B) equal to the ratio between the prices for textiles and food.
C) tangent of an iso-value line.
D) all of the above.

Question 20

________ exchange rates tend to discourage ________.

A) over-valued; imports
B) under-valued; imports
C) over-valued; exports
D) under-valued; exports

Question 21

In the Factor Proportions Model,suppose Home country is a labor-abundant country and Foreign country is a capital-abundant country,when trade between these two countries happens,the Factor Proportions Model indicates that ________.

A) the price of capital-intensive good will rise in Home country
B) the price of labor-intensive good will rise in Home country
C) the price of capital-intensive good will fall in Foreign country
D) the price of labor-intensive good will rise in Foreign country

Question 22

A country's terms of trade is defined as the ratio of ________ to ________.

A) its currency; foreign country's currency
B) its tariff rate; foreign country's tariff rate
C) price of its importing product; price of its exporting product
D) price of its exporting product; price of its importing product

Question 23

In the Factor Proportions Model,if the world relative price of textiles increases and Home country is a textile exporter,________.

A) Home country will produce more textiles and less chemicals
B) Home country will produce less textiles and more chemicals
C) Home country will produce more textiles and more chemicals
D) all of the above are possible

Question 24

In the Factor Proportions Model,the opening to trade will ________ the real return to the country's relatively abundant factor and ________the real return to the country's relatively scarce factor.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question 25

In the specific factors model,suppose that Home country has a comparative advantage in textile industry.With trade,which of the following statement is true?

A) the real earnings of capital will not change.
B) the real earnings of capital will first increase,then decrease eventually.
C) the real earnings of capital will increase.
D) the real earnings of capital will decrease.