Download Economics Exam Questions and Answers: International Trade and more Exams Economics in PDF only on Docsity!
ECON 327 Final wsu questions with
answers
The predictive power of the Heckscher-Ohlin model, at least in terms of forecasting the volume of trade, appears to undergo improvement upon abandonment of the assumption - CORRECT ANSWERS ✔✔that technologies are the same across countries. As more labor is used, holding capital constant, - CORRECT ANSWERS ✔✔the marginal product of labor decreases The nature of political battles over trade in the modern era - CORRECT ANSWERS ✔✔typically centers on issues involving the trade-induced devaluation of labor skills According to the factor proportions model, a consequence of international trade is that factor prices across trading nations - CORRECT ANSWERS ✔✔become completely equalized. Suppose Home and Foreign only differ in their resources: Home has a higher ratio of labor to land than Foreign does. According to the factor proportions model, factor prices will become equalized because - CORRECT ANSWERS ✔✔Home indirectly exports its labor and Foreign indirectly exports its land.
Home and Foreign produce two goods, flowers and soybeans. Home exports the labor intensive flowers and Foreign exports the land intensive soybeans. Suppose that Home provides an export subsidy to its domestic flower producers. The provision of an export subsidy to flower producers by Home will cause - CORRECT ANSWERS ✔✔an improvement in Foreign's terms of trade. The provision of the export subsidy by Home on flowers, in the absence of Metzler's paradox, will have which of the following income distribution effects? - CORRECT ANSWERS ✔✔It worsens Home's terms of trade but aids its exporting sector as the internal relative price of flowers declines. In the multi-good, single-factor Ricardian model the equilibrium relative wage of Home's workers is determined by the - CORRECT ANSWERS ✔✔relative demand and relative supply of labor.re The relative demand for labor function is shaped as - CORRECT ANSWERS ✔✔a step function. In the "2 by 2 by 2" version of the factor-proportions model, assume that Home is labor-abundant and coal is labor-intensive. The movement from no-trade to free-trade between Home and Foreign can be expected to cause the relative price of coal to - CORRECT ANSWERS ✔✔increase in Home Suppose that the Home government is somewhat beholden to landowners. Which of the following adjectives might describe the Home government's stance toward the opening of trade? - CORRECT ANSWERS ✔✔resistant
The fundamental reason why trade potentially benefits a country is that it
- CORRECT ANSWERS ✔✔expands the economy's choices. In today's economy, knowledge is at least as important an input as are factors of production like labor, capital, and raw materials. This is especially true in highly innovative industries, where being even a few months behind the cutting edge in production techniques or product design can put a company at a major disadvantage. Do localized industrial clusters have an advantage over individual firms in obtaining specialized knowledge? Why? - CORRECT ANSWERS ✔✔Yes, localized industrial clusters do have an advantage in obtaining specialized knowledge, because they help foster knowledge spillovers-the informal exchange of information and ideas that takes place at a personal level and seems most effective when employees of different companies in a fairly small area mix socially and talk freely about technical issues. The optimum tariff is - CORRECT ANSWERS ✔✔not practical for a large country due to the likelihood of retaliation. The reason protectionism remains strong in the United States is that - CORRECT ANSWERS ✔✔the losses associated with protectionism are diffuse, making lobbying by the public impractical. If some industries exhibit internal increasing returns to scale in each country, we should not expect to see - CORRECT ANSWERS ✔✔perfect competition in these industries.
In a deflationary environment, we will find that over time - CORRECT ANSWERS ✔✔a specific tariff will tend to raise more revenue than an ad valorem tariff. The European Union (EU) began in 1957 as a customs union among six nations, and has widened and deepened the economic integration of Europe up until the Brexit decision in 2016. The reason for Brexitlong dashBritish exit from the European Union, which was decided upon narrowly through a referendum held in that countrylong dashis most likely related to - CORRECT ANSWERS ✔✔the perception in Britain that the inward migration of poorer EU citizens from the former Communist countries in Eastern Europe have resulted in job losses for native-born British citizens and put a strain on public services. GNP accounts avoid double counting by including only the value of final goods and services sold on the market. Should the measure of imports and exports used in the GNP accounts therefore be defined to include only imports and exports of final goods and services received from and sold to other countries? - CORRECT ANSWERS ✔✔No, total values and imports and exports should be included in the calculation of the GNP. One of the major issues that arose during the Doha round of negotiations involved complaints by ________ about ________. - CORRECT ANSWERS ✔✔developing countries; agricultural subsidies. If output is increased in the long run, average production costs in the presence of internal diseconomies of scale will ________, and in the presence of external diseconomies of scale, will ________. - CORRECT ANSWERS ✔✔remain constant; increase
What are the determinants of the aggregate money demand? - CORRECT ANSWERS ✔✔Price level, national income, and interest rate. For a given Euro interest rate, what is the correct causality chain in the short run? - CORRECT ANSWERS ✔✔The Fed determines real money balances, which in turn determine the interest rate, given money demand, which, given the interest parity condition, determines the Euro/dollar exchange rate. After September 11, 2001, the U.S. government imposed greater restrictions on Student (F-1, J-1) visas making it more difficult for international students to enter the U.S. for undergraduate and graduate study. This is likely to cause - CORRECT ANSWERS ✔✔a divergence in real tuition rates (the price of education) among trading nations. Which of the following is a correct prediction based on the PPP model of the exchange rates? - CORRECT ANSWERS ✔✔An increase in the U.S. interest rates leads to depreciation of the dollar. An Based on purchasing power parity (PPP), which of the following, all else being equal, could lead to a long-run real appreciation of the U.S. dollar? - CORRECT ANSWERS ✔✔A rise in the growth rate of the U.S. GDP. Suppose that output demand and supply trends induce people to expect Home's currency to depreciate in real terms against the currency of Foreign, its key trading partner. This implies that the expected real interest rate should be - CORRECT ANSWERS ✔✔higher in Home.
An increase in the real exchange rate (real depreciation of domestic currency) will result in - CORRECT ANSWERS ✔✔an increase in net exports.an Inflation bias is - CORRECT ANSWERS ✔✔positive inflation resulting from policies designed to prevent recession. If an economy does not start out at full employment, is it still true that a permanent change in fiscal policy has no current effect on output? - CORRECT ANSWERS ✔✔No, there is no reason for output to remain constant in this case since its initial value is not equal to its long-run level. If the economy's output is initially above full employment, which of the following policy combinations could restore full employment and keep the exchange rate at the same level? - CORRECT ANSWERS ✔✔Contractionary monetary and fiscal policy. If one compares low-inflation economies with economies in which inflation is high and very volatile, the degree of exchange rate pass-through is likely to be - CORRECT ANSWERS ✔✔higher in the high-inflation economies. The reasoning behind the correct response given above centers on the - CORRECT ANSWERS ✔✔ability and willingness of foreign sellers to alter their foreign currency prices
The efficiency case made for free trade is that as trade distortions are eliminated... - CORRECT ANSWERS ✔✔efficiency losses for producers and consumers will decrease, thus increasing national economic welfare What is the relationship between GATT & WTO? - CORRECT ANSWERS ✔✔WTO is a more formal organization with larger scope Given the model of competition among political parties used by political scientists, the most likely tariff policy would be... - CORRECT ANSWERS ✔✔a tariff favored by the median voter When are preferential trade agreements "welfare-improving"? - CORRECT ANSWERS ✔✔when they lead to trade creation What particular market failure does the "market failure argument" against free trade refer to? - CORRECT ANSWERS ✔✔Any market failure that occurs in the tradeable sector (unemployment, environmental externalities, spillovers (all spillovers). What is not an argument to support free trade? - CORRECT ANSWERS ✔✔Free trade is always welfare improving because those who gain can compensate those who lose. What is not part of the definition for Gross National Product? - CORRECT ANSWERS ✔✔"produced within a countries borders"
In theory, the equation (Cur Acct+Cap Acct+Fin Acct= 0) must hold. In reality a statistical discrepancy is often included to achieve this balance. What acct causes this discrepancy? - CORRECT ANSWERS ✔✔The Financial Account When the dollar is worth less in relation to currencies of other countries (yen has ^ in value /$ over time) Are you more likely to buy American made of foreign made electronics? - CORRECT ANSWERS ✔✔American (domestic) products Are U.S companies that manufacture semi-conductors happier when the dollar is strong or weak? - CORRECT ANSWERS ✔✔When the dollar is weaker Are U.S companies that are in the business of importing electronic consumer goods into the U.S happier when the dollar is strong or weak? - CORRECT ANSWERS ✔✔When the dollar is stronger The effect of a decline in the dollar interest rate will lead to a... - CORRECT ANSWERS ✔✔Dollar depreciation A futures contract - CORRECT ANSWERS ✔✔A contract that contains a promise that a specific amount of foreign currency will be delivered on the specified date in the future.
If the dollar appreciates, what would you expect to happen to outsourcing by american companies? - CORRECT ANSWERS ✔✔We would expect outsourcing by American companies to increase. The "Theory of the Second Best" states that.. - CORRECT ANSWERS ✔✔in the presence of a market failure, government intervention may improve welfare What is the main reason explaining why agriculture enjoys protective tariffs in the U.S? - CORRECT ANSWERS ✔✔Producers (who gain) are well organized while consumers (who lose) are not. Why are international negotiations important in order to reduce tariff rates worldwide? - CORRECT ANSWERS ✔✔They help avoid trade wars Preferential trading agreements exp - CORRECT ANSWERS ✔✔customs unions and free trade areas difference between customs unions and free trade areas - CORRECT ANSWERS ✔✔custom unions member countries apply tariffs to nonmembers & free trade areas act independently in setting tariff rates against the outside world. A small country - CORRECT ANSWERS ✔✔a country that cannot affect its terms or trade
An import tariff imposed by a large country affects income distribution in the following way - CORRECT ANSWERS ✔✔Consumers lose in the importing country & gain in the exporting country while producers gain in the importing country and lose in the exporting country. Export subsidy vs import quota - CORRECT ANSWERS ✔✔export subsidy worsens terms of trade while an import quota improves them why do internal economies of scale lead to imperfectly competitive industries? - CORRECT ANSWERS ✔✔large firms have cost advantage over small firms external economies of scale occur when avg costs... - CORRECT ANSWERS ✔✔fall as the industry grows larger but rise as the representative firm grows larger. external economies of scal - CORRECT ANSWERS ✔✔are more likely to be associated with a perfectly competitive industry a Forward-falling supply curve - CORRECT ANSWERS ✔✔is the supply curve of a perfectly competitive industry with external economies
