international economics final exam

What is the international investment position and how has it changed for the United States over the last fifty years.

-18 trillion at the end quarter of 2023. it has improved over the last 50 years. ???

Unit cost of beef: 2 (dollars), 8 (marks) unit cost of computer chips: 1 (dollar), 2 (marks) what is the opportunity cost of beef in US? in germany? which good would US export

2 chips; 4 chips beef

if nation A can produce 5 units of good X or 10 units of good Y an nation B can produce 4 units of good X or 12 units of good Y we can conclude that both nations would gain from trade if nation A sold _____ units of good ___ for one unit of good ___

2.5; X;Y

The model we can the gravity model of international trade predicts that trade between two nations is larger

All are correct

The international investment position of a nation

All of the above

The Statistical discrepancy is needed to ensure that

Current account minus capital account equal financial account

in the figure above, the international price of good X will be

E*

Commercial bank deposits outside the country of their issue are commonly referred to as

Eurocurrency

Which of these is true?

Gains from trade normally stem from both gains from exchange and gains from specialization

given favorable terms of trade, in which good will nation 1 specialize and export to Nation 2?

Good Y

Which of the following statements is correct?

In a customs union, member nations apply a uniform external tariff

Define and discuss the differences between intra-industry trade and inter-industry trade.

Intra-industry occurs when a country exports and imports goods from the same industry. And, inter-industry is a trade of products that belong to different industries. ????

Which of the following is NOT an explanation for the growth of the trade deficit in the United States over the last thirty years

The weak dollar in the 2010's

The WTO was established during the

Uruguay Round

imagine a two-nation (a and b) world, with two commodities (x and y), and it is established that nation A has a comparative advantage in commodity x. In this case, nation B must have:

a comparative advantage in commodity Y

A shortage of pounds under a flexible exchange rate system results in:

a depreciation of the dollar

international trade can be based on economies of scale even if both nations have identical

all

On which of the following principles does GATT rest?

all answers are correct

Community indifference curves:

all answers are true

a difference in relative commodity prices between two nations can be based upon a difference in

all of these are correct

An increase in the pound price of the dollar represents:

an appreciation of the dollar

An international cartel refers to:

an organization of exporters

Over the last fifty years the current account balance of the United States has

been deteriorating

with trade, nations can attain an indifference curve that is

beyond the indifference curve it would attains without trade

A production frontier that is concave from the origin indicates that the nation incurs increasing opportunity costs in. the production of:

both commodities

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:

capital outflow under covered interest arbitrage

Technical progress that increases the productivity of L proportionately more than the productivity of K is called:

capital saving

A customs union that allows for the free movement of labor and capital among its member nations is called a:

common market

When a nation has increasing returns to scale, the shape of its production possibility frontier is

convex to the origin (bows outward from the origin)

The spot sale of a currency combined with a forward repurchase of the same currency is a

currency swap

The imposition of a tariff will

decrease imports, increase domestic production, and decrease consumption

You used to be able to purchase .85 Euro with one dollar, now you can purchase .9 Euro with one dollar. The Euro has

depreciated

if terms of trade increase in two- nation world, those of the trade partner:

deteriorate

If a small nation increases the tariff on its import commodity, its:

domestic price of the commodity increases

Doubling only the amount of L available under constant returns to scale:

doubles the output of the K-intensive commodity

increasing returns to scale means that

doubling all inputs leads to a more than proportional increase in output

The exchange rate is kept nearly the same across different monetary centers by:

exchange arbitrage

if the equilibrium price of corn in nation a is below the international trade price, nation a would be more likely

export corn

In general, for the last 50 years tariff rates around the world have been

falling

what did the mercantilists not advocate

free trade

The North American Free Trade Agreement (NATFA) and its replacement, the USMCA, is best defined as a

free trade area

over time, the economic interdependence of nations has:

grown

moving to an indifference curve farther out from the origin shows

higher satisfaction

in the figure above, nation 2 will ___ good x

import

intra-industry trade takes place

in order to take advantage of economies of scale

primary income receipts include the

income earned on foreign investments

The formation of a trade-creating customs union where all economic resources of member nations are fully employed before and after the formation of the customs union leads to an:

increase in the welfare of member and nonmember nations

transport costs:

increase the price in the importing country

An import quota does all of the following except:

increases domestic social welfare

An increase in the demand of the imported commodity subject to a given import quota:

increases the domestic production of the commodity

According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation:

increases the real return of the nation's scarce factor

An increase in tastes for the import commodity in both nations:

increases the volume of trade

A trade-diverting customs union:

increases trade among members but reduces trade with non-members

Which of the following was not negotiated under the Uruguay Round?

increasing nontariff barriers among developing nations

which of these is not true for a nation that is in equilibrium in isolation?

it consistently consumes inside its production frontier

which of the following is an example of intra-industry trade?

japan and the unites states both import and export cars.

Doubling the amount of L and K under constant returns to scale does all of the following except:

leaves the shape of the production frontier unchanged

A customs union is more like to lead to trade creation and increased welfare under the following condition

lower trade barriers with the rest of the world

All of the following are examples of protectionism except

most favored nation treatment

Expanding or opening international trade in a nation usually affects all member of society

most positively but some negatively

if the autarky (no trade) Px/Py is lower in nation 1 than in nation 2 without trade

nation 2 has a comparative advantage in commodity Y

with free trade an increasing costs:

neither nation will specialize completely in production

What international transactions are included in the current account? What is meant by net lending and net borrowing in the current account?

net lending means the government is providing resources to other sectors and borrowing is the government requires resources. transactions trade account balance , service exports, service imports, net portfolio investments etc.

Which is false about the United States balance of payments in 2013?

none of the above

the purchase of parts and components from overseas to reduce costs is

outsourcing

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:

predatory dumping

A U.S. importer scheduled to make a payment of €100,000 in three months can hedge his foreign exchange risk by:

purchasing €100,000 in the forward market for delivery in three months

The imposition of an import tariff by a small nation:

reduces the nation's welfare

The Rybczynski theorem postulates that doubling L at constant relative commodity prices:

reduces the output of the K-intensive commodity

Destabilizing speculation refers to the:

sale of the foreign currency when the exchange rate falls or is low

A trade-creating customs union is one where:

some domestic production in a member nation is replaced by lower-cost imports from another member nation

The opposite of hedging is

speculation

In the absence of trade, technical progress

tends to increase the nation's welfare.

a ratio of the index of the price of a nations exports to the index of the price of a nations imports is known as the nations

terms of trade

Hedging refers to:

the covering of a foreign exchange risk

If SR=$1/€1 and the three-month FR=$0.99/€1: (SR=spot rate, FR = forward rate)

the euro is at a three-month forward discount of 1%

A tariff in a small country will benefit

the government imposing the tariff.

two nations will trade a good until

the relative costs of that good are equal between the two nations

every point on a given indifference curve shows

the same level of satisfaction

What is the significance of the slope of the production possibility frontier?

the slope is the opportunity cost of the good on x (horizontal) axis.

if two nations have identical production possibilities frontiers, it is possible for them to experience gains from trade if

they have different tastes and preferences

Which is not a dynamic benefit from the formation of a customs union?

trade creation