Question 1

Describe the nature of trade between two countries based on intertemporal comparative advantage.

Accepted Answer

Intertemporal comparative advantage aris

Question 2

An import tariff will cause the terms of trade of the ________ country to ________ and will ________ the country.

Accepted Answer

A)  importing; improve; benefit 
B)  importing; improve; harm 
C)  exporting; improve; benefit 
D)  exporting; improve; harm 
E)  importing; suffer; harm 
A)  importing; improve; benefit 
B)  importing; improve; harm 
C)  exporting; improve; benefit 
D)  exporting; improve; harm 
E)  importing; suffer; harm

Question 3

If the U.S. (a large country) imposes a tariff on its imported good, this will tend to

Accepted Answer

A)  cause a deterioration of U.S. terms of trade. 
B)  have no effect on terms of trade. 
C)  improve the terms of trade of all countries. 
D)  raise the world price of the good imported by the United States. 
E)  improve the terms of trade of the United States. 
A)  cause a deterioration of U.S. terms of trade. 
B)  have no effect on terms of trade. 
C)  improve the terms of trade of all countries. 
D)  raise the world price of the good imported by the United States. 
E)  improve the terms of trade of the United States.

Question 4

-Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at ________, then moving to ________ will cause utility to ________.

Accepted Answer

A)  point b; point a; increase 
B)  point a; point b; increase 
C)  point c; point b; increase 
D)  point c; point b; decrease 
E)  point a; point c; remain unchanged 
A)  point b; point a; increase 
B)  point a; point b; increase 
C)  point c; point b; increase 
D)  point c; point b; decrease 
E)  point a; point c; remain unchanged

Question 5

-Suppose, as a result of various dynamic factors associated with exposure to international competition, Albania's economy grew, and is now represented by the rightmost production possibility frontier in the figure above. If its point of production with trade was point c, would you consider this growth to be export-biased or import biased? If Albania were a large country with respect to the world trade of A and B, how would this growth affect Albania's terms of trade? Its real income?

Accepted Answer

If point c is the production point with

Question 6

Suppose that a country experiences growth strongly biased toward its export, cloth,

Accepted Answer

A)  this will tend to leave the country's terms of trade unchanged. 
B)  this will tend to improve the country's terms of trade. 
C)  this will increase the price of cloth relative to the imported good. 
D)  this will tend to worsen the terms of trade for the country's trading partner. 
E)  this will tend to worsen the country's terms of trade. 
A)  this will tend to leave the country's terms of trade unchanged. 
B)  this will tend to improve the country's terms of trade. 
C)  this will increase the price of cloth relative to the imported good. 
D)  this will tend to worsen the terms of trade for the country's trading partner. 
E)  this will tend to worsen the country's terms of trade.

Question 7

If Slovenia is a large country in world trade, then if it imposes a large set of tariffs on many of its imports, this would

Accepted Answer

A)  increase its exports. 
B)  have no effect on its terms of trade. 
C)  harm its terms of trade. 
D)  improve its terms of trade. 
E)  decrease its marginal propensity to consume. 
A)  increase its exports. 
B)  have no effect on its terms of trade. 
C)  harm its terms of trade. 
D)  improve its terms of trade. 
E)  decrease its marginal propensity to consume.

Question 8

-Refer to above figure. Albania refused to engage in international trade for ideological reasons. To maximize its economic welfare it would choose to produce at which point in the diagram above? Suppose the PA/PB at point a was equal to 1. 
Given this information, in which good (A or B) does Albania enjoy a comparative advantage?
Now that the Cold War is over, Albania is interested in obtaining economic welfare gains from trade. The relevant international relative price is PA/PB = 2. Albania would therefore choose to produce at which point (a, b, or c)? Given this additional information, in which good does Albania enjoy a comparative advantage?

Accepted Answer

Albania would choose to produce at point

Question 9

A country will be able to consume a combination of goods that is NOT attainable solely from domestic production if

Accepted Answer

A)  the country avoids international trade. 
B)  the country specializes in one product. 
C)  the world terms of trade equal the domestic relative costs. 
D)  the world terms of trade differ from its domestic relative costs. 
E)  the country's domestic production value equals world relative value. 
A)  the country avoids international trade. 
B)  the country specializes in one product. 
C)  the world terms of trade equal the domestic relative costs. 
D)  the world terms of trade differ from its domestic relative costs. 
E)  the country's domestic production value equals world relative value.

Question 10

Tastes of individuals are represented by

Accepted Answer

A)  isovalue lines. 
B)  production possibility frontiers. 
C)  production functions. 
D)  indifference curves. 
E)  the terms of trade. 
A)  isovalue lines. 
B)  production possibility frontiers. 
C)  production functions. 
D)  indifference curves. 
E)  the terms of trade.

Question 11

An export subsidy has the opposite effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the domestic terms of trade. A production subsidy for the export product will lower the local price of the export good, lowering the domestic terms of trade for the country. Hence the export subsidy and the import tariff have the same effect. This analysis seems to contradict the first sentence in this paragraph. Discuss this paradox.

Accepted Answer

While this (Lerner) equivalence may well

Question 12

If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must

Accepted Answer

A)  have no effect on its terms of trade. 
B)  harm world terms of trade. 
C)  harm its terms of trade. 
D)  decrease its marginal propensity to consume. 
E)  improve its terms of trade. 
A)  have no effect on its terms of trade. 
B)  harm world terms of trade. 
C)  harm its terms of trade. 
D)  decrease its marginal propensity to consume. 
E)  improve its terms of trade.

Question 13

The intertemporal tradeoff between present and future consumption is measured by the

Accepted Answer

A)  nominal interest rate. 
B)  real interest rate. 
C)  terms of trade. 
D)  rate of economic growth. 
E)  inflation rate. 
A)  nominal interest rate. 
B)  real interest rate. 
C)  terms of trade. 
D)  rate of economic growth. 
E)  inflation rate.

Question 14

An increase in a country's net commodity terms of trade will

Accepted Answer

A)  not always guarantee positive changes in the country's economy. 
B)  always increase the country's economic welfare. 
C)  always increase the country's real income. 
D)  never increase the country's quantity of exports. 
E)  always increase the country's production of its import competing good. 
A)  not always guarantee positive changes in the country's economy. 
B)  always increase the country's economic welfare. 
C)  always increase the country's real income. 
D)  never increase the country's quantity of exports. 
E)  always increase the country's production of its import competing good.

Question 15

-Refer to above figure. Now, suppose that the relative price of A is actually not higher than Albania's autarkic level of 1, but quite the opposite . Would Albania still be able to gain from trade? If so, where would be its production point? Given the information in this question, where is Albania's comparative advantage?

Accepted Answer

Yes. As long as the world's terms of tra

Question 16

If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then

Accepted Answer

A)  the terms of trade of food exporters will improve. 
B)  the terms of trade of all countries will improve. 
C)  the terms of trade of cloth exporters will worsen. 
D)  all countries would be better off. 
E)  the terms of trade of cloth exporters will improve. 
A)  the terms of trade of food exporters will improve. 
B)  the terms of trade of all countries will improve. 
C)  the terms of trade of cloth exporters will worsen. 
D)  all countries would be better off. 
E)  the terms of trade of cloth exporters will improve.

Question 17

If points A and B are two locations on a country's production possibility frontier, then

Accepted Answer

A)  at any point in time, the country could produce both. 
B)  both bundles must have the same relative cost. 
C)  consumers are indifferent between the two bundles. 
D)  the country could produce either of the two bundles. 
E)  producers are indifferent between the two bundles. 
A)  at any point in time, the country could produce both. 
B)  both bundles must have the same relative cost. 
C)  consumers are indifferent between the two bundles. 
D)  the country could produce either of the two bundles. 
E)  producers are indifferent between the two bundles.

Question 18

Terms of trade refers to

Accepted Answer

A)  what goods are exported. 
B)  the volume of trade. 
C)  the relative price at which trade occurs. 
D)  the tariffs applied to trade. 
E)  what goods are imported. 
A)  what goods are exported. 
B)  the volume of trade. 
C)  the relative price at which trade occurs. 
D)  the tariffs applied to trade. 
E)  what goods are imported.

Question 19

Rapidly growing developing countries tend to be borrowers on the international capital markets. From this information we may surmise that they have a comparative advantage in

Accepted Answer

A)  capital goods. 
B)  future income. 
C)  consumer goods. 
D)  present income. 
E)  disposable income. 
A)  capital goods. 
B)  future income. 
C)  consumer goods. 
D)  present income. 
E)  disposable income.

Question 20

An export subsidy will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.

Accepted Answer

A)  imports; decrease; imports; increase 
B)  exports; increase; imports; decrease 
C)  exports; increase; exports; decrease 
D)  exports; decrease; exports; increase 
E)  imports; increase; imports; decrease 
A)  imports; decrease; imports; increase 
B)  exports; increase; imports; decrease 
C)  exports; increase; exports; decrease 
D)  exports; decrease; exports; increase 
E)  imports; increase; imports; decrease

Describe the nature of trade between two countries based on intertemporal comparative advantage.

An import tariff will cause the terms of trade of the country to and will the country.

If the U.S. (a large country) imposes a tariff on its imported good, this will tend to

-Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at , then moving to will cause utility to .

Suppose that a country experiences growth strongly biased toward its export, cloth,

If Slovenia is a large country in world trade, then if it imposes a large set of tariffs on many of its imports, this would

A country will be able to consume a combination of goods that is NOT attainable solely from domestic production if

Tastes of individuals are represented by

If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must

The intertemporal tradeoff between present and future consumption is measured by the

An increase in a country's net commodity terms of trade will

If the ratio of price of cloth (P_C) divided by the price of food (P_F) increases in the international marketplace, then

If points A and B are two locations on a country's production possibility frontier, then

Terms of trade refers to

Rapidly growing developing countries tend to be borrowers on the international capital markets. From this information we may surmise that they have a comparative advantage in

An export subsidy will cause the relative demand for to and the relative supply for to .

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 6: The Standard Trade Model

Describe the nature of trade between two countries based on intertemporal comparative advantage.

An import tariff will cause the terms of trade of the ________ country to ________ and will ________ the country.

If the U.S. (a large country) imposes a tariff on its imported good, this will tend to

-Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at ________, then moving to ________ will cause utility to ________.

Suppose that a country experiences growth strongly biased toward its export, cloth,

If Slovenia is a large country in world trade, then if it imposes a large set of tariffs on many of its imports, this would

A country will be able to consume a combination of goods that is NOT attainable solely from domestic production if

Tastes of individuals are represented by

If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must

The intertemporal tradeoff between present and future consumption is measured by the

An increase in a country's net commodity terms of trade will

If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then

If points A and B are two locations on a country's production possibility frontier, then

Terms of trade refers to

Rapidly growing developing countries tend to be borrowers on the international capital markets. From this information we may surmise that they have a comparative advantage in

An export subsidy will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

An import tariff will cause the terms of trade of the country to and will the country.

-Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at , then moving to will cause utility to .

If the ratio of price of cloth (P_C) divided by the price of food (P_F) increases in the international marketplace, then

An export subsidy will cause the relative demand for to and the relative supply for to .