Question 1

The terms of trade (ToT) refer to:

Accepted Answer

A)  the rate at which a country can exchange exports for imports in the world market. 
B)  the rate at which one country's currency exchanges for another country's currency. 
C)  the relative prices of goods in a country before it opens up to free trade. 
D)  the amount of labor used to produce exports as compared to the amount of labor that would have been used to produce the goods imported. 
A)  the rate at which a country can exchange exports for imports in the world market. 
B)  the rate at which one country's currency exchanges for another country's currency. 
C)  the relative prices of goods in a country before it opens up to free trade. 
D)  the amount of labor used to produce exports as compared to the amount of labor that would have been used to produce the goods imported. A

Question 2

In the two-sector learning-by-doing model of Grossman and Helpman (1990, 1991) with no technological transfers and international trade, countries with a comparative advantage in fast growing industries will:

Accepted Answer

A)  have permanently faster rates of growth than countries with a comparative advantage in slow growing industries. 
B)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear. 
C)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear and will become stagnant as technological transfers erodes profit margins of the fast growing industry/country. 
D)  None of the above. 
A)  have permanently faster rates of growth than countries with a comparative advantage in slow growing industries. 
B)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear. 
C)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear and will become stagnant as technological transfers erodes profit margins of the fast growing industry/country. 
D)  None of the above. A

Question 3

The Bastable Test of the infant industry argument for protection asks whether:

Accepted Answer

A)  the short-run losses are less than the long-run gains. 
B)  protection will actually help to build a profitable industry. 
C)  foreign governments will retaliate with even larger tariffs. 
D)  All of the above. 
E)  None of the above. 
A)  the short-run losses are less than the long-run gains. 
B)  protection will actually help to build a profitable industry. 
C)  foreign governments will retaliate with even larger tariffs. 
D)  All of the above. 
E)  None of the above. A

Question 4

Hymans and Stafford achieve their surprising result that a country that trades can suffer welfare losses because, in their two-country model, they assume that:

Accepted Answer

A)  the poor country discovers oil. 
B)  the rich country increases the size of its government too much. 
C)  the rich country stops investing altogether while the poor country increases investment. 
D)  the poor country steals technology from the rich country. 
A)  the poor country discovers oil. 
B)  the rich country increases the size of its government too much. 
C)  the rich country stops investing altogether while the poor country increases investment. 
D)  the poor country steals technology from the rich country.

Question 5

Hymans and Stafford (1995) present a model that illustrates how, under free trade, economic growth in a poor country can cause a decline in a rich country's welfare because:

Accepted Answer

A)  the poor and rich countries PPF curves and relative prices become increasingly similar. 
B)  the poor and rich countries PPF curves and relative prices become increasingly dissimilar. 
C)  the poor and rich countries compete for similar resources causing input prices to increase. 
D)  the poor and rich countries actually increase their trade when the terms of trade in the rich country improve. 
A)  the poor and rich countries PPF curves and relative prices become increasingly similar. 
B)  the poor and rich countries PPF curves and relative prices become increasingly dissimilar. 
C)  the poor and rich countries compete for similar resources causing input prices to increase. 
D)  the poor and rich countries actually increase their trade when the terms of trade in the rich country improve.

Question 6

One of the earliest proponents of infant industry protection was:

Accepted Answer

A)  Adam Smith. 
B)  Alexander Hamilton. 
C)  Alan Greenspan. 
D)  Paul Krugman. 
A)  Adam Smith. 
B)  Alexander Hamilton. 
C)  Alan Greenspan. 
D)  Paul Krugman.

Question 7

According to material presented in Chapter 7, which focuses on the sectoral models of the economy, protection from imports can be justified if it:

Accepted Answer

A)  shifts a country's comparative advantage to products that improve the terms of trade. 
B)  solicits retaliation from foreign governments. 
C)  favors traditional industries. 
D)  induces the government to favor the industries that innovated most in the past. 
A)  shifts a country's comparative advantage to products that improve the terms of trade. 
B)  solicits retaliation from foreign governments. 
C)  favors traditional industries. 
D)  induces the government to favor the industries that innovated most in the past.

Question 8

In the two-sector learning-by-doing model by Grossman and Helpman (1990) with technological transfers and international trade, countries with a comparative advantage in fast growing industries will:

Accepted Answer

A)  have permanently faster rates of growth than countries with a comparative advantage in slow growing industries. 
B)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear. 
C)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear and will become stagnant as technological transfers erodes profit margins of the fast growing industry/country. 
D)  None of the above. 
A)  have permanently faster rates of growth than countries with a comparative advantage in slow growing industries. 
B)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear. 
C)  have temporarily faster rates of growth than countries with a comparative advantage in slow growing industries, but the differences in growth rates will eventually disappear and will become stagnant as technological transfers erodes profit margins of the fast growing industry/country. 
D)  None of the above.

Question 9

The evidence suggests that import substitution policies caused:

Accepted Answer

A)  faster export, economic and total factor productivity growth. 
B)  faster export growth, but slower economic and total factor productivity growth. 
C)  slower export growth, but faster economic and total factor productivity growth. 
D)  slower export, economic and total factor productivity growth. 
A)  faster export, economic and total factor productivity growth. 
B)  faster export growth, but slower economic and total factor productivity growth. 
C)  slower export growth, but faster economic and total factor productivity growth. 
D)  slower export, economic and total factor productivity growth.

Question 10

The validity of the infant industry argument for protection depends on the following assumption, among others:

Accepted Answer

A)  The protected industry will eventually be the world's low cost producer. 
B)  There is no market failure that prevents private individuals from carrying out investments in industries that have good prospects of gaining a comparative advantage in the future. 
C)  The government has accurate information about future comparative advantage at home and abroad. 
D)  There is foreign retaliation. 
A)  The protected industry will eventually be the world's low cost producer. 
B)  There is no market failure that prevents private individuals from carrying out investments in industries that have good prospects of gaining a comparative advantage in the future. 
C)  The government has accurate information about future comparative advantage at home and abroad. 
D)  There is foreign retaliation.

Question 11

Engel's law refers to:

Accepted Answer

A)  a relationship between supply and income, which states that food
Supply will rise as income grows. 
B)  a relationship between demand and income, which states that the income elasticity of food is low. 
C)  a relationship between supply and income, which states that food supply will fall as income grows. 
D)  a relationship between demand and income, which states that the income elasticity of food is high. 
A)  a relationship between supply and income, which states that food
Supply will rise as income grows. 
B)  a relationship between demand and income, which states that the income elasticity of food is low. 
C)  a relationship between supply and income, which states that food supply will fall as income grows. 
D)  a relationship between demand and income, which states that the income elasticity of food is high.

Question 12

Among the criteria that the infant industry argument for temporary protection must meet are:

Accepted Answer

A)  The industry to be protected will never gain a comparative advantage. 
B)  The short run costs of protection are greater than the discounted future benefits from enabling the industry to survive. 
C)  There are no market failures that prevent private individuals from carrying out investments in industries that will become competitive in the future. 
D)  the government has accurate information about future comparative advantage at home and abroad, and it objectively acts on this information. 
A)  The industry to be protected will never gain a comparative advantage. 
B)  The short run costs of protection are greater than the discounted future benefits from enabling the industry to survive. 
C)  There are no market failures that prevent private individuals from carrying out investments in industries that will become competitive in the future. 
D)  the government has accurate information about future comparative advantage at home and abroad, and it objectively acts on this information.

Question 13

The term immizerizing growth applies to the case where:

Accepted Answer

A)  technological progress reduces the number of jobs and puts people out of work. 
B)  investment increases output but reduces national welfare. 
C)  trade restrictions push the economy back to its production possibilities frontier. 
D)  economic growth makes people feel miserable. 
A)  technological progress reduces the number of jobs and puts people out of work. 
B)  investment increases output but reduces national welfare. 
C)  trade restrictions push the economy back to its production possibilities frontier. 
D)  economic growth makes people feel miserable.

Question 14

Import substitution was popular during the 1950s and into the early 1980s. Which of the following economist/statesmen was known for his support of the import substitution argument?

Accepted Answer

A)  Alexander Hamilton. 
B)  Milton Friedman. 
C)  John Maynard Keynes. 
D)  Raúl Prebisch. 
A)  Alexander Hamilton. 
B)  Milton Friedman. 
C)  John Maynard Keynes. 
D)  Raúl Prebisch.

Question 15

Under certain circumstances, economic growth that increases an economy's capacity to export can trigger a worsening terms of trade that completely eliminates the welfare gains from the increased output and trade. This is called:

Accepted Answer

A)  the Porter-Linder hypothesis. 
B)  the combinatoric growth hypothesis. 
C)  the Heckscher-Ohlin hypothesis. 
D)  the immizerizing growth hypothesis. 
A)  the Porter-Linder hypothesis. 
B)  the combinatoric growth hypothesis. 
C)  the Heckscher-Ohlin hypothesis. 
D)  the immizerizing growth hypothesis.

Question 16

The criterion that an infant industry must eventually generate welfare gains that exceed the initial costs of protection, all properly discounted, is known as:

Accepted Answer

A)  the Bastable test. 
B)  the Smith test. 
C)  the Mill test. 
D)  the First test. 
A)  the Bastable test. 
B)  the Smith test. 
C)  the Mill test. 
D)  the First test.

Question 17

Among the criteria that the infant industry argument for temporary protection must meet are:

Accepted Answer

A)  The industry to be protected eventually becomes competitive and gains a comparative advantage. 
B)  The short run costs of protection are less than the discounted future benefits from enabling the industry to survive. 
C)  There is some market failure that prevents private individuals from carrying out investments in industries that will become competitive in the future. 
D)  All of the above. 
E)  None of the above. 
A)  The industry to be protected eventually becomes competitive and gains a comparative advantage. 
B)  The short run costs of protection are less than the discounted future benefits from enabling the industry to survive. 
C)  There is some market failure that prevents private individuals from carrying out investments in industries that will become competitive in the future. 
D)  All of the above. 
E)  None of the above.

The terms of trade (ToT) refer to:

In the two-sector learning-by-doing model of Grossman and Helpman (1990, 1991) with no technological transfers and international trade, countries with a comparative advantage in fast growing industries will:

The Bastable Test of the infant industry argument for protection asks whether:

Hymans and Stafford achieve their surprising result that a country that trades can suffer welfare losses because, in their two-country model, they assume that:

Hymans and Stafford (1995) present a model that illustrates how, under free trade, economic growth in a poor country can cause a decline in a rich country's welfare because:

One of the earliest proponents of infant industry protection was:

According to material presented in Chapter 7, which focuses on the sectoral models of the economy, protection from imports can be justified if it:

In the two-sector learning-by-doing model by Grossman and Helpman (1990) with technological transfers and international trade, countries with a comparative advantage in fast growing industries will:

The evidence suggests that import substitution policies caused:

The validity of the infant industry argument for protection depends on the following assumption, among others:

Engel's law refers to:

Among the criteria that the infant industry argument for temporary protection must meet are:

The term immizerizing growth applies to the case where:

Import substitution was popular during the 1950s and into the early 1980s. Which of the following economist/statesmen was known for his support of the import substitution argument?

Under certain circumstances, economic growth that increases an economy's capacity to export can trigger a worsening terms of trade that completely eliminates the welfare gains from the increased output and trade. This is called:

The criterion that an infant industry must eventually generate welfare gains that exceed the initial costs of protection, all properly discounted, is known as:

Among the criteria that the infant industry argument for temporary protection must meet are:

The Welfare Gains From Trade

Trade and Growth: the Empirical Evidence

International Trade and Factor Accumulation

Overcoming Diminishing Returns: Technology As an Externality

Technological Progress As Creative Destruction

International Trade and Technological Progress

International Trade and Technology Transfers

Restating the Case for Free Trade

Filters

Exam 7: Multi-Sector Models and International Trade

The terms of trade (ToT) refer to:

In the two-sector learning-by-doing model of Grossman and Helpman (1990, 1991) with no technological transfers and international trade, countries with a comparative advantage in fast growing industries will:

The Bastable Test of the infant industry argument for protection asks whether:

Hymans and Stafford achieve their surprising result that a country that trades can suffer welfare losses because, in their two-country model, they assume that:

Hymans and Stafford (1995) present a model that illustrates how, under free trade, economic growth in a poor country can cause a decline in a rich country's welfare because:

One of the earliest proponents of infant industry protection was:

According to material presented in Chapter 7, which focuses on the sectoral models of the economy, protection from imports can be justified if it:

In the two-sector learning-by-doing model by Grossman and Helpman (1990) with technological transfers and international trade, countries with a comparative advantage in fast growing industries will:

The evidence suggests that import substitution policies caused:

The validity of the infant industry argument for protection depends on the following assumption, among others:

Engel's law refers to:

Among the criteria that the infant industry argument for temporary protection must meet are:

The term immizerizing growth applies to the case where:

Import substitution was popular during the 1950s and into the early 1980s. Which of the following economist/statesmen was known for his support of the import substitution argument?

Under certain circumstances, economic growth that increases an economy's capacity to export can trigger a worsening terms of trade that completely eliminates the welfare gains from the increased output and trade. This is called:

The criterion that an infant industry must eventually generate welfare gains that exceed the initial costs of protection, all properly discounted, is known as:

Among the criteria that the infant industry argument for temporary protection must meet are:

The Welfare Gains From Trade

Trade and Growth: the Empirical Evidence

International Trade and Factor Accumulation

Overcoming Diminishing Returns: Technology As an Externality

Technological Progress As Creative Destruction

International Trade and Technological Progress

International Trade and Technology Transfers

Restating the Case for Free Trade

Filters