Question 1

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

Question 2

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

Accepted Answer

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

Question 3

If two countries with diminishing returns and different marginal rates of substitution between two products were to engage in trade, then

Accepted Answer

A)  the marginal rates of substitution of both would become equal. 
B)  the shapes of their respective production possibility frontiers would change. 
C)  the larger of the two countries would dominate their trade. 
D)  the country with relatively elastic supplies would export more. 
E)  the opportunity costs for the smaller country would increase. 
A)  the marginal rates of substitution of both would become equal. 
B)  the shapes of their respective production possibility frontiers would change. 
C)  the larger of the two countries would dominate their trade. 
D)  the country with relatively elastic supplies would export more. 
E)  the opportunity costs for the smaller country would increase. A

Question 4

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 5

An export subsidy will cause the terms of trade of the ________ country to ________ and will ________ the country.

Accepted Answer

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

Question 6

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

Accepted Answer

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

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

Question 8

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

Accepted Answer

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

Question 9

Other things being equal, a rise in a country's terms of trade increases its welfare. What would happen if we relax the ceteris paribus assumption, and allow for the law of demand to operate internationally?

Accepted Answer

Let us assume that the terms of trade (o

Question 10

-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 (e.g., PA/PB = 0.5). 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 11

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

Accepted Answer

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

Question 12

When the production possibility frontier shifts out relatively more in one direction, we have

Accepted Answer

A)  biased growth. 
B)  unbiased growth. 
C)  immiserizing growth. 
D)  balanced growth. 
E)  imbalanced growth. 
A)  biased growth. 
B)  unbiased growth. 
C)  immiserizing growth. 
D)  balanced growth. 
E)  imbalanced growth.

Question 13

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

Question 14

-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 c; remain unchanged 
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 c; remain unchanged 
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 15

If a small country were to levy a tariff on its imports then this would

Accepted Answer

A)  decrease the country's economic welfare. 
B)  have no effect on that country's economic welfare. 
C)  increase the country's economic welfare. 
D)  change the terms of trade. 
E)  raise prices on its exports in other countries. 
A)  decrease the country's economic welfare. 
B)  have no effect on that country's economic welfare. 
C)  increase the country's economic welfare. 
D)  change the terms of trade. 
E)  raise prices on its exports in other countries.

Question 16

-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 17

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

Accepted Answer

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

Question 18

-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 19

The price of ________ consumption in terms of ________ consumption is ________.

Accepted Answer

A)  future; current; 1/(1 + r) 
B)  present; future; 1/(1 + r) 
C)  future; current; r 
D)  present; future; r 
E)  future; current; 1 + r 
A)  future; current; 1/(1 + r) 
B)  present; future; 1/(1 + r) 
C)  future; current; r 
D)  present; future; r 
E)  future; current; 1 + r

Question 20

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

Accepted Answer

A)  world relative quantity of cloth supplied will increase. 
B)  world relative quantity of cloth supplied and demanded will increase. 
C)  world relative quantity of cloth supplied and demanded will decrease. 
D)  world relative quantity of cloth demanded will decrease. 
E)  world relative quantity of food will increase. 
A)  world relative quantity of cloth supplied will increase. 
B)  world relative quantity of cloth supplied and demanded will increase. 
C)  world relative quantity of cloth supplied and demanded will decrease. 
D)  world relative quantity of cloth demanded will decrease. 
E)  world relative quantity of food will increase.

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

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

If two countries with diminishing returns and different marginal rates of substitution between two products were to engage in trade, then

An export subsidy will cause the terms of trade of the country to and will the country.

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

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

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

Other things being equal, a rise in a country's terms of trade increases its welfare. What would happen if we relax the ceteris paribus assumption, and allow for the law of demand to operate internationally?

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

When the production possibility frontier shifts out relatively more in one direction, we have

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

-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 a small country were to levy a tariff on its imports then this would

-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,

The price of consumption in terms of consumption is .

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

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

Optimum Currency Areas and the European Experience

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 6: The Standard Trade Model

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

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

If two countries with diminishing returns and different marginal rates of substitution between two products were to engage in trade, then

An export subsidy will cause the terms of trade of the ________ country to ________ and will ________ the country.

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

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

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

Other things being equal, a rise in a country's terms of trade increases its welfare. What would happen if we relax the ceteris paribus assumption, and allow for the law of demand to operate internationally?

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

When the production possibility frontier shifts out relatively more in one direction, we have

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

-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 a small country were to levy a tariff on its imports then this would

-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,

The price of ________ consumption in terms of ________ consumption is ________.

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

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

Optimum Currency Areas and the European Experience

Financial Globalization: Opportunity and Crisis

Developing Countries: Growth, Crisis, and Reform

Filters

An export subsidy will cause the terms of trade of the country to and will the country.

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

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

-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 .

-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 .

The price of consumption in terms of consumption is .

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