Question # 1

Riskless transactions to take advantage of profit opportunities due to a price differential or a yield differtial in excess of transaction costs are called.

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Differential actions

Cash transactions

Arbitrage

Forward transactions

Exchange rate overshooting often occur because.

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Domestic prices adjust slowly to shifts in demand

Military spending increases during military's confects

Elasticities are smaller in the long run than the short run

Elasticities are smaller in the short run than the long run.

The supply of foreign currency tends to be

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Upward sloping

Down ward sloping

Vertical

Any of the above

A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a given time period is referred to as a

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Domestic subsidy

Export subsidy

Import quota

Export quota

Prohibiting a trade between two people

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Will promote economic efficiency

Probably Will inhibit productive efficiency

Might be necessary if resources are to be put to their most highly valued uses

Will have no effect on other persons.

Which exchange rate mechanism calls for frequent redefining of the par value by small amounts to remove payments disequilibrium.

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Dual exchange rates

Adjustable pegged exchange rates

Managed floating exchange rates

Crawling pegged exchange rates.

A _________ is a regional trading block in which member countries eliminate intercanal trade barriers but maintain existing barriers against countries that are not members.

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Free trade area

Customs union

Common market

Monetary union

A tax of 17 percent per imported item would be an example of a

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Ad valorem tariff

Specific tariff

effective tariff

Compound tariff

In today world most countries impose tariffs

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Only on imports

Only on exports

On both imports and exports

On imports exports and nontrade goods

International trade is based on the idea that

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Exports should exceed imports

Imports should exceed exports

Resources are more mobile internationally than are goods

Resources are less mobile internationally than are goods

A country that is a net international debtor initially experiences a.

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Larger savings pool available finance domestic spending

Higher interest rate which leads lower domestic investment.

Loss of funds to trading partners overseas

Decrease in tis services exports to other countire.

The current account includes

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The value of trade in merchandise

Services

Unilateral transfers

All of the above

Small nations whose trade and financial relationships are mainly with a single partner tend to utilize.

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Pegged exchange rates

Freely floating exchanged rates

Managed floating exchange rates

Crewing exchange rates.

A country transactions with the rest of the world are recorded in the

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Balance of international indebtedness

Balance of financial transactions

Balance of payments

Income statement

According to the factor price equalization theorem, the ______ factor should oppose free trade policies in any given country.

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Abundant

scarce

Neither

Can't tell without more information

__________ is a said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries infavor of member countries.

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Trade creation

Trade diversion

Trade exclusion

Trade distortion

The balance of trade can only worsen if income________ relative to absorption

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Increases

Decreases

Adjustment mechanism

Currency contract period

currency speculation is__________ if speculators bet against market forces that cause exchange fluctuations, thus moderating such fluctuations.

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Destabilizing

Stabilizing

Inflationary

Deflationary

Comparative advantage is determined by

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Actual difference in labor productivity between countries.

Relative difference in labor productivity between countries.

Both a and b

Neither a nor b

Should international transpiration costs decrease, the effect on international trade would include a.

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Increase in the volume of trade

smaller gain from trade

Decline in the income of home producers

Decrease in the level of specialization production.

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