Question # 1

Trade based on comparative advantage assures that.

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Only the strongest suvrive

Some people are rich and others are poor

Each item is produced using the least amount of time needed to produce it

Each item is produced at as low a cost possible in terms of other things given up

All of the following are debit items in the balance of payment eexcept.

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Capital outflows

merchandise exports

Private gifts to foreigners

Foreign and granted to other nations

__________ 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 theory of overlapping demands predicts that trade in manufactured goods is unimportant for countries with very different.

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Tastes and preferenes

Expectations of future interest rate levels

Per capita income levels

Labor productivities

Credit (+) items in the balance of payments correspond to anything that.

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Involves receipts from foreigners

Involves payments to foreigners

Increases the domestic money supply

Decrease the demand for foreign exchange

Debit (-) items in the balance of payments correspond to anything that.

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Involve receipts from foreigners

Involves payments to foreigners

Increase the domestic money supply

Decrease the demand for foreign exchange

A current account surplus implies that

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The country is a net lender to the rest of the world

The country is running a net capital account surplus

Foreign investment in domestic securities is at very low levels

All of the above

When all of the debit or credit items in the balance of payments are combined

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Merchandise imports equal merchandise exports

Capital imports equal capital exports

Services exports equal service imports

the total surplus or deficit equals zero

The comparative advantage model of Ricardo was based on.

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Interindustry specialization and trade

Demand conditions underlying specialization and trade

Income conditions underlying specialization and trade

If export's are a constant proportion of GNP such that E = 18 GNP, find the level of imports that would represent a zero trade balance when GNP = 10,000

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180

555

1,800

5,555

Current account deficits are offset by

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Merchandise trade deficits

Merchandise trade surpluses

Capital /financial account surpluses

Capital /financial account deficits

The least common type of transaction in the foreign exchanges is a.

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Forward transaction

Spot transaction

Swap transaction

None of the above

The asset market approach is most helpful in explaining.

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Why exchange rate remain quite stable

Why government change their money supplies

Long term exchange rate movements

Short term exchange rate movements

A sudden shift from import tariffs to free trade may induce short term unemployment in.

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