Question # 1

_____________ represent the most widely used tool in international finance for measuring the average value of a currency relative to a number of other currencies

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Nominal exchange rates

Real exchange rates

Cross exchange rates

Exchange rate indexes

The _____ analyzes the income distribution effects of trade in the short run when resources are immobile among industries.

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Stolpher Samuelson theory

Factor endowment theory.

Specific factor theory

Over lapping demand theory

That the division of labor is limited by the size of th market best applies to which explanation of trade.

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Factor endowment theory

Product like cycle theory

Economics of scale theory

Over lapping demand theory

A product will be traded only if the pre trade price difference between the two countries

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Is less than the cost of transporting it between them

is greater than the cost of transporting it between them

Equals the cost of transporting it between them

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If the home country government grants a subsidy on a domestically produced good domestic producers lend to.

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Capture the entire subsidy in the form of higher profits

Increases their level of production

Reduce wages paid to domestic workers

Consider the subsidy as an increase in production cost

Among the institutions and polices that have been created to support developing countries are.

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the World bank

The international Monetary Fund

The Generalized system of Preferences

All of the above

The trade model of the Swedish economists Hackscher and Ohlin maintains that.

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Absolute advantage determines the distribution of the gain from trade

Comparative advantage determines the distribution of the gains from trade.

The division of labor is limited by the size of the world market

A country exports goods for which its resource endowment are most suited.

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.

In the classical model of Ricardo the direction of trade is determined by

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Absolute advantage

Comparative advantage

Physical advantage

Which way the wind blows

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

When one country provides most favored nation status for another if agrees to.

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Change that nation's product a lower tariff than any other nations

Charge that nation's products a tariff rate no higher than that on any other nation.

Charge that nation's products a higher tariff than any other nation's

Export to that nation any products that it wants to purchase

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 tariff that prohibits imports has only

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a revenue effect and redistribution effect

Revenue effect and protection effect

Consumption effect and protection effect

Redistribution effect and consumption effect

When the price of foreign currency the exchange is above the equilibrium level.

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an excess supply of that currency exists in the foreign exchange market.

an excess demand for that currency exists in the foreign exchange market

The supply of foreign exchange shifts outward to the right

the supply of foreign exchange shifts backward to the left

International trade forces domestic firms to become more completive in terms of.

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The introduction of new products

Product design and quality

Product price

All of the above

The reduction or covering of foreign exchange risk is called.

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Hedging

Speculation

Intervention

Arbitrage

Debit entries on the balance of payments are the entries that would.

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Mean a loss of foreign exchange

Bring foreign exchange into the country

Indicate a surplus exists

Exist at the bottom line a after all accounts are totaled.

Which trade theory contends that a country that initially develops and exports a new product may eventually become an importer of it and may no lorger manufacture the product.

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Theory of factor endearments

Theory of overlapping demands

Economies of scale theory

Product life cycle theory.

The institutional framework developed in 1974 to promote trade liberalization is known as.

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WTO

GATT

IMF

World bank

Tariff levels in advanced countries tend to be ___ tariff levels in developing countries.

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Higher than

Equal to

Lower than

There is no general pattern

When imports from a higher cost supplier with in customs union replace imports from a lower cost supplier outside the custom union, there exists.

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Trade creation

Trade diversion

Dynamic welfare effects

Comprehensive welfare efffects

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