Old Exams

Question 1

What is GATT

Answer 1

An international agreement governing trade

Question 2

The gravity model implies that trade between countries will be proportional to their gdp

Answer 2

True

Question 3

In unit labor cost a lower number is associated with advantage

Answer 3

True

Question 4

In the Ricardian model comparative advantage is gained by relative labor productivity

Answer 4

True

Question 5

If the value of both products in the specific factor model decreases who loses and who gains

Answer 5

No one

Question 6

If price increases in the specific factor model the production possibility fronteir expands

Answer 6

False, prices dont effect possibilities

Question 7

In the heckscher ohlin model a country abundant in labor will export labor intensive goods

Answer 7

True

Question 8

In the heckscher ohlin model when there is equalibrium a capital rich country charges less for capital intensive goods

Answer 8

False, it charges the world markwt price

Question 9

If the cloth/food increases both supply and demand will increase

Answer 9

No just supply, demand has already increased

Question 10

If a large country subsidizes exports it will deteriorate terms if trade

Answer 10

True

Question 11

If ptoduction increases per unit costs decreases if there are internal economies of scale not external

Answer 11

False

Question 12

When making horizontal FDI what matters are trade costs

Answer 12

True

Question 13

When making vertical FDI desicions what matters is production costs

Answer 13

True

Question 14

Efficiency los is becouse if an inefficient use of a countries resources

Answer 14

True

Question 15

Subsidizing exports will effect producer, consumer, government and agregate how

Answer 15

Producer surplus up, vonsumer surplus down, gov finance down and agregate down

Question 16

If a country is a netvexporter of a good it looses if a rival subsidizes that good

Answer 16

True

Question 17

If a country is a net state importer of a good it gains from foreign subsidies of that good

Answer 17

True

Question 18

How has the infant industry argument been used historically

Answer 18

That poor countries have comparative advantages in manufacturing

Question 19

In the brander spencer model what creates returns greater than the actual subsidy

Answer 19

That foreign competitors are scared off

Question 20

In the 1990s there was an anti globalization movement, who did they think globalization was bad for

Answer 20

Factory workers everywhere

Question 21

If the same jeans cost 60$ and 30£ what is the darra/pund exchange rate

Answer 21

2

Question 22

If € rent is constant as well as expectations $ rent increase will lead to a $ appreciation

Answer 22

True

Question 23

If money supply increases what happens to exchange rate and interest

Answer 23

Interest falls and exchange rate depreciates

Question 24

Increased demand for foreign goods leads to long term depreciation of domestic currency

Answer 24

True

Question 25

London was the financial center durring the gold standard 1870-1914

Answer 25

True

Question 26

Trade is harmful if there are salary differences between the trade partners

Answer 26

Generally false

Question 27

What share of goods and services are exports globally

Answer 27

30%

Question 28

The rickardian model gains countries if they export what they have a comparative advantage in

Answer 28

True

Question 29

If the production possibility fronteir is a straight line the opportunity cost is constant

Answer 29

True

Question 30

What would happen to the number of people employed in the cloth sector if the price of cloth increases in the specific factor model

Answer 30

More people are employed

Question 31

If the hecksher ohlin model is in equilibrium relative prices for a good are different globally

Answer 31

False, they are the same, no matter the factor endowment

Question 32

In the standard model if production is on the production possibility fronteir there is full employment

Answer 32

True

Question 33

If there are two countries producing a good characterised by internal economies of scale trade will lead one to overtake the other all else equal

Answer 33

True

Question 34

If there is monopolistic competition more companies force a lower price

Answer 34

True

Question 35

What are specific tariffs

Answer 35

Import taxes of a specific sum per unit

Question 36

What is the characteristics of an optimal tariff

Answer 36

A small one made by a large country

Question 37

The infant industry argument was a pillar stone of import substitution policies

Answer 37

True

Question 38

The Brander spencer model identifies matket failures by what

Answer 38

Imperfect competition

Question 39

What is the $ cost of a 50 pound jacket if the exchange rate is 1.25

Answer 39

62.5

Question 40

If interests are constant increased expectations of interest leads to a present appreciation in exchange rate

Answer 40

True

Question 41

If gdp increases what happens to the demand for money

Answer 41

It also increases

Question 42

Increased productivity leads to a longterm depreciation while the same is true if the same happens abroad

Answer 42

False, opposite abroad, it is relative

Question 43

How does an increase in real income effect aggregate demand

Answer 43

Y increases and so does YD and then IM increases which decreases CA but AD still increases. Why did they go into current account?

Question 44

With what variables does the DD model show when the goods market is in equalibrium

Answer 44

Production and exchange rate

Question 45

How do you best describe a balance of payment crisis

Answer 45

Huge changes in foreign reserves caused by speculations about future exchange rates

Question 46

What is internal equalibrium (balance)

Answer 46

Full employment and stable prices

Question 47

Name the three alternatives in the monetary trilemma

Answer 47

Monetary policy, exchange rate stability and free trade

Question 48

If a vountry is linked to another with goods and factor mobility will a vommon currency lead to an efficiency gain

Answer 48

Yea

Question 49

Who has enforced trade rules since 1994

Answer 49

Wto

Question 50

The gravity model of trade explains why sweden trades more with Germany than spain

Answer 50

True

Question 51

What factor does the rickardian model attibutes trade to

Answer 51

Labor productivity

Question 52

Sallaries are constant in the specific factor modeling

Answer 52

True

Question 53

What does the hecksher ohlin model hold constant

Answer 53

Tecknology aka productivity

Question 54

When a country has a relative lack of land what happens when that vountry opens up to trade

Answer 54

Land intensive goods become cheaper

Question 55

A country can produce no less than when the isovalue line tangents the production possibility fronteir

Answer 55

False

Question 56

If a large country imposes a small tariff on an imported goods what will happen

Answer 56

Improved terms if trade

Question 57

The market supply curve slopes down when there is economies of scale

Answer 57

True

Question 58

If trade costs are high and there are internal economies of scale will a company want to do horizontal fdi

Answer 58

Yes, not on external though

Question 59

What does terms of trade gain need to be greater than to validate a tariff

Answer 59

The efficiency loss (both consumers and producers lose)

Question 60

Profits might increase for national firms if tariff

Answer 60

True

Question 61

Will the optimal tariff be realistic in reality

Answer 61

No becouse others will answer in kind

Question 62

What is the argument to subsidize high tech companies

Answer 62

The problem of appropriation matket failure as these are seen as producing positive externalities

Question 63

What is the formula gor interest parity

Answer 63

R = Rf + (Ee-E)/E

Question 64

In ling term a minetary expansion leads to a depreciation of exchange rate

Answer 64

Yes

Question 65

What happens to the dd curve and output when fiscal stimulus

Answer 65

Dd curve to right and output increase

Question 66

What is it called when the government decides to appreciate the exchange rate

Answer 66

Revaluation

Question 67

Monetary policy is not effective with a fixed exchange rate

Answer 67

True