Section C Multiple Choice Questions

Question 1
"If the general level of prices in the United States increases relative to prices in Japan,"
  
the value of the dollar will likely appreciate relative to the yen.
   
not enough information is given.
 
  
the value of the dollar will likely depreciate relative to the yen.
  
the value of the dollar will likely remain constant relative to the yen.
 
Question 2
The optimal monopoly markup is
   
higher with less elastic demand for cartel sales
 
   
higher with more elastic demand for cartel sales
 
   
lower with less elastic demand for cartel sales
 
   
higher with more elastic supply schedules
 
 
Question 3
The characteristics of quotas and tariffs are described correctly by which of the following:
  
quotas assure a certain final price for imports better than a tariff does.
  
"tariffs assure a certain final price for imports, but not as surely as a quota does."
  
tariffs do not assure a certain limited quantity of imports as a quota does.
  
"quotas assure a certain limited quantity of imports, but not as well as a tariff does."
 
Question 4
"In the long run, countries with faster inflation have had"
   
appreciating currencies
 
  
"at some times and in some places, appreciating currencies, while at other times in other places, depreciating currencies."
   
no change in the value of their currencies
 
   
depreciating currencies
 
 
Question 5
Which of the following observations about a tariff is not true? A tariff:
   
can be used to protect foreign industries
 
  
usually benefits domestic producers more than consumers
 
   
is usually an ad valorem tax
 
   
can raise revenues for the imposing government
 
 
Question 6
An economic transaction is recorded in the balance of payments as a debit if it leads to
   
a payment to foreigners
 
   
neither an inflow or an outflow of value.
 
   
the receipt of payments from foreigners
 
   
an increase in foreign exchange reserves
 
 
Question 7
Which of the following is not recorded as a debit item in the U.S. balance-of-payments accounts?
  
the U.S. Treasury contributes $1 million to the United Nations Development Fund.
  
"a French firm sells 25-year bonds, valued at $100 million, in the United States"
  
U.S. grain company engages Russian ships to carry U.S. wheat to Russian ports.
  
a West German firm pays $3 million in interest to the holders of its bonds in the US.
 
Question 8
Which of the following is true with respect to the infant industry argument for protection?
  
It does not refer to temporary protection to establish a domestic industry.
  
"To be valid, the return to the grown-up industry need not be sufficiently high to repay for the higher prices paid by domestic consumers of the commodity during the infancy period."
  
It is inferior to an equivalent production subsidy to the infant industry.
   
None of the above.
 
 
Question 9
The nationally optimal tariff hopes to take advantage of the idea that
  
"you can charge optimal (minimal) tariffs and encourage good will from trade partners, leading to tariff-free exports for domestic producers and workers"
  
you can limit imports and extract low import prices from  foreign suppliers if you are a major world buyer
  
you can increase domestic producers well-being by keeping foreign competition minimal
  
you can gain optimal tariff revenues for public purposes by taxing foreign imports
 
Question 10
Intra industry trade is more likely to occur between
   
developing countries
 
   
rich and poor countries
 
   
developed and developing countries
 
   
countries with high and similar income levels
 
 
Question 11
The organization responsible for mediating trade disputes is the
   
The G-7 Countries.
 
   
International Monetary Fund.
 
   
World Bank.
 
   
World Trade Organization.
 
 
Question 12
An international cartel that maximizes its profits is optimal for
   
no country at all
 
   
the member countries but not the world
 
   
the member countries and the world
 
   
the consuming countries and the world
 
 
Question 13
"Wine costs $10, cloth costs fr 30 and the dollar exchange rate is fr 6.   The wine price in terms of cloth is:"
   
3 cloth
 
   
5 wine
 
   
2 cloth
 
   
3 wine
 
 
Question 14
Intervention at the source of a distortion in resource allocation problems and the use of policy tools closest to the sources of the distortions is called
   
public policy
 
   
benefit/cost analysis
 
   
resource allocation
 
   
the specificity rule
 
 
Question 15
The best and probably rarest way to allocate import licenses is
  
achieving equity by assigning fixed shares to firms according to the market shares they have previously enjoyed in the market in question.
  
inviting the countries or firms who want to sell the commodity in question to participate in a competitive auction to be held by the customs agency of the importing country for import licenses.
  
applying rational rather than arbitrary (bureaucratic) criteria to award import licenses on the basis of merit.
  
avoiding injustice and favoritism by granting the scarce and highly demanded licenses on a purely random basis (regarded as the lottery effect of license distribution).
 
Question 16
" When a country exports a commodity produced with intensive use of its abundant factor, that factor s returns will rise. This statement is"
   
The Leontief paradox
 
   
The Hecksher-Ohlin theory
 
   
the modern trade theory
 
   
the Stolper-Samuelson Theorem
 
 
Question 17
Countries export commodities produced through the intensive use of factors which they possess in abundance. Labor abundant countries export labor-intensive commodities and import capital-intensive commodities. This statement is
   
None of the above
 
   
Classical Smith/Ricardo trade theory
 
   
The Leontief paradox
 
   
the Stolper-Samuelson Theorem
 
 
Question 18
The best way to characterize monopolistic competition is
   
a product group with the same demand curve
 
   
a product group which perceives no interdependence
 
   
a product group of ten to fifteen firms
 
   
a product group of fifteen to twenty firms
 
 
Question 19
Economies of scale are more likely to occur in
   
the footwear industry
 
   
a small scale textile industry
 
   
the aircraft industry
 
   
small business
 
 
Question 20
In a monopolistic competition model of trade
  
factor endowments do not play any role in determining inter ind
  
if two countries have the same overall capital labor ratio there is no trade
  
there are gains from trade from an increased variety of goods and large firm scale
   
firms earn positive economic profits in the long run
 
 
Question 21
"In the Heckscher Ohlin model, international trade is based mostly on a difference in"
   
economies of scale
 
   
factor endowments
 
   
product differentiation
 
   
technology
 
 
Question 22
Intra-industry trade (IIT) is
   
two-way international trade in very similar products.
 
  
trade among the various firms of a single industry in one country.
  
the result of capital-intensive nations trading with labor-intensive nations.
  
the result of nations following their comparative advantage.
 
Question 23
Biased growth implies
  
the growing economy will have decreased willingness to trade
  
the growing economy will have increased willingness to trade
   
either b or c could be true.
 
   
trade patterns cannot change
 
 
Question 24
"According to modern ( alternative ) trade theory,"
  
"trade depends on scale economies, not consumer preferences"
  
historical quirks can lead to external economies which promote trade advantage
  
"trade depends on consumer preferences, not scale economies."
  
trade patterns are unrelated to the industrial or market structures (monopolistic competition or oligopoly) of traded goods.
 
Question 25
Ricardo explained the law of comparative advantage on the basis of
   
the labor theory of value
 
   
opportunity costs
 
   
economies of scale
 
   
the law of diminishing returns
 
 
Question 26
"In terms of international trade, a small nation is best described as one which"
   
is of limited geographical size
 
   
has small numbers of buyers and sellers
 
   
is land-locked nation without sea ports
 
   
doesn t have many sellers
 
 
Question 27
The nationally optimal tariff hopes to take advantage of the idea that
  
"you can charge optimal (minimal) tariffs and encourage good will from trade partners, leading to tariff-free exports for domestic producers and workers"
  
you can increase domestic producers well-being by keeping foreign competition minimal
  
you can limit imports and extract low import prices from  foreign suppliers if you are a major world buyer
  
you can gain optimal tariff revenues for public purposes by taxing foreign imports
 
Question 28
" When a country exports a commodity produced with intensive use of its abundant factor, that factor s returns will rise. This statement is"
   
The Leontief paradox
 
   
the Stolper-Samuelson Theorem
 
   
the modern trade theory
 
   
The Hecksher-Ohlin theory
 
 
Question 29
" In tests run in the late 1940s, it was discovered that the U.S. was actually exporting labor-intensive goods and importing capital-intensive goods. This statement is"
   
the Stolper-Samuelson Theorem
 
   
The Hecksher-Ohlin theory
 
   
The Leontief paradox
 
   
the modern trade theory
 
 
Question 30
Which of the following statements is correct?
   
Potential Real GDP is always greater than Equilibrium
 
  
Your buying stock in the stock market is an example of investment spending
   
Real GDP
 
  
Real GDP is the total market value of the final goods and services produced in America for sale in a year valued in the prices of 1992.
 
Question 31
The period of the business cycle in which real GDP is increasing is called the:
   
recession
 
   
trough
 
   
peak
 
   
expansion
 
 
Question 32
"Assume that, in the population, 95 million people worked for pay last week, 5 million people did not work for pay but had been seeking a job, 5 million people did not work for pay and had not been seeking a job for the past several months, and 45 million were under age 16.  The unemployment rate, given these numbers, is:"
   
5%
 
   
8%
 
   
10%
 
   
20%
 
 
Question 33
A type of unemployment in which workers are in-between jobs or are searching for new and better jobs is called _______ unemployment:
   
structural
 
   
frictional
 
   
cyclical
 
   
turnover
 
 
Question 34
"Consider three consumer goods: 100 of Good A, 100 of Good B, and 100 of Good C.  In the base year, Good A sold at a price of $1, Good B sold at a price of $1, and Good C sold at a price of $1.  In the current year, Good A sold at a price of $3, Good B sold at a price of $5, and Good C sold at a price of $10.  The Consumer Price Index (CPI) for the current year is:"
   
600
 
   
500
 
   
300
 
   
100
 
 
Question 35
"Which of the following is a ""loser"" from unexpected inflation?"
   
workers with COLAs
 
   
the middle class
 
   
people who own Treasury Bill
 
   
people who own homes and have fixed-rate mortgages
 
 
Question 36
"If the nominal interest rate on a checking account is 2% and the inflation rate is 3% this year, the real interest rate is:"
   
2/3%
 
   
5%
 
   
2%
 
   
1%
 
 
Question 37
Which of the following would cause the demand curve for automobiles to shift to the left?
  
an increase in the interest rate paid to borrow money to pay for the automobile
   
an increase in buyers' incomes
   
an increase in the cost of production of automobiles
 
   
an increase in the price of the automobiles
 
 
Question 38
"Suppose it is announced that industry analysts are predicting that decreased oil supplies from Iraq will cause gasoline prices to rise, beginning next month.  In the current week, the announcement would:"
   
shift the demand for gasoline right
 
   
shift the supply of gasoline right
 
   
have no effect on the demand or supply of gasoline
 
   
shift the demand for gasoline left
 
 
Question 39
"""At the price of $500, tickets for the Super Bowl are expensive.  Yet, the are long lines of people who wish to buy them.  Many people who desire tickets will not be able to find them."" From this quote, we know that the price of Super Bowl tickets must be:"
   
None of the above
 
   
above equilibrium
 
   
equal to equilibrium
 
   
below equilibrium
 
 
Question 40
"Assume that the market for computers begins in equilibrium.  Then, there is a decrease in a price of Pentium processors used in the production of computers.  When the new equilibrium is reached,"
  
the price of computers will have risen and the quantity will have fallen
  
the price and quantity of computers will both have fallen
 
  
the price of computers will have fallen and the quantity will have risen
  
the price and quantity of computers will both have risen