Q Which of the following is true about PPP theory?
A The theory explains that the change in the exchange rate between two currencies is proportional to the change in the ratio in the two countries' general price levels
Q A nation's currency will appreciate if the nation's economy experiences which of the following?
A Economic growth
Q Trade cannot be an engine of growth for today's developing nations because:
A all of the listed choices
Q The foreign exchange market is:
A the framework for the exchange of one national currency for another
Q Which are is not an advantage of export-oriented industrialization?
A domestic industries grow accustomed to protection and have an incentive to become more efficient
Q Suppose that apples from Japan face a 15% tariff in Germany and a 20% tariff in Italy, while Germany and Italy maintain free trade between each other. Germany and Italy are therefore part of a(n):
A Free trade area
Q For most developing countries:
A agricultural goods and raw material tend to make up much of domestic output.
Q Compare the different types of economic integration, which of the following represents the loosest form of economic integration?
A Preferential trade arrangement
Q With free trade, the supply curve faced by a small importing country will be:
A upward sloping
Q A dynamic welfare gain resulting from the formation of a customs union would be:
A trade creation
Q Assume in base year 1990, the index for the volume of exports is equal to 100, and we find that, for the 2004 fiscal year, the US price index for exports has fallen 6 percent, the price index for imports has risen by 9 percent, and the index for the volume of exports is 108 for 2004. What is the value of the U.S. income terms of trade?
A The income terms of trade is I = [P(X)/P(M)]Q(X). Thus, after the change, the new scaled ratio is [94/109]108 = 93.1
Q Immizerising growth refers to a:
A a decrease in the welfare of a nation with growth
Q ____________ are balance of payments transactions involving payments to foreigners.
A Debit transactions
Q Which of the following is an example of a capital inflow for the US?
A A domestic increase of assets held by foreign investors
Q Which of the following is not included in the current account?
A Currently produced goods and services
Q If the sport rate for Euro is $1.32/€ and the 90 day forward rate is $1.44/€ then the forward rate carries how much forward premium or discount?
A Formula: [(Forward rate - spot rate)/spot rate] x (360/number of days in the contract) x 100
(1.44-1.32)/1.32X(360/90)X100
36.36% premium
Q A nation's currency will depreciate if the nation itself experiences which of the following?
A Economic growth
Q If Nation B is the source of all of Nation A's imports, then a customs union between Nations A and B will:
A Be trade creating.
Q An exchange rate is defined as:
A the domestic currency price of the foreign currency
Q Trade creation will ________________ for the domestic country.
A increase welfare
RESULTS: 75%
A The theory explains that the change in the exchange rate between two currencies is proportional to the change in the ratio in the two countries' general price levels
Q A nation's currency will appreciate if the nation's economy experiences which of the following?
A Economic growth
Q Trade cannot be an engine of growth for today's developing nations because:
A all of the listed choices
Q The foreign exchange market is:
A the framework for the exchange of one national currency for another
Q Which are is not an advantage of export-oriented industrialization?
A domestic industries grow accustomed to protection and have an incentive to become more efficient
Q Suppose that apples from Japan face a 15% tariff in Germany and a 20% tariff in Italy, while Germany and Italy maintain free trade between each other. Germany and Italy are therefore part of a(n):
A Free trade area
Q For most developing countries:
A agricultural goods and raw material tend to make up much of domestic output.
Q Compare the different types of economic integration, which of the following represents the loosest form of economic integration?
A Preferential trade arrangement
Q With free trade, the supply curve faced by a small importing country will be:
A upward sloping
Q A dynamic welfare gain resulting from the formation of a customs union would be:
A trade creation
Q Assume in base year 1990, the index for the volume of exports is equal to 100, and we find that, for the 2004 fiscal year, the US price index for exports has fallen 6 percent, the price index for imports has risen by 9 percent, and the index for the volume of exports is 108 for 2004. What is the value of the U.S. income terms of trade?
A The income terms of trade is I = [P(X)/P(M)]Q(X). Thus, after the change, the new scaled ratio is [94/109]108 = 93.1
Q Immizerising growth refers to a:
A a decrease in the welfare of a nation with growth
Q ____________ are balance of payments transactions involving payments to foreigners.
A Debit transactions
Q Which of the following is an example of a capital inflow for the US?
A A domestic increase of assets held by foreign investors
Q Which of the following is not included in the current account?
A Currently produced goods and services
Q If the sport rate for Euro is $1.32/€ and the 90 day forward rate is $1.44/€ then the forward rate carries how much forward premium or discount?
A Formula: [(Forward rate - spot rate)/spot rate] x (360/number of days in the contract) x 100
(1.44-1.32)/1.32X(360/90)X100
36.36% premium
Q A nation's currency will depreciate if the nation itself experiences which of the following?
A Economic growth
Q If Nation B is the source of all of Nation A's imports, then a customs union between Nations A and B will:
A Be trade creating.
Q An exchange rate is defined as:
A the domestic currency price of the foreign currency
Q Trade creation will ________________ for the domestic country.
A increase welfare
RESULTS: 75%
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