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国际经济学选择题题库(有答案)

国际经济学选择题题库(有答案)
国际经济学选择题题库(有答案)

Multiple-Choice Questions Ch.2

1.The Mercantilists did not advocate: a

a. free trade

b. stimulating the nation's exports

c. restricting the nations' imports

d. the accumulation of gold by the nation

2.According to Adam Smith, international trade was based on: a

a. absolute advantage

b. comparative advantage

c. both absolute and comparative advantage

d. neither absolute nor comparative advantage

3.What proportion of international trade is based on absolute advantage? c.

a. All

b. most

c. some

d. none

4.The commodity in which the nation has the smallest absolute disadvantage is the commodity of its: d

a. absolute disadvantage

b. absolute advantage

c. comparative disadvantage

d. comparative advantage

5.If in a two-nation (A and B), two-commodity (X and Y) world, it is established that nation d

A has a comparative advantage in commodity X, then nation

B must have:

a. an absolute advantage in commodity Y

b. an absolute disadvantage in commodity Y

c. a comparative disadvantage in commodity Y

d. a comparative advantage in commodity Y

6.If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input): c

a. nation A has a comparative disadvantage in commodity X

b. nation B has a comparative disadvantage in commodity Y

c. nation A has a comparative advantage in commodity X

d. nation A has a comparative advantage in neither commodity

7. With reference to the statement in Question 6: d

a. Px/Py=1 in nation A

b. Px/Py=3 in nation B

c. Py/Px=1/3 in nation B

d. all of the above

8. With reference to the statement in Question 6, if 3X is exchanged for 3Y: .b

a. nation A gains 2X

b. nation B gains 6Y

c. nation A gains 3Y

d. nation B gains 3Y

9.With reference to the statement of Question 6, the range of mutually beneficial trade

between nation A and B is: .c

a. 3Y < 3X < 5Y

b. 5Y < 3X < 9Y

c. 3Y < 3X < 9Y

d. 1Y < 3X < 3Y

10. If domestically 3X=3Y in nation A, while 1X=1Y domestically in nation B:d..

a. there will be no trade between the two nations

b. the relative price of X is the same in both nations

c. the relative price of Y is the same in both nations

d. all of the above

11. Ricardo explained the law of comparative advantage on the basis of: a.

a. the labor theory of value

b. the opportunity cost theory

c. the law of diminishing returns

d. all of the above

12. Which of the following statements is true? d.

a. The combined demand for each commodity by the two nations is negatively sloped

b. the combined supply for each commodity by the two nations is rising stepwise

c.the equilibrium relative commodity price for each commodity with trade is given by

the

intersection of the demand and supply of each commodity by the two nations

d. all of the above

13. A difference in relative commodity prices between two nations can be based upon a

difference in: d.

a. factor endowments

b. technology

c. tastes

d. all of the above

14. In the trade between a small and a large nation:b

a. the large nation is likely to receive all of the gains from trade

b. the small nation is likely to receive all of the gains from trade

c. the gains from trade are likely to be equally shared

d. we cannot say

15. The Ricardian trade model has been empirically a.

a. verified

b. rejected

c. not tested

d. tested but the results were inconclusive

Multiple-Choice Questions Ch.3

1. A production frontier that is concave from the origin indicates that the nation incurs

increasing opportunity costs in the production of:

a. commodity X only

b. commodity Y only

c. both commodities

d. neither commodity

2. The marginal rate of transformation (MRT) of X for Y refers to:

a. the amount of Y that a nation must give up to produce each additional unit of X

b. the opportunity cost of X

c. the absolute slope of the production frontier at the point of production

d. all of the above

3. Which of the following is not a reason for increasing opportunity costs:

a. technology differs among nations

b. factors of production are not homogeneous

c. factors of production are not used in the same fixed proportion in the production

of all

commodities

d. for the nation to produce more of a commodity, it must use resources that are less and

less suited in the production of the commodity

4. Community indifference curves:

a. are negatively sloped

b. are convex to the origin

c. should not cross

d. all of the above

5. The marginal rate of substitution (MRS) of X for Y in consumption refers to the:

a.amount of X that a nation must give up for one extra unit of Y and still remain on

the

same indifference curve

b. amount of Y that a nation must give up for one extra unit of X and still remain on the

same indifference curve

c.amount of X that a nation must give up for one extra unit of Y to reach a higher

indifference curve

d.amount of Y that a nation must give up for one extra unit of X to reach a higher

indifference curve

6. Which of the following statements is true with respect to the MRS of X for Y?

a. It is given by the absolute slope of the indifference curve

b. declines as the nation moves down an indifference curve

c. rises as the nation moves up an indifference curve

d. all of the above

7. Which of the following statements about community indifference curves is true?

a. They are entirely unrelated to individuals' community indifference curves

b. they cross, they cannot be used in the analysis

c. the problems arising from intersecting community indifference curves can be

overcome by the application of the compensation principle

d. all of the abov

e.

8. Which of the following is not true for a nation that is in equilibrium in isolation?

a. It consumes inside its production frontier

b. it reaches the highest indifference curve possible with its production frontier

c. the indifference curve is tangent to the nation's production frontier

d. MRT of X for Y equals MRS of X for Y, and they are equal to Px/Py

9. If the internal Px/Py is lower in nation 1 than in nation 2 without trade:

a. nation 1 has a comparative advantage in commodity Y

b. nation 2 has a comparative advantage in commodity X

c. nation 2 has a comparative advantage in commodity Y

d. none of the above

10. Nation 1's share of the gains from trade will be greater:

a. the greater is nation 1's demand for nation 2's exports

b. the closer Px/Py with trade settles to nation 2's pretrade Px/Py

c. the weaker is nation 2's demand for nation 1's exports

d. the closer Px/Py with trade settles to nation 1's pretrade Px/Py

11. If Px/Py exceeds the equilibrium relative Px/Py with trade

a. the nation exporting commodity X will want to export more of X than at equilibrium

b. the nation importing commodity X will want to import less of X than at equilibrium

c. Px/Py will fall toward the equilibrium Px/Py

d. all of the above

12. With free trade under increasing costs:

a. neither nation will specialize completely in production

b. at least one nation will consume above its production frontier

c. a small nation will always gain from trade

d. all of the above

13. Which of the following statements is false?

a.The gains from trade can be broken down into the gains from exchange and the

gains

from specialization

b. gains from exchange result even without specialization

c. gains from specialization result even without exchange

d. none of the above

14. The gains from exchange with respect to the gains from specialization are always:

a. greater

b. smaller

c. equal

d. we cannot say without additional information

15. Mutually beneficial trade cannot occur if production frontiers are:

a. equal but tastes are not

b. different but tastes are the same

c. different and tastes are also different

d. the same and tastes are also the sam

e.

Multiple Choice Questions Ch.4

1. Which of the following statements is correct?

a. The demand for imports is given by the excess demand for the commodity

b. the supply of exports is given by the excess supply of the commodity

c. the supply curve of exports is flatter than the total supply curve of the commodity

d. all of the above

2. At a relative commodity price above equilibrium

a. the excess demand for a commodity exceeds the excess supply of the commodity

b. the quantity demanded of imports exceeds the quantity supplied of exports

c. the commodity price will fall

d. all of the above

3. The offer curve of a nation shows:

a. the supply of a nation's imports

b. the demand for a nation's exports

c. the trade partner's demand for imports and supply of exports

d. the nation's demand for imports and supply of exports

4. The offer curve of a nation bulges toward the axis measuring the nation's

a. import commodity

b. export commodity

c. export or import commodity

d. nontraded commodity

5. Export prices must rise for a nation to increase its exports because the nation:

a. incurs increasing opportunity costs in export production

b. faces decreasing opportunity costs in producing import substitutes

c. faces decreasing marginal rate of substitution in consumption

d. all of the above

6. Which of the following statements regarding partial equilibrium analysis is false?

a. It relies on traditional demand and supply curves

b. it isolates for study one market

c. it can be used to determine the equilibrium relative commodity price but not the

equilibrium quantity with trade

d. none of the above

7. Which of the following statements regarding partial equilibrium analysis is true?

a.The demand and supply curves are derived from the nation's production frontier and

indifference map

b. It shows the same basic information as offer curves

c. It shows the same equilibrium relative commodity prices as with offer curves

d. all of the above

8. In what way does partial equilibrium analysis differ from general equilibrium analysis?

a. The former but not the latter can be used to determine the equilibrium price with trade

b.the former but not the latter can be used to determine the equilibrium quantity with

trade

c.the former but not the latter takes into consideration the interaction among all

markets

in the economy

d. the former gives only an approximation to the answer sought.

9. If the terms of trade of a nation are 1.5 in a two-nation world, those of the trade partner are:

a. 3/4

b. 2/3

c. 3/2

d. 4/3

10. If the terms of trade increase in a two-nation world, those of the trade partner:

a. deteriorate

b. improve

c. remain unchanged

d. any of the above

11. If a nation does not affect world prices by its trading, its offer curve:

a. is a straight line

b. bulges toward the axis measuring the import commodity

c. intersects the straight-line segment of the world's offer curve

d. intersects the positively-sloped portion of the world's offer curve

12. If the nation's tastes for its import commodity increases:

a. the nation's offer curve rotates toward the axis measuring its import commodity

b. the partner's offer curve rotates toward the axis measuring its import commodity

c. the partner's offer curve rotates toward the axis measuring its export commodity

d. the nation's offer curve rotates toward the axis measuring its export commodity

13. If the nation's tastes for its import commodity increases:

a. the nation's terms of trade remain unchanged

b. the nation's terms of trade deteriorate

c. the partner's terms of trade deteriorate

d. any of the above

14. If the tastes for a nation import commodity increases, trade volume:

a. increases

b. declines

c. remains unchanged

d. any of the above

15. A deterioration of a nation's terms of trade causes the nation's welfare to:

a. deteriorate

b. improve

c. remain unchanged

d. any of the above

Multiple-Choice Questions ch.5

1. The H-O model extends the classical trade model by:

a. explaining the basis for comparative advantage

b. examining the effect of trade on factor prices

c. both a and b

d. neither a nor b

2. Which is not an assumption of the H-O model

a. the same technology in both nations

b. constant returns to scale

c. complete specialization

d. equal tastes in both nations

3. With equal technology nations will have equal K/L in production if:

a. factor prices are the same

b. tastes are the same

c. production functions are the same

d. all of the above

4. We say that commodity Y is K-intensive with respect to X when:

a. more K is used in the production of Y than X

b. less L is used in the production of Y than X

c. a lower L/K ratio is used in the production of Y than X

d. a higher K/L is used in the production of X than Y

5. When w/r falls, L/K

a. falls in the production of both commodities

b. rises in the production of both commodities

c. can rise or fall

d. is not affected

6. A nation is said to have a relative abundance of K if it has a:

a. greater absolute amount of K

b. smaller absolute amount of L

c. higher L/K ratio

d. lower r/w

7. A difference in relative commodity prices between nations can be based on a difference in:

a. technology

b. factor endowments

c. tastes

d. all of the above

8. In the H-O model, international trade is based mostly on a difference in:

a. technology

b. factor endowments

c. economies of scale

d. tastes

9. According to the H-O-S model, trade reduces international differences in:

a. relative but not absolute factor prices

b. absolute but not relative factor prices

c. both relative and absolute factor prices

d. neither relative nor absolute factor prices

10. According to the H-O-S model, international trade will:

a. reduce international differences in per capita incomes

b. increases international differences in per capita incomes

c. may increase or reduce international differences in per capita incomes

d. lead to complete specialization

11. The H-O model is a general equilibrium model because it deals with:

a. production in both nations

b. consumption in both nations

c. trade between the two nations

d. all of the above

12. The H-O model is a simplification of the a truly general equilibrium model

because it deals with:

a. two nations

b. two commodities

c. two factors of production

d. all of the above

13. The Leontief paradox refers to the empirical finding that U.S.

a. import substitutes are more K-intensive than exports

b. imports are more K-intensive than exports

c. exports are more L-intensive than imports

d. exports are more K-intensive than import substitutes

14. From empirical studies, we conclude that the H-O theory:

a. must be rejected

b. must be accepted without reservations

c. can be accepted while awaiting further testing

d. explains all international trade

15. For factor reversal to occur, two commodities must be produced with:

a. sufficiently different elasticity of substitution of factors

b. the same K/L ratio

c. technologically-fixed factor proportions

d. equal elasticity of substitution of factors

Multiple-Choice Questions Ch. 6:

1. Relaxing the assumptions on which the Heckscher-Ohlin theory rests:

a. leads to rejection of the theory

b. leaves the theory unaffected

c. requires complementary trade theories

d. any of the abov

e.

1.Which of the following assumptions of the Heckscher-Ohlin theory, when relaxed,

leave

the theory unaffected?

a. Two nations, two commodities, and two factors

b. both nations use the same technology

c. the same commodity is L-intensive in both nations

d. all of the above

2.Which of the following assumptions of the Heckscher-Ohlin theory, when relaxed,

require new trade theories?

a. Economies of scale

b. incomplete specialization

c. similar tastes in both nations

d. the existence of transportation costs

3.International trade can be based on economies of scale even if both nations have

identical:

a. factor endowments

b. tastes

c. technology

d. all of the above

5. A great deal of international trade:

a. is intra-industry trade

b. involves differentiated products

c. is based on monopolistic competition

d. all of the above

6. The Heckscher-Ohlin and new trade theories explains most of the trade:

a. among industrial countries

b. between developed and developing countries

c. in industrial goods

d. all of the above

4.The theory that a nation exports those products for which a large domestic market exists

was advanced by:

a. Linder

b. Vernon

c. Leontief

d. Ohlin

8. Intra-industry trade takes place:

a. because products are homogeneous

b. in order to take advantage of economies of scale

c. because perfect competition is the prevalent form of market organization

d. all of the above

1.If a nation exports twice as much of a differentiated product that it imports, its intra-

industry (T) index is equal to:

a. 1.00

b. 0.75

c. 0.666

d. 0.25

10. Trade based on technological gaps is closely related to:

a. the H-O theory

b. the product-cycle theory

c. Linder's theory

d. all of the above

11. Which of the following statements is true with regard to the product-cycle theory?

a. It depends on differences in technological changes over time among countries

b. it depends on the opening and the closing of technological gaps among countries

c. it postulates that industrial countries export more advanced products to less

advanced countries

d. all of the above

12. Transport costs:

a. increase the price in the importing country

b. reduces the price in the exporting country

c. both of the above

d. neither a nor b.

13. Transport costs can be analyzed:

a. with demand and supply curves

b. production frontiers

c. offer curves

d. all of the above

14. The share of transport costs will fall less heavily on the nation:

a. with the more elastic demand and supply of the traded commodity

b. with the less elastic demand and supply of the traded commodity

c. exporting agricultural products

d. with the largest domestic market

15. A footloose industry is one in which the product:

a. gains weight in processing

b. loses weight in processing

c. both of the above

d. neither a nor b.

Multiple-choice Questions Ch.8

1. Which of the following statements is incorrect?

a.An ad valorem tariff is expressed as a percentage of the value of the traded

commodity

b. a specific tariff is expressed as a fixed sum of the value of the traded commodity.

c. export tariffs are prohibited by the U.S. Constitution

d. The U.S. uses exclusively the specific tariff

2. A small nation is one:

a. which does not affect world price by its trading

b. which faces an infinitely elastic world supply curve for its import commodity

b.whose consumers will pay a price that exceeds the world price by the amount of

the

tariff

d. all of the above

3. If a small nation increases the tariff on its import commodity, its:

a. consumption of the commodity increases

b. production of the commodity decreases

c. imports of the commodity increase

d. none of the above

4.The increase in producer surplus when a small nation imposes a tariff is measured by

the

area:

a. to the left of the supply curve between the commodity price with and without the

tariff

b. under the supply curve between the quantity produced with and without the tariff

c. under the demand curve between the commodity price with and without the tariff

d. none of the abov

e.

5. If a small nation increases the tariff on its import commodity:

a. the rent of domestic producers of the commodity increases

b. the protection cost of the tariff decreases

c. the deadweight loss decreases

d. all of the above

6. Which of the following statements is incorrect with respect to the rate of effective

protection?

a. for given values of ai and ti, g is larger the greater is t

b. for a given value of t and ti, g is larger the greater is a i

c. g exceeds, is equal to or is smaller than t, as t i is smaller than, is equal to or is

larger than t

d. when a i t i exceeds t, the rate of effective protection is positive

7. With a i=50%, t i=0, and t=20%, g is:

a. 40%

b. 20%

c. 80%

d. 0

8. The imposition of an import tariff by a small nation:

a. increases the relative price of the import commodity for domestic producers and

consumers

b.reduces the relative price of the import commodity for domestic producers and

consumers

c. increases the relative price of the import commodity for the nation as a whole

d. any of the above is possible

9. The imposition of an import tariff by a small nation:

a. increases the nation's welfare

b. reduces the nation's welfare

c. leaves the nation's welfare unchanged

d. any of the above is possible

10. According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation:

a. increases the real return of the nation's abundant factor

b. increases the real return of the nation's scarce factor

c. reduces the real return of the nation's scarce factor

d. any of the above is possible

11. The imposition of an import tariff by a nation results in:

a. an increase in relative price of the nation's import commodity

b. an increase in the nation's production of its importable commodity

c. reduces the real return of the nation's abundant factor

d. all of the above

12. The imposition of an import tariff by a nation can be represented by a rotation of the:

a. nation's offer curve away from the axis measuring the commodity of its comparative

advantage

b.the nation's offer curve toward the axis measuring the commodity of its

comparative

advantage

c.the other nation's offer curve toward the axis measuring the commodity of its

comparative advantage

d.the other nation's offer curve away from the axis measuring the commodity of its

comparative advantage

13. The imposition of an import tariff by a large nation:

a. increases the nation's terms of trade

b. reduces the volume of trade

c. may increase or reduce the nation's welfare

d. all of the above

14. The imposition of an optimum tariff by a large nation:

a. improves its terms of trade

b. reduces the volume of trade

c. increases the nation's welfare

d. all of the above

15. The optimum tariff for a small nation is:

a. 100%

b. 50%

c. 0

d. depends on elasticities

Multiple-choice Questions Ch. 9:

1. An import quota:

a. increases the domestic price of the imported commodity

b. reduces domestic consumption

c. increases domestic production

d. all of the above

2. An increase in the demand of the imported commodity subject to a given import quota:

a. reduces the domestic quantity demanded of the commodity

b. increases the domestic production of the commodity

c. reduces the domestic price of the commodity

d. reduces the producers' surplus

3. Adjustment to any shift in the domestic demand or supply of an importable commodity

occurs:

a. in domestic price with an import quota

b. in the quantity of imports with a tariff

c. through the market mechanism with an import tariff but not with an import quota

d. all of the above

4. An international cartel refers to:

a. dumping

b. an organization of exporters

c. an international commodity agreement

d. voluntary export restraints

5. The temporary sale of a commodity at below cost or at a lower price abroad in order to

drive foreign producers out of business is called:

a. predatory dumping

b. sporadic dumping

c. continuous dumping

d. voluntary export restraints

6. The type of dumping which would justify antidumping measures by the country subject

to the dumping is:

a. predatory dumping

b. sporadic dumping

c. continuous dumping

d. all of the above

7. A fallacious argument for protection is:

a. the infant industry argument

b. protection for national defense

c. the scientific tariff

d. to correct domestic distortions

8. Which of the following is true with respect to the infant-industry argument for protection:

a. it refers to temporary protection to establish a domestic industry

b.to be valid, the return to the grown-up industry must be sufficiently high also to

repay

for the higher prices paid by domestic consumers of the commodity during the infancy

period

c. is inferior to an equivalent production subsidy to the infant industry

d. all of the above

9. Which of the following is false with respect to strategic trade policy?

a. it postulates that a nation can gain by an activist trade policy

b. it is practiced to some extent by most industrial nations

c. it can easily be carried out

d. all of the above

10. Industrial policy refers to:

a.an activist policy by the government of an industrial country to stimulate the

development of an industry

b.the granting of a subsidy to a domestic industry to stimulate the development of

an

industry

c. the granting of a subsidy to a domestic industry to counter a foreign subsidy

d. all of the above

11. Game theory refers to:

a. a method of choosing the optimal strategy in conflict situations

b. the granting of a subsidy to correct a domestic distortion

c. the theory of tariff protection

d. none of the above

12. Trade protection in the United States is usually provided to:

a. low-wage workers

b. well-organized industries with large employment

c. industries producing consumer products

d. all of the above

13. The most-favored-nation principle refers to:

a. extension to all trade partners of any reciprocal tariff reduction negotiated by the

U.S. with any of its trade partners

b. multilateral trade negotiation

c. the General Agreement on Tariffs and Trade

d. the International Trade Organization

14. On which of the following principles does GATT rest?

a. nondiscrimination

b. elimination of nontariff barriers

c. consultation among nations in solving trade disputes

d. all of the above

15. Which of the following was not negotiated under the Uruguay Round?

a. reduction of tariffs on industrial goods

b. replacement of quotas with tariffs

c. reduction of subsidies on industrial products and on agricultural exports

d. liberalization in trade in most services

Multiple-choice Questions for Ch. 13

1. Which of the following is false?

a. A credit transaction leads to a payment from foreigners

b. A debit transaction leads to a payment to foreigners

c. A credit transaction is entered with a negative sign

d. Double-entry bookkeeping refers to each transaction entered twic

e.

2. Which of the following is a debit?

a. The export of goods

b. The export of services

c. Unilateral transfers given to foreigners

d. Capital inflows

3. Capital inflows:

a. refer to an increase in foreign assets in the nation

b. refer to a reduction in the nation's assets abroad

c. lead to a payment from foreigners

d. all of the above

4. When a U.S. firm imports goods to be paid in three months the U.S. credits:

a. the current account

b. unilateral transfers

c. capital

d. official reserves

5.The receipt of an interest payment on a loan made by a U.S. commercial bank to a

foreign

resident is entered in the U.S. balance of payments as a:

a. credit in the capital account

b. credit in the current account

c. credit in official reserves

d. debit in unilateral transfers

6. The payment of a dividend by an American company to a foreign stockholder represents:

a. a debit in the U.S. capital account

b. a credit in the U.S. capital account

c. a credit in the U.S. official reserve account

d. a debit in the U.S. current account

7 .When a U.S. firm imports a good from England a pays for it by drawing on its pound

sterling balances in a London Bank, the U.S. debits its current account and credits its:

a. official reserve account

b. unilateral transfers account

c. services in its current account

d. capital account

8. When the U.S. ships food aid to a developing nation, the U.S. debits:

a. unilateral transfers

b. services

c. capital

d. official reserves

9. When the resident of a foreign nation (1) sells a U.S. stock and (2) deposits the proceeds in

a U.S. bank, the U.S.:

a. credits capital for (1) and debits capital for (2)

b. credits the current account and debits capital

c. debits capital and credits official reserves

d. debits capital for (1) and credits capital for (2)

1.When a U.S. resident (1) purchases a foreign treasury bill and pays by (2) drawing

down his

bank balances abroad:

a. debits short-term capital and credits official reserves

b. debits capital for (1) and credits capital for (2)

c. debits official reserves and credits capital

d. credits short-term capital and debits official reserves

11. From the U.S. point of view, drawing on (reducing) foreign bank balances in a New York

bank represents a:

a. capital inflow

b. capital outflow

c. outflow of official reserves

d. debit in the current account

11. Which is not an official reserve asset of the U.S.?

a. U.S. holdings of Special Drawing Rights

b. The U.S. reserve position in the International Monetary Fund

c. Foreign official holdings of U.S. dollars

d. Official holdings of foreign currencies by U.S. monetary authorities

13. The capital account of the U.S. includes:

a. the change in U.S. assets abroad and foreign assets in the U.S.

b. the change in U.S. assets abroad and foreign assets in the U.S., other than official

reserve assets

c. all financial assets

d. all but current account transactions

14. Accommodating items are:

a. transactions in official reserve assets

b. the items below the line

c. needed to balance international transactions

d. all of the above

15. Which of the following is false?

a. a net debit balance in the current and capital accounts measures the surplus in the

nation's balance of payments

b. a balance of payments deficit must be settled by a net credit in the official reserve

account

b.a deficit in the balance of payments can be measured by the excess of credits over

debits in the official reserve account

d. a net debit balance in the official reserve account refers to a surplus

Multiple-choice Questions for Ch. 14

1. Which is not a function of the foreign exchange market?

a. to transfer funds from one nation to another

b. to finance trade

c. to diversify risks

d. to provide the facilities for hedging

2. An increase in the pound price of the dollar represents:

a. an appreciation of the dollar

b. a depreciation of the dollar

c. an appreciation of the pound

d. a devaluation of the dollar

3. A change from $1=£1 to $2=£1 represents

a. depreciation of the dollar

b. an appreciation of the dollar

c. a depreciation of the pound

d. none of the above

4. A shortage of pounds under a flexible exchange rate system results in:

a. a depreciation of the pound

b. a depreciation of the dollar

c. an appreciation of the dollar

d. no change in the exchange rate

5. An effective exchange rate is a:

a. spot rate

b. forward rate

c. flexible exchange rates

d. weighted average of the exchange rates between the domestic currency and the

nation's most important trade partners

6. The exchange rate is kept within narrow limits in different monetary centers by:

a. hedging

b. exchange arbitrage

c. interest arbitrage

d. speculation

7. If SR=$2/£1 and the three-month FR=$1.98/£1:

a. the pound is at a three-month forward discount of 1%

b. the pound is at a forward discount of 1% per year

c. the pound is at a three-month forward premium of 1%

d. the dollar is at a three-month forward discount of 1%

8. Hedging refers to:

a. the acceptance of a foreign exchange risk

b. the covering of a foreign exchange risk

c. foreign exchange speculation

d. foreign exchange arbitrage

9. A U.S. importer scheduled to make a payment of £100,000 in three months can hedge

his foreign exchange risk by:

a. purchasing $100,000 in the forward market for delivery in three months

b. selling £100,000 in the spot market for delivery in three months

c. purchasing £100,000 in the forward market for delivery in three months

d. selling £100,000 in the spot market for delivery in three months

10. If the three-month FR=$2/£1 and a speculator anticipates that SR=$2.03/£1 in three

months, he can earn a profit by:

a. selling pounds forward

b. purchasing pounds forward

c. selling dollars forward

d. purchasing dollars forward

11. Destabilizing speculation refers to the:

a. sale of the foreign currency when the exchange rate falls or is low

b. purchase of the foreign currency when the exchange rate falls or is low

c. sale of the foreign currency when the exchange rate rises or is high

d. all of the above

1. A capital outflow from New York to London under covered interest arbitrage can take

place

if the interest differential in favor of London is:

a. smaller than the forward discount on the pound

b. equal to the forward discount on the pound

c. larger than the forward discount on the pound

d. none of the abov

e.

2.According to the theory of covered interest arbitrage, if the interest differential in favor

of

the foreign country exceeds the forward discount on the foreign currency, there will be a:

a. capital inflow under covered interest arbitrage

b. capital outflow under covered interest arbitrage

c. no capital flow under a covered interest arbitrage

d. any of the above

3.When the interest differential in favor of the foreign country is equal to the forward

premium on the foreign currency, we:

a. are at covered interest arbitrage parity

b. are not at covered interest arbitrage parity

c. may or may not be at covered interest arbitrage parity

d. we cannot say without additional information

15. The currency of the nation with the lower interest rate is usually at a

a. forward premium

b. forward discount

c. covered interest arbitrage parity

d. any of the above

Multiple-choice Questions for Ch. 15

1. Which is correct with respect to the absolute PPP theory?

a.It postulates that the exchange rate between two currencies is equal to the ratio of

the

price levels in the two nations

b.it does not take into consideration transportation costs or other obstructions to the

flow

of international trade

c. can be very misleading

d. all of the above

2. The relative purchasing power-parity theory postulates that:

a. The equilibrium exchange rate is equal to the ratio of the price level in the two nations

b. the change in the exchange rate over a period of time should be proportional to the

relative change in the price level in the two nations over the same time period

c.the change in the exchange rate over a period of time should be proportional to

the

absolute change in the price level in the two nations over the same time period

d.the exchange rate at a period of time should be proportional to the relative prices

in

the two nations

3. The relative PPP theory gives better results:

a. in the long run than in the short run

b. when structural changes take place

c. the greater is the level of commodity aggregation

d. in tests including developed and developing countries

4. The monetary approach to the balance of payments:

a. views the balance of payments as an essentially monetary phenomenon

b. rests on the purchasing power-parity theory

c. postulates that money plays the crucial role in the long run both as a disturbance

and

adjustment in the nation's balance of payments

d. all of the above

5. If a nation's money GDP is 100 and the velocity of circulation of money is 4, the quantity

demanded of money in the nation is:

a. 20

b. 25

c. 50

d. 100

6. The monetary base of the nation refers to the:

a.domestic credit created by the nation's monetary authorities or the domestic assets

backing of the nation's money supply

b. international reserves of the nation

c. domestic credit created by the nation's monetary authorities or the domestic assets

backing of the nation's money supply plus the international reserves of the nation

d. legal reserve requirements in the nation

7. If the legal reserve requirement of the nation is 25%, the money multiplier in the nation is:

a. 2

b. 4

c. 5

d. 6

5.According to the monetary approach to the balance of payments, a deficit in the nation's

balance of payments results from:

a. an excess in the nation's stock of money supply that is not eliminated or corrected by

the nation's monetary authorities

b.an excess in the stock of money demanded in the nation that is not satisfied by

domestic

monetary authorities

c.an excess in the stock of money demanded in the other nation that is not satisfied

by the

other nation's monetary authorities

d. an excess of imports over exports in the nation

6.If the increase in a nation's money supply grows less rapidly than its GNP, the nation

will face a:

a. once-and-for-all balance of payments deficit

b. once-and-for-all balance of payments surplus

c. continuous balance of payments deficit

d. continuous balance of payments surplus

7.According to the monetary approach to the balance of payments a non-reserve

currency

nation:

a. has no control over its money supply in the long-run under fixed exchange rates

b. has no control over its money supply in the short-run under fixed exchange rates

c. has no control over its money supply in the long-run under flexible exchange

rates

d. retains complete control over its money supply in the long-run

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