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IE Chapter 6

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Chapter 6

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Question 1

Question
The meaning of "terms of trade" is
Answer
  • the price of a country's exports divided by the price of its imports.
  • the amount of exports sold by a country.
  • the price conditions bargained for in international markets.
  • the quantities of imports received in free trade.
  • the tariffs in place between two trading countries.

Question 2

Question
A country cannot produce a mix of products with a higher value than where
Answer
  • the isovalue line is tangent to the production possibility frontier.
  • the isovalue line intersects the production possibility frontier.
  • the isovalue line is above the production possibility frontier.
  • the isovalue line is below the production possibility frontier.
  • the isovalue line is tangent with the indifference curve.

Question 3

Question
Tastes of individuals are represented by
Answer
  • indifference curves.
  • production possibility frontiers.
  • isovalue lines.
  • production functions.
  • the terms of trade.

Question 4

Question
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then
Answer
  • the terms of trade of cloth exporters will improve.
  • all countries would be better off.
  • the terms of trade of food exporters will improve.
  • the terms of trade of all countries will improve.
  • the terms of trade of cloth exporters will worsen.

Question 5

Question
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then
Answer
  • the cloth exporter will increase the quantity of cloth produced.
  • the cloth exporter will increase the quantity of cloth exported.
  • the food exporter will increase the quantity of food exported.
  • the cloth exporter will decrease the quantity of cloth exported.
  • the country would import more cloth.

Question 6

Question
If the ratio of price of cloth (PC) divided by the price of food (PF) increases in the international marketplace, then
Answer
  • world relative quantity of cloth supplied will increase.
  • world relative quantity of cloth supplied and demanded will increase.
  • world relative quantity of cloth supplied and demanded will decrease.
  • world relative quantity of cloth demanded will decrease.
  • world relative quantity of food will increase.

Question 7

Question
A country will be able to consume a combination of goods that is not attainable solely from domestic production if
Answer
  • the world terms of trade differ from its domestic relative costs.
  • the country specializes in one product.
  • the country avoids international trade.
  • the world terms of trade equal the domestic relative costs.
  • the country's domestic production value equals world relative value.

Question 8

Question
Terms of trade refers to
Answer
  • the relative price at which trade occurs.
  • what goods are imported.
  • what goods are exported.
  • the volume of trade.
  • the tariffs applied to trade.

Question 9

Question
If points A and B are two locations on a country's production possibility frontiers, then
Answer
  • the country could produce either of the two bundles.
  • consumers are indifferent between the two bundles.
  • producers are indifferent between the two bundles.
  • at any point in time, the country could produce both.
  • both bundles must have the same relative cost.

Question 10

Question
If the economy is producing at point a on its production possibility frontier, then
Answer
  • all of the country's workers are employed.
  • all of the country's workers are specialized in one product.
  • all of the country's capital is used for one product.
  • all of its capital is used, but not efficiently.
  • all of the country's exports are produced in equal amounts.

Question 11

Question
Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at ______________, then moving to ______________ will cause utility to ____________.
Image:
f1724021-324f-44c4-9f6d-09c2b24f760b (image/jpeg)
Answer
  • point b; point c; remain unchanged
  • point a; point b; increase
  • point c; point b; increase
  • point c; point b; decrease
  • point a; point c; remain unchanged

Question 12

Question
If two countries with diminishing returns and different marginal rates of substitution between two products were to engage in trade, then
Answer
  • the marginal rates of substitution of both would become equal.
  • the shapes of their respective production possibility frontiers would change.
  • the larger of the two countries would dominate their trade.
  • the country with relatively elastic supplies would export more.
  • the opportunity costs for the smaller country would increase.

Question 13

Question
If a country began exporting product A and importing product B, then, as compared to the autarky (no-trade) situation, the marginal cost of product A will
Answer
  • increase.
  • decrease.
  • shift outward.
  • shift inward.
  • remain the same.

Question 14

Question
When the production possibility frontier shifts out relatively more in one direction, we have
Answer
  • biased growth.
  • unbiased growth.
  • immiserizing growth.
  • balanced growth.
  • imbalanced growth.

Question 15

Question
Suppose that a country experiences growth strongly biased toward its export, cloth
Answer
  • this will tend to worsen the country's terms of trade.
  • this will tend to improve the country's terms of trade.
  • this will tend to leave the country's terms of trade unchanged.
  • this will tend to worsen the terms of trade for the country's trading partner.
  • this will increase the price of cloth relative to the imported good.

Question 16

Question
Suppose that a "small country" experiences growth strongly biased toward its export, cloth
Answer
  • this will have no effect on terms of trade for the country's trading partner.
  • this will tend to worsen the country's terms of trade.
  • this will tend to improve the country's terms of trade.
  • this will tend to worsen terms of trade for the country's trading partner.
  • this will tend to improve terms of trade for the country's trading partner.

Question 17

Question
Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at __________, then moving to ___________ will cause utility to ___________________.
Image:
67972805-12cd-4e3a-ac24-e7b437d6d9e1 (image/jpeg)
Answer
  • point c; point b; remain unchanged
  • point a; point b; increase
  • point c; point b; increase
  • point c; point b; decrease
  • point a; point c; remain unchanged

Question 18

Question
Refer to the figure above, which shows a country's possible production possibility frontiers and indifference curves. If the country is producing at __________, then moving to ___________ will cause utility to ___________________.
Image:
77964a98-d04b-4b8d-9167-1e7946001467 (image/jpeg)
Answer
  • point b; point a; increase
  • point a; point b; increase
  • point c; point b; increase
  • point c; point b; decrease
  • point a; point c; remain unchanged

Question 19

Question
If the U.S. (a large country) imposes a tariff on its imported good, this will tend to
Answer
  • improve the terms of trade of the United States.
  • have no effect on terms of trade.
  • improve the terms of trade of all countries.
  • cause a deterioration of U.S. terms of trade.
  • raise the world price of the good imported by the United States.

Question 20

Question
If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs on many of its imports, this would
Answer
  • have no effect on its terms of trade.
  • improve its terms of trade.
  • deteriorate its terms of trade.
  • decrease its marginal propensity to consume.
  • increase its exports.

Question 21

Question
If Slovenia is a large country in world trade, then if it imposes a large set of tariffs on many of its imports, this would
Answer
  • improve its terms of trade.
  • have no effect on its terms of trade.
  • harm its terms of trade.
  • decrease its marginal propensity to consume.
  • increase its exports.

Question 22

Question
If Slovenia were a large country in world trade, then if it imposes a large set of tariffs on its imports, this must
Answer
  • decrease the internal price of imports below the world market rate.
  • cause retaliation on the part of its trade partners.
  • harm Slovenia's real income.
  • improve Slovenia's real income.
  • improve the real income of its trade partners.

Question 23

Question
If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must
Answer
  • harm its terms of trade.
  • have no effect on its terms of trade.
  • improve its terms of trade.
  • decrease its marginal propensity to consume.
  • harm world terms of trade.

Question 24

Question
If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must
Answer
  • improve the real income of its trade partners.
  • cause retaliation on the part of its trade partners.
  • harm Slovenia's real income.
  • improve Slovenia's real income.
  • increase internal prices above the world market rate.

Question 25

Question
If a small country were to levy a tariff on its imports then this would
Answer
  • decrease the country's economic welfare.
  • have no effect on that country's economic welfare.
  • increase the country's economic welfare.
  • change the terms of trade.
  • raise prices on its exports in other countries.

Question 26

Question
An increase in a country's net commodity terms of trade will
Answer
  • not always guarantee positive changes in the country's economy.
  • always increase the country's economic welfare.
  • always increase the country's real income.
  • never increase the country's quantity of exports.
  • always increase the country's production of its import competing good.

Question 27

Question
An import tariff will cause the relative demand for ____________ to ________________ and the relative supply for _______________ to ________________.
Answer
  • imports; decrease; imports; increase
  • imports; increase; imports; decrease
  • exports; increase; exports; decrease
  • exports; decrease; exports; increase
  • exports; increase; imports; decrease

Question 28

Question
An export subsidy will cause the relative demand for _______________ to ________________ and the relative supply for ______________ to ______________.
Answer
  • exports; decrease; exports; increase
  • imports; decrease; imports; increase
  • imports; increase; imports; decrease
  • exports; increase; exports; decrease
  • exports; increase; imports; decrease

Question 29

Question
An import tariff will cause the terms of trade of the _______________ country to ______________ and will _______________ the country.
Answer
  • importing; improve; benefit
  • exporting; improve; benefit
  • importing; suffer; harm
  • exporting; improve; harm
  • importing; improve; harm

Question 30

Question
An export subsidy will cause the terms of trade of the ____________ country to ____________ and will ______________ the country.
Answer
  • exporting; suffer; harm
  • exporting; improve; benefit
  • importing; suffer; harm
  • importing; suffer; benefit
  • importing; improve; harm

Question 31

Question
International borrowing and lending may be interpreted as one form of
Answer
  • intertemporal trade.
  • intermediate trade.
  • trade in services.
  • unrequited international transfers.
  • aid to offset trade advantages.

Question 32

Question
If one observes that Japan was traditionally a net foreign lender, one could conclude that relative to its international trade and financial partners
Answer
  • Japan's intertemporal production possibilities are biased toward present consumption.
  • Japan's intertemporal production possibilities are biased toward future consumption.
  • Japan's intertemporal production possibilities are larger than that of the other countries.
  • Japan's intertemporal production possibilities are not biased.
  • Japan preferred to consume beyond its production in the present.

Question 33

Question
Rapidly growing developing countries tend to be borrowers on the international capital markets. From this information we may surmise that they have a comparative advantage in
Answer
  • future income.
  • capital goods.
  • disposable income.
  • consumer goods.
  • present income.

Question 34

Question
It may be argued that theoretically, international capital movements
Answer
  • tend to hurt labor in donor countries.
  • tend to hurt the donor countries.
  • tend to hurt the recipient countries.
  • tend to hurt labor in recipient countries.
  • increase future production in donor countries.

Question 35

Question
The intertemporal tradeoff between present and future consumption is measured by the
Answer
  • real interest rate.
  • inflation rate.
  • nominal interest rate.
  • terms of trade.
  • rate of economic growth.

Question 36

Question
A fall in the real interest rate, all other things held constant, will cause a country's ___________ to ______________.
Answer
  • current consumption; increase
  • current consumption: decrease
  • terms of trade; improve
  • terms of trade; worsen
  • welfare level; improve

Question 37

Question
An increase in the real interest rate, all other things held constant, will cause a country's ____________ to _______________.
Answer
  • current consumption: increase
  • current consumption; decrease
  • terms of trade; improve
  • terms of trade; worsen
  • welfare level; improve

Question 38

Question
The price of _____________ consumption in terms of _________________ consumption is ____________________.
Answer
  • future; current; 1/(1+r)
  • present; future; 1/(1 + r)
  • future; current; r
  • present; future; r
  • future; current; 1 + r

Question 39

Question
The intertemporal budget constraint is defined as:
Answer
  • DP + DF/(1+r) = QP + QF/(1+r)
  • V = QP + QF/(1 + r)
  • V = DP + DF/(1 + r)
  • DF + DP/(1 + r) = QF + QP/(1 + r)
  • DP + DF(1 + r) = QP + QF(1 + r)
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