Old Exams Flashcards
What is GATT
An international agreement governing trade
The gravity model implies that trade between countries will be proportional to their gdp
True
In unit labor cost a lower number is associated with advantage
True
In the Ricardian model comparative advantage is gained by relative labor productivity
True
If the value of both products in the specific factor model decreases who loses and who gains
No one
If price increases in the specific factor model the production possibility fronteir expands
False, prices dont effect possibilities
In the heckscher ohlin model a country abundant in labor will export labor intensive goods
True
In the heckscher ohlin model when there is equalibrium a capital rich country charges less for capital intensive goods
False, it charges the world markwt price
If the cloth/food increases both supply and demand will increase
No just supply, demand has already increased
If a large country subsidizes exports it will deteriorate terms if trade
True
If ptoduction increases per unit costs decreases if there are internal economies of scale not external
False
When making horizontal FDI what matters are trade costs
True
When making vertical FDI desicions what matters is production costs
True
Efficiency los is becouse if an inefficient use of a countries resources
True
Subsidizing exports will effect producer, consumer, government and agregate how
Producer surplus up, vonsumer surplus down, gov finance down and agregate down
If a country is a netvexporter of a good it looses if a rival subsidizes that good
True
If a country is a net state importer of a good it gains from foreign subsidies of that good
True
How has the infant industry argument been used historically
That poor countries have comparative advantages in manufacturing
In the brander spencer model what creates returns greater than the actual subsidy
That foreign competitors are scared off
In the 1990s there was an anti globalization movement, who did they think globalization was bad for
Factory workers everywhere
If the same jeans cost 60$ and 30£ what is the darra/pund exchange rate
2
If € rent is constant as well as expectations $ rent increase will lead to a $ appreciation
True
If money supply increases what happens to exchange rate and interest
Interest falls and exchange rate depreciates
Increased demand for foreign goods leads to long term depreciation of domestic currency
True
London was the financial center durring the gold standard 1870-1914
True
Trade is harmful if there are salary differences between the trade partners
Generally false
What share of goods and services are exports globally
30%
The rickardian model gains countries if they export what they have a comparative advantage in
True
If the production possibility fronteir is a straight line the opportunity cost is constant
True
What would happen to the number of people employed in the cloth sector if the price of cloth increases in the specific factor model
More people are employed
If the hecksher ohlin model is in equilibrium relative prices for a good are different globally
False, they are the same, no matter the factor endowment
In the standard model if production is on the production possibility fronteir there is full employment
True
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
True
If there is monopolistic competition more companies force a lower price
True
What are specific tariffs
Import taxes of a specific sum per unit
What is the characteristics of an optimal tariff
A small one made by a large country
The infant industry argument was a pillar stone of import substitution policies
True
The Brander spencer model identifies matket failures by what
Imperfect competition
What is the $ cost of a 50 pound jacket if the exchange rate is 1.25
62.5
If interests are constant increased expectations of interest leads to a present appreciation in exchange rate
True
If gdp increases what happens to the demand for money
It also increases
Increased productivity leads to a longterm depreciation while the same is true if the same happens abroad
False, opposite abroad, it is relative
How does an increase in real income effect aggregate demand
Y increases and so does YD and then IM increases which decreases CA but AD still increases. Why did they go into current account?
With what variables does the DD model show when the goods market is in equalibrium
Production and exchange rate
How do you best describe a balance of payment crisis
Huge changes in foreign reserves caused by speculations about future exchange rates
What is internal equalibrium (balance)
Full employment and stable prices
Name the three alternatives in the monetary trilemma
Monetary policy, exchange rate stability and free trade
If a vountry is linked to another with goods and factor mobility will a vommon currency lead to an efficiency gain
Yea
Who has enforced trade rules since 1994
Wto
The gravity model of trade explains why sweden trades more with Germany than spain
True
What factor does the rickardian model attibutes trade to
Labor productivity
Sallaries are constant in the specific factor modeling
True
What does the hecksher ohlin model hold constant
Tecknology aka productivity
When a country has a relative lack of land what happens when that vountry opens up to trade
Land intensive goods become cheaper
A country can produce no less than when the isovalue line tangents the production possibility fronteir
False
If a large country imposes a small tariff on an imported goods what will happen
Improved terms if trade
The market supply curve slopes down when there is economies of scale
True
If trade costs are high and there are internal economies of scale will a company want to do horizontal fdi
Yes, not on external though
What does terms of trade gain need to be greater than to validate a tariff
The efficiency loss (both consumers and producers lose)
Profits might increase for national firms if tariff
True
Will the optimal tariff be realistic in reality
No becouse others will answer in kind
What is the argument to subsidize high tech companies
The problem of appropriation matket failure as these are seen as producing positive externalities
What is the formula gor interest parity
R = Rf + (Ee-E)/E
In ling term a minetary expansion leads to a depreciation of exchange rate
Yes
What happens to the dd curve and output when fiscal stimulus
Dd curve to right and output increase
What is it called when the government decides to appreciate the exchange rate
Revaluation
Monetary policy is not effective with a fixed exchange rate
True
