Test 2

Question 1

What determines the supply and demand of foreign exchange?

Answer 1

1. Relative price differences and PPP
2. Interest rates and money supply
3. Productivity and balance of payments
4. Exchange rate policies
5. Investor psychology

Question 2

Current account =

Answer 2

balance of trade + net factor income from abroad + net unilateral transfers from abroad

Question 3

Types of exchange rate policies:

Answer 3

Clean float
Dirty float
Target (crawling band)
Fixed rate policy
Peg

Question 4

Classical Trade Theories

Answer 4

1. Mercantilism
2. Absolute advantage
3. Comparative advantage

Question 5

Modern Trade Theories

Answer 5

1. Product life cycle
2. Strategic trade
3. National comparative advantage of industries

Question 6

Types of non-tariff barriers:

Answer 6

Subsidy
Import quota
Voluntary export restriction
Local content requirement
Administrative policy
Antidumping policy

Question 7

The EU’s challenges:

Answer 7

1. Determining whether to become a political union
2. Voting power
3. Growth and expansion
4. Labor and immigration
5. Financial crises and recession

Question 8

Types of Regional Economic Integration

Answer 8

1. Free Trade Area
2. Customs Union
3. Common Market
4. Economic Union
5. Political Union