1、Chapter 5 The Standard Trade Model Multiple Choice Questions1. The concept “terms of trade” means(a) the amount of exports sold by a country.(b) the price conditions bargained for in international markets.(c) the price of a countrys exports divided by the price of its imports.(d) the quantities of i
2、mports received in free trade.(e) None of the above.Answer: C2. A country cannot produce a mix of products with a higher value than where(a) the isovalue line intersects the production possibility frontier.(b) the isovalue line is tangent to the production possibility frontier.(c) the isovalue line
3、is above the production possibility frontier.(d) the isovalue line is below the production possibility frontier.(e) the isovalue line is tangent with the indifference curve.Answer: B3. Tastes of individuals are represented by(a) the production possibility frontier.(b) the isovalue line.(c) the indif
4、ference curve.(d) the production function.(e) None of the above.Answer: C4. If PC/PF were to increase in the international marketplace, then(a) all countries would be better off.(b) the terms of trade of cloth exporters improve.(c) the terms of trade of food exporters improve.(d) the terms of trade
5、of all countries improve.(e) None of the aboveAnswer: B50 Krugman/Obstfeld Seventh Edition5. If PC/PF were to increase,(a) the cloth exporter would increase the quantity of cloth exports.(b) the cloth exporter would increase the quantity of cloth produced.(c) the food exporter would increase the qua
6、ntity of food exports.(d) Both (a) and (c).(e) None of the above.Answer: B6. If PC/PF were to increase,(a) world relative quantity of cloth supplied and demanded would increase.(b) world relative quantity of cloth supplied and demanded would decrease.(c) world relative quantity of cloth supplied wou
7、ld increases.(d) world relative quantity of cloth demanded would decrease.(e) None of the above.Answer: C7. When the production possibility frontier shifts out relatively more in one direction, we have(a) biased growth.(b) unbiased growth.(c) immiserizing growth.(d) balanced growth.(e) imbalanced gr
8、owth.Answer: A8. Export-biased growth in Country H will(a) improve the terms of trade of Country H.(b) trigger anti-bias regulations of the WTO.(c) worsen the terms of trade of Country F (the trade partner).(d) improve the terms of trade of Country F.(e) decrease economic welfare in Country H.Answer
9、: D9. Immiserizing growth is(a) likely to occur if the exporting country is poor.(b) likely to occur if the exporting country is rich.(c) likely to occur when terms of trade change.(d) likely to occur if relative supplies are elastic.(e) None of the above.Answer: EChapter 5 The Standard Trade Model
10、5110. If the U.S. Agency for International Development transfers funds to poor countries in Sub-Saharan Africa, this must(a) worsen the U.S. terms of trade.(b) improve the U.S. terms of trade.(c) worsen the terms of trade of the African aid recipients.(d) improve the terms of trade of the African ai
11、d recipients.(e) None of the above.Answer: E11. If the poor USAID recipient countries have a higher marginal propensity to consume each and every product than does the United States, then such aid will(a) worsen the U.S. terms of trade.(b) improve the U.S. terms of trade.(c) leave the world terms of
12、 trade unaffected.(d) worsen the terms of trade of both donor and recipient countries.(e) None of the above.Answer: B12. If the U.S. has a higher marginal propensity to consume (MPC) imports as compared to both its MPC for exportables and nontradables, then such aid will(a) worsen the U.S. terms of
13、trade.(b) improve the U.S. terms of trade.(c) leave the world terms of trade unaffected.(d) worsen the terms of trade of both donor and recipient countries.(e) None of the above.Answer: B13. If the U.S. (a large country) imposes a tariff on its imported good, this will tend to(a) have no effect on t
14、erms of trade.(b) improve the terms of trade of all countries.(c) improve the terms of trade of the United States.(d) cause a deterioration of U.S. terms of trade.(e) raise the world price of the good imported by the United States.Answer: C14. If the U.S. (a large country) imposes a tariff on its im
15、ported good, this will(a) have no effect on economic welfare.(b) improve the terms of trade of all countries.(c) improve the economic welfare of the United States.(d) harm the economic welfare of U.S. trading partners.(e) None of the aboveAnswer: D52 Krugman/Obstfeld Seventh Edition15. A country wil
16、l be able to consume a bundle which is not attainable solely from domestic production only if(a) the world terms of trade differ from its domestic relative costs.(b) the country specializes in one product.(c) the country avoids international trade.(d) the world terms of trade equal the domestic rela
17、tive costs.(e) None of the above.Answer: A16. Terms of trade refers to(a) what goods are imported.(b) what goods are exported.(c) the volume of trade.(d) the prices at which trade occurs.(e) None of the above.Answer: D17. If a countrys (net-barter) terms of trade increase (“improve”) we know from th
18、is that economic welfare in this country(a) increases(b) increases, but only relative to that of its trade partners(c) is unchanged(d) decreases(e) None of the aboveAnswer: E18. If points a and b are both on the production possibility frontier of a country, then(a) consumers are indifferent between
19、the two bundles.(b) producers are indifferent between the two bundles.(c) at any point in time, the country could produce both.(d) Both cost the same.(e) The country could produce either of the two bundles.Answer: E19. If the economy is producing at point a on its production possibility frontier, th
20、en(a) all of the countrys workers are specialized in one product.(b) all of the countys capital is used for one product.(c) all of the countys workers are employed.(d) all of its capital is used, but not efficiently.(e) None of the above.Answer: CChapter 5 The Standard Trade Model 5320. If at point
21、A on the production possibility frontier, and the community indifference curve cuts through point a from northwest to southeast, then the optimal autarky production bundle is(a) at point A.(b) to the right of point A.(c) to the left of point A.(d) to the northeast of point A.(e) to the southwest of
22、point A.Answer: B21. A bundle indicated by a point to the northeast of the production possibility frontier is(a) unattainable at a point in time.(b) unattainable at a point in time without international trade.(c) unattainable at a point in time without domestic trade.(d) unattainable as a consumptio
23、n point.(e) None of the above.Answer: B22. If two countries with diminishing returns and different marginal rates of substitution between two products were to engage in trade, then(a) the shapes of their respective production possibility frontiers would change.(b) the marginal rates of substitution
24、of both would become equal.(c) the larger of the two countries would dominate their trade.(d) the country with relatively elastic supplies would export more.(e) None of the above.Answer: B23. If a country began exporting product A and importing product B, then, as compared to the autarky (no-trade)
25、situation, the marginal cost of product A will(a) increase.(b) decrease.(c) shift outward.(d) shift inward.(e) None of the above.Answer: A24. If, beginning from a free trade equilibrium, the (net barter) terms of trade improve for a country, then it will(a) increase production of its import competin
26、g good.(b) increase consumption of its export good.(c) increase the quantity of its imports.(d) experience an export-biased shift in its production possibility frontier.(e) None of the above.Answer: C54 Krugman/Obstfeld Seventh Edition25. If a small country were to levy a tariff on its imports then
27、this would(a) have no effect on that countrys economic welfare.(b) increase the countrys economic welfare.(c) decrease the countrys economic welfare.(d) change the terms of trade.(e) None of the above.Answer: C26. An increase in a countrys net commodity terms of trade will always(a) increase the cou
28、ntrys economic welfare.(b) increase the countrys real income.(c) increase the countrys quantity of exports.(d) increase the countrys production of its import competing good.(e) None of the above.Answer: E27. After WWI, Germany was forced to make large reparationstransfers of real income- to France.
29、If the marginal propensity to consume was equal in both countries, and if Frances demand was biased toward food (relative to Germanys demand pattern) then we would expect to find(a) the worlds relative price for food remains unchanged.(b) the worlds relative price for food increase.(c) the worlds re
30、lative price for food decrease.(d) the world relative price for both food and non-food rise.(e) None of the above.Answer: B28. If we add to Question 27 that France exported manufactures, whereas Germany exported food, then the reparations from Germany to France would(a) improve Frances international
31、 terms of trade.(b) cause France terms of trade to deteriorate.(c) cause both France and Germanys terms of trade to deteriorate.(d) cause both France and Germanys terms of trade to improve.(e) None of the above.Answer: B29. If a country lent money to another, this must(a) lower the terms of trade of
32、 the recipient country.(b) lower the terms of trade of both countries.(c) improve the terms of trade of the recipient country.(d) improve the terms of trade of the donor country(e) None of the above.Answer: EChapter 5 The Standard Trade Model 5530. During the 19th Century, economic growth of the maj
33、or trading countries was biased toward manufactures and away from food. The less developed countries of that time were net exporters of food. From this information, we would expect to have observed(a) falling terms of trade for the less developed countries.(b) improving (rising) terms of trade for t
34、he less developed countries.(c) no change at all in the terms of trade of the less developed countries.(d) a decrease in the relative price of food.(e) None of the above.Answer: B31. Immiserizing growth could occur to(a) a poor country experiencing export-biased economic growth.(b) a poor country ex
35、periencing import-biased economic growth.(c) a poor country experiencing growth in its non-traded sector.(d) a poor country experiencing capital-intensive biased growth.(e) None of the above.Answer: A32. A large country experiencing import-biased economic growth will tend to experience(a) positive t
36、erms of trade.(b) deteriorating terms of trade.(c) improving terms of trade.(d) immiserizing terms of trade.(e) None of the above.Answer: C33. In the period preceding the recent Financial Crisis in Asia, the South East Asian countries were receiving large inflows of financial capital. Following John
37、 Maynard Keynes theory, this should have caused(a) a glut in their banking asset situation.(b) an improvement in their terms of trade.(c) deterioration in their terms of trade.(d) a fluctuation upward and then downward in their terms of trade.(e) None of the above.Answer: B34. If Slovenia is a small
38、 country in world trade terms, then if it imposes a large series of tariffs on many of its imports, this would(a) have no effect on its terms of trade.(b) improve its terms of trade.(c) deteriorate its terms of trade.(d) decrease its marginal propensity to consume.(e) None of the above.Answer: A56 K
39、rugman/Obstfeld Seventh Edition35. 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(a) have no effect on its terms of trade.(b) improve its terms of trade.(c) deteriorate its terms of trade.(d) decrease its marginal propensit
40、y to consume.(e) None of the above.Answer: B36. If Slovenia were a large country in world trade, then if it imposes a large set of tariffs on its imports, this must(a) cause retaliation on the part of its trade partners.(b) harm Slovenias real income.(c) improve Slovenias real income.(d) improve the
41、 real income of its trade partners.(e) None of the above.Answer: E37. If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must(a) have no effect on its terms of trade.(b) improve its terms of trade.(c) deteriorate its terms of trade.(
42、d) decrease its marginal propensity to consume.(e) None of the above.Answer: C38. If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its exports, this must(a) cause retaliation on the part of its trade partners.(b) harm Slovenias real income.(c) impro
43、ve Slovenias real income.(d) improve the real income of its trade partners.(e) None of the above.Answer: D39. If the United States exports skilled-labor intensive products and services, then we should expect unions representing skilled labor to(a) lobby in favor of tariffs.(b) lobby against the impo
44、sition of tariffs.(c) be indifferent to the issue of tariffs.(d) lobby in favor of improved terms of trade.(e) Not enough information.Answer: EChapter 5 The Standard Trade Model 5740. If the United States exports skilled-labor intensive products and services, then we should expect unions representin
45、g unskilled labor to(a) lobby in favor of tariffs.(b) lobby against the imposition of tariffs.(c) be indifferent to the issue of tariffs.(d) lobby in favor of improved terms of trade.(e) Not enough information.Answer: B41. If a there are no international loans or capital flows, then if a countrys te
46、rms of trade improve, we would find that(a) the value of its exports exceeds the value of its imports.(b) the value of its exports becomes less than that of its imports.(c) the value of its exports exactly equals that of its imports.(d) the quantity of its exports equals that of its imports.(e) None
47、 of the above.Answer: C42. If the U.S. Agency for International Development transfers funds to poor countries in Sub-Saharan Africa, the conventional assumption, following Keynes analysis would presume that this would tend to(a) worsen the U.S. terms of trade.(b) improve the U.S. terms of trade.(c)
48、worsen the terms of trade of the African aid recipients.(d) improve the terms of trade of the African aid recipients.(e) None of the above.Answer: A Essay Questions1. Other things being equal, a rise in a countrys terms of trade increases its welfare. What would happen if we relax the ceteris paribu
49、s assumption, and allow for the law of demand to operate internationally?Answer: Let us assume that the terms of trade (or technically the net commodity terms of trade) improve, thus the relative price of a countrys exports increase. This would, logically, lead to a shift away by world consumers to substitute goods. If the demand for a countrys exports is elastic, the quantity decrease would be proportionally larger than the per unit price increase. This term of trade effect would actually lower the countrys real income and economic w
