MEcon Master of Economics International Trade and Finance

Question 1

According to the theory of comparative advantage, a country should specialize in producing goods for which it has a lower:

Accepted Answer

Opportunity cost

Answer

Absolute cost

Answer

Labor cost

Answer

Capital cost

Question 2

The Heckscher-Ohlin theorem predicts that a country will export goods that intensively use its:

Accepted Answer

Abundant factor

Answer

Scarce factor

Answer

Most expensive factor

Answer

Imported factor

Question 3

A tariff imposed on imported goods directly results in:

Accepted Answer

Higher government revenue and higher domestic prices

Answer

Lower domestic prices

Answer

Lower foreign producer revenue only

Answer

A trade surplus necessarily

Question 4

The Marshall-Lerner condition states that a currency depreciation will improve the trade balance if the sum of the absolute values of import and export demand elasticities is:

Accepted Answer

Greater than 1

Answer

Less than 0

Answer

Equal to 0

Answer

Less than 1

Question 5

Under a fixed exchange rate regime, a central bank must intervene in currency markets to:

Accepted Answer

Maintain the pegged exchange rate

Answer

Maximize exports

Answer

Control inflation directly

Answer

Set domestic interest rates freely

Question 6

The 'impossible trinity' (trilemma) in international finance states that a country cannot simultaneously have:

Accepted Answer

A fixed exchange rate, free capital flows, and independent monetary policy

Answer

Low inflation, high growth, and low unemployment

Answer

Free trade, capital controls, and a surplus

Answer

High tariffs, a weak currency, and a trade deficit