81. Haberler reconstituted comparative advantage theory on the basis of ___
A. opportunity cost theory
B. labour theory of value
C. money
D. non of the above
Answer
A. opportunity cost theory
82. Factor endowment theory is also known as
A. heckcher ohlin theory
B. limit pricing theory
C. labour theory of value
D. opportunity cost theory
Answer
A. heckcher ohlin theory
83. The accounting system used in BOP
A. double entry book keeping system
B. the balance of payment system
C. system of national accounting
D. none of the above
Answer
A. double entry book keeping system
84. PPP theory is associated with the determination of ___
A. exchange rate
B. money value
C. tariffs
D. quatas
Answer
A. exchange rate
85. The analysis method used in Leontief’s study
A. factor price equalization theorem
B. double entry book keeping system
C. input – output analysis
D. none of the above
Answer
C. input – output analysis
86. India is NOT a ___ abundant nation
A. labour
B. capital
C. human capital
D. natural resources
Answer
B. capital
87. According to HO Model, India should import ___ abundant goods
A. labour
B. capital
C. human capital
D. natural resources
Answer
A. labour
88. When a commodity is produced with low K/L ratio that commodity is ___ intensive commodity
A. labour
B. capital
C. human capital
D. natural resources
Answer
B. capital
89. A situation where one commodity is capital intensive in one country and labourintensive in another country is called
A. opportunity cost
B. factor price equalization
C. leontiff paradox
D. faction intensity reversal
Answer
D. faction intensity reversal
90. According to Rybczyski theorem commodity price should be
A. constant
B. increasing
C. decreasing
D. either increasing or decreasing
Answer
A. constant
91. Product transformation curve is also called
A. production indifference curves
B. production possibility frontier
C. isoquants
D. all the above
Answer
B. production possibility frontier
92. Current and capital accounts are examples of
A. autonomous transactions
B. accommodating transactions
C. unilateral transactions
D. balance of trade
Answer
A. autonomous transactions
93. Paper gold is also known as
A. us dollar
B. pound sterling
C. sdr
D. indian rupee.
Answer
C. sdr
94. SDR is the official currency of
A. imf
B. world bank
C. un
D. non of the above
Answer
A. imf
95. Which of the following is NOT true?
A. Small countries depend more on trade than large countries.
B. U.S. imports exceed U.S. exports.
C. Economists believe that international trade is beneficial for all countries involved in it, in most cases.
D. Imports cannot exceed exports for an extended period of time.
Answer
D. Imports cannot exceed exports for an extended period of time.
96. The term “gains from trade” describes:
A. The fact that when two countries trade, both are better off.
B. Consumer surplus.
C. Profits made by businessmen involved in international trade.
D. Producer surplus.
Answer
A. The fact that when two countries trade, both are better off.
97. Why do some people argue against free international trade?
A. Trade alters the distribution of income between broad groups of people.
B. Free trade threatens our country’s security.
C. There is disagreement on whether or not there are gains from trade.
D. The U.S. is a large country and therefore does not gain from international trade.
Answer
A. Trade alters the distribution of income between broad groups of people.
98. Which of the following theories was proposed by David Ricardo?
A. Theory of differences in labor productivity.
B. Theory of differences in climate and resources.
C. Theory of random components determining the pattern of trade.
D. Theory of differences in factor endowments.
Answer
A. Theory of differences in labor productivity.
99. What are most trade policies driven by?
A. Conflicts of interest between nations.
B. Conflicts of interest within nations.
C. Disagreements regarding who should produce certain products.
D. Disagreements on the prices of major commodities.
Answer
B. Conflicts of interest within nations.
100. Many countries were fixing the price of their currency in terms of gold:
A. Before World War I.
B. During World War I.
C. After World War II.
D. During World War II.
Answer
A. Before World War I.
101. How are international trade policies governed?
A. By the IMF.
B. They are not governed by anyone.
C. By the GATT.
D. By the U.N.
Answer
C. By the GATT.
102. Which of the following is NOT true regarding international capital markets?
A. There are special regulations in many countries with respect to foreign investment.
B. The volume of trade on capital markets is lower ever since the “debt crisis” of 1982.
C. Nations can default on their debt and may not be brought to court.
D. Currency fluctuations add instability.
Answer
B. The volume of trade on capital markets is lower ever since the “debt crisis” of 1982.
103. In his empirical test of comparative advantage, Wassily Leontief found that
A. U.S. exports are capital intensive relative to U.S. imports
B. U.S. imports are labor intensive relative to U.S. exports
C. U.S. exports are neither labor nor capital intensive
D. None of the above
Answer
D. None of the above
104. By adjusting the model of comparative advantage to include transportation costs along with production costs, we would expect
A. the prices of traded goods to be lower than when there are no transportation costs
B. specialization to stop when the production costs of the trading partners equalize
C. the volume of trade to be less than when there are no transportation costs
D. the gains from trade to be greater than when there are no transportation costs.
Answer
C. the volume of trade to be less than when there are no transportation costs
105. Assume that Country A is relatively abundant in labor and Country B is relatively abundant in land. Note that wages are the returns to labor and rents are the returns to land. According to the factor price equalization theorem, once Country A begins specializing according to comparative advantage and trading with Country B.
A. Wages and rents should fall in Country A
B. Wages and rents should rise in Country A
C. Wages should rise and rents should fall in Country A
D. Wages should fall and rents should rise in Country A
Answer
C. Wages should rise and rents should fall in Country A
106. Trade between two countries can benefit both countries if
A. Each country exports that good in which it has a comparative advantage.
B. Each country enjoys superior terms of trade.
C. Each country has a more elastic demand for the imported goods.
D. Each country has a more elastic supply for the supplied goods.
Answer
A. Each country exports that good in which it has a comparative advantage.
107. The Ricardian theory of comparative advantage states that a country has a comparative advantage in widgets if
A. Output per worker of widgets is higher in that country.
B. That country’s exchange rate is low.
C. Wage rates in that country are high.
D. The output per worker of widgets as compared to the output of some other product ishigher in that country.
Answer
D. The output per worker of widgets as compared to the output of some other product ishigher in that country.
108. In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ___ unit labor requirements
A. One
B. Two
C. Three
D. Four
Answer
D. Four
109. As a result of trade, specialization in the Ricardian model tends to be
A. Complete with constant costs and with increasing costs.
B. Complete with constant costs and incomplete with increasing costs.
C. Incomplete with constant costs and complete with increasing costs.
D. Incomplete with constant costs and incomplete with increasing costs.
Answer
B. Complete with constant costs and incomplete with increasing costs.
110. A nation engaging in trade according to the Ricardian model will find its consumption bundle
A. Inside its production possibilities frontier.
B. On its production possibilities frontier.
C. Outside its production possibilities frontier.
D. Inside its trade-partner’s production possibilities frontier.
Answer
C. Outside its production possibilities frontier.
111. In the Ricardian model, if a country’s trade is restricted, this will cause all except which?
A. Limit specialization and the division of labor.
B. Reduce the volume of trade and the gains from trade
C. Cause nations to produce inside their production possibilities curves
D. May result in a country producing some of the product of its comparative Disadvantage
Answer
C. Cause nations to produce inside their production possibilities curves
112. If a very small country trades with a very large country according to the Ricardianmodel, then
A. The small country will suffer a decrease in economic welfare.
B. The large country will suffer a decrease in economic welfare.
C. The small country will enjoy gains from trade.
D. The large country will enjoy gains from trade.
Answer
C. The small country will enjoy gains from trade.
113. The following are all assumptions that must be accepted in order to apply theHeckscher – Ohlin Theory, except for one:
A. Countries differ in their endowments of factors of production.
B. Countries differ in their technologies.
C. There are two factors of production.
D. Production is subject to constant returns to scale.
Answer
B. Countries differ in their technologies.
114. In international-trade equilibrium in the Heckscher-Ohlin model,
A. The capital rich country will charge less for the capital intensive good than the price paid by the capital poor country for the capital-intensive good.
B. The capital rich country will charge the same price for the capital intensive good as that paid for it by the capital poor country.
C. The capital rich country will charge more for the capital intensive good than the price paid by the capital poor country for the capital-intensive go
Answer
B. The capital rich country will charge the same price for the capital intensive good as that paid for it by the capital poor country.
115. The Heckscher-Ohlin model predicts all of the following except:
A. Which country will export which product
B. Which factor of production within each country will gain from trade.
C. The volume of trade.
D. That wages will tend to become equal in both trading countries.
Answer
C. The volume of trade.
116. The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that the former
A. Has only two countries
B. Has only two products.
C. Has two factors of production.
D. Has two production possibility frontiers (one for each country).
Answer
C. Has two factors of production.
117. In free trade between two countries in an H-O world:
A. If both countries produce both goods, wages in the two countries will be the
B. same.
C. If one country does not produce both goods, wages in the two countries will be the same
D. The world relative price is between the two-self-sufficiency relative Prices but the relative Price of a good would not be exactly the same in both countries
Answer
A. If both countries produce both goods, wages in the two countries will be the
118. The trade model of the Swedish economists Heckscher and Ohlin maintains that:
A. Absolute advantage determines the distribution of the gains from trade
B. Comparative advantage determines the distribution of the gains from trade.
C. The division of labor is limited by the size of the world market
D. A country exports goods for which its resource endowments are most suited.
Answer
D. A country exports goods for which its resource endowments are most suited.
119. According to the factor endowment model of Heckscher and Ohlin, countries heavil y endowed with land will:
A. Devote excessive amounts of resources to agricultural production.
B. Devote insufficient amounts of resources to agricultural production
C. Export products that are land-intensive.
D. Import products that are land-intensive.
Answer
C. Export products that are land-intensive.
120. According to the Heckscher-Ohlin model, the source of comparative advantage is a country’s:
A. Technology
B. Advertising
C. Factor endowments
D. Both (a) and (c)
Answer
C. Factor endowments
