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1) If a nation has an open economy it means that the nation ? a. Allows private ownership of capital b. Has flexible exchange rates c. Has fixed exchange rates d. conducts trade with other countries
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2) A main advantage of specialization results from ? a. Economies of large-scale production b. The specializing country behaving as a monopoly c. Smaller production runs resulting in lower unit costs d. High wages paid to foreign workers
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3) If a country has a burden of debt it cannot sustain it can ? a. reschedule debt b. get a loan from an international organization c. default on the loan d. any of the above
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4) Import substitution is the replacement of ____ by domestic production _____ protection of ________? a. exports, subsidies b. exports, patents c. imports, high tariffs or import quotas d. imports, subsidies
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5) LDCs are reluctant to pursue development through the export of primary products because of ____ and _____ ? a. The upward trend in commodity prices the stability of primary products real prices b. The upward trend in commodity prices, the volatility of primary products real prices c. The downward trend in commodity prices the stability of primary products real prices d. The downward trend in commodity prices the volatility of primary products real prices
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6) All of the following represent obstacles to LDC development except ? a. resource scarcity b. low levels of investment c. low population d. poor infrastructure e. poor human capital
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7) Economic transition involves high inflation because _____ and ______? a. high monetary growth high wages b. high budget deficits devaluation c. high monetary growth devaluation d. Prices surge from an artificially low level to their equilibrium level the inflation tax is required a source of government revenue
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8) An optimal tariff is one which reduces imports to the level at which ____ equals ____? a. imports, exports b. the balance of trade, zero c. The demand for currency the supply of currency d. social marginal cost, social marginal benefit
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9) The imposition of a tariff causes consumption to _____ and imports to _________? a. rise, rise b. fall, rise c. fall, fall d. rise, fall
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10) The main cause of different relative costs between countries are ? a. relative factor competition b. relative factor mobility c. relative factor substitution d. relative factor endowments
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