TEST BANK
To accompany
International Economics: Theory and Policy
Sixth Edition
Krugman and Obstfeld
Dr. Mitchell Kellman
The City College of The City University of New
York, and
The Graduate Center, The City University of New
York
And
Dr. Yochanan Shachmurove
The City College of The City University of New
York, and
The University of Pennsylvania
,Contents Page
Chapter 1 Introduction 1
Chapter 2 Labor Productivity and Comparative Advantage: The Ricardian Model 14
Chapter 3 Specific Factors and Income Distribution 28
Chapter 4 Resources and Trade: The Heckscher-Ohlin Model 41
Chapter 5 The Standard Trade Model 56
Chapter 6 Economies of Scale, imperfect Competition, and International Trade 70
Chapter 7 International Factor Movements 82
Chapter 8 The Instruments of Trade Policy 96
Chapter 9 The Political Economy of Trade Policy 108
Chapter 10 Trade Policy in Developing Countries 121
Chapter 11 Strategic Trade Policy in Advanced Countries 133
Chapter 12 National Income Accounting and the Balance of Payments 147
Chapter 13 Exchange Rates and the Foreign Exchange Market:
An Asset Approach 164
Chapter 14 Money, Interest Rates, and Exchange Rates 189
Chapter 15 Price Levels and Exchange Rate in the Long Run 210
Chapter 16 Output and Exchange Rate in the Short Run 237
Chapter 17 Fixed Exchange Rates and Foreign Exchange Intervention 256
Chapter 18 The International Monetary System, 1870 – 1973 278
Chapter 19 Macroeconomic Policy and Coordination Under
Floating Exchange Rates 302
Chapter 20 Optimum Currency Areas and the European Experience 324
Chapter 21 The Global Capital Market: Performance and Policy Problems 346
Chapter 22 Developing Countries: Growth, Crisis, and Reform 370
,Chapter 1: Introduction
Multiple Choice Questions
1. Historians of economic thought often describe ___________ written by _______
and published in __________ as the first real exposition of an economic model.
A. "Of the Balance of Trade,” David Hume, 1776
B. "Wealth of Nations," David Hume, 1758
C. "Wealth of Nations," Adam Smith, 1758
D. "Wealth of Nations," Adam Smith, 1776
E. "Of the Balance of Trade," David Hume, 1758
Answer: E
2. From 1959 to 2000,
A. the U.S. economy roughly tripled in size.
B. U.S. imports roughly tripled in size.
C. the share of US Trade in the economy roughly tripled in size.
D. U.S. Imports roughly tripled as compared to U.S. exports.
E. U.S. exports roughly tripled in size.
Answer: C
3. The United States is less dependent on trade than most other countries because
A. the United States is a relatively large country.
B. the United States is a "Superpower.".
C. the military power of the United States makes it less dependent on
anything.
D. the United States invests in many other countries
E. many countries invest in the United States.
Answer: A
4. Ancient theories of international economics from the 18th and 19th Centuries are:
A. not relevant to current policy analysis.
B. are only of moderate relevance in today's modern international economy.
C. are highly relevant in today's modern international economy.
D. are the only theories that actually relevant to modern international
economy.
E. are not well understood by modern mathematically oriented theorists.
Answer: C
1
, 5. An important insight of international trade theory is that when countries exchange
goods and services one with the other it
A. is always beneficial to both countries.
B. is usually beneficial to both countries.
C. is typically beneficial only to the low wage trade partner country .
D. is typically harmful to the technologically lagging country.
E. tends to create unemployment in both countries.
Answer: B
6. If there are large disparities in wage levels between countries, then
A. trade is likely to be harmful to both countries.
B. trade is likely to be harmful to the country with the high wages.
C. trade is likely to be harmful to the country with the low wages.
D. trade is likely to be harmful to neither country.
E. trade is likely to have no effect on either country.
Answer: D
7. Benefits of international trade are limited to
A. tangible goods.
B. intangible goods.
C. all goods but not services.
D. services.
E. None of the above.
Answer: E
8. Attempts to explain the pattern of international trade
A. have been a major focus of international economists.
B. have proven to be hopeless.
C. have proven to be a trivial exercise.
D. have been the preoccupation of economic development theorists.
E. None of the above.
Answer: A
9. Which of the following does not belong?
A. NAFTA
B. Uruguay Round
C. World Trade Organization
D. None Tariff Barriers
2
To accompany
International Economics: Theory and Policy
Sixth Edition
Krugman and Obstfeld
Dr. Mitchell Kellman
The City College of The City University of New
York, and
The Graduate Center, The City University of New
York
And
Dr. Yochanan Shachmurove
The City College of The City University of New
York, and
The University of Pennsylvania
,Contents Page
Chapter 1 Introduction 1
Chapter 2 Labor Productivity and Comparative Advantage: The Ricardian Model 14
Chapter 3 Specific Factors and Income Distribution 28
Chapter 4 Resources and Trade: The Heckscher-Ohlin Model 41
Chapter 5 The Standard Trade Model 56
Chapter 6 Economies of Scale, imperfect Competition, and International Trade 70
Chapter 7 International Factor Movements 82
Chapter 8 The Instruments of Trade Policy 96
Chapter 9 The Political Economy of Trade Policy 108
Chapter 10 Trade Policy in Developing Countries 121
Chapter 11 Strategic Trade Policy in Advanced Countries 133
Chapter 12 National Income Accounting and the Balance of Payments 147
Chapter 13 Exchange Rates and the Foreign Exchange Market:
An Asset Approach 164
Chapter 14 Money, Interest Rates, and Exchange Rates 189
Chapter 15 Price Levels and Exchange Rate in the Long Run 210
Chapter 16 Output and Exchange Rate in the Short Run 237
Chapter 17 Fixed Exchange Rates and Foreign Exchange Intervention 256
Chapter 18 The International Monetary System, 1870 – 1973 278
Chapter 19 Macroeconomic Policy and Coordination Under
Floating Exchange Rates 302
Chapter 20 Optimum Currency Areas and the European Experience 324
Chapter 21 The Global Capital Market: Performance and Policy Problems 346
Chapter 22 Developing Countries: Growth, Crisis, and Reform 370
,Chapter 1: Introduction
Multiple Choice Questions
1. Historians of economic thought often describe ___________ written by _______
and published in __________ as the first real exposition of an economic model.
A. "Of the Balance of Trade,” David Hume, 1776
B. "Wealth of Nations," David Hume, 1758
C. "Wealth of Nations," Adam Smith, 1758
D. "Wealth of Nations," Adam Smith, 1776
E. "Of the Balance of Trade," David Hume, 1758
Answer: E
2. From 1959 to 2000,
A. the U.S. economy roughly tripled in size.
B. U.S. imports roughly tripled in size.
C. the share of US Trade in the economy roughly tripled in size.
D. U.S. Imports roughly tripled as compared to U.S. exports.
E. U.S. exports roughly tripled in size.
Answer: C
3. The United States is less dependent on trade than most other countries because
A. the United States is a relatively large country.
B. the United States is a "Superpower.".
C. the military power of the United States makes it less dependent on
anything.
D. the United States invests in many other countries
E. many countries invest in the United States.
Answer: A
4. Ancient theories of international economics from the 18th and 19th Centuries are:
A. not relevant to current policy analysis.
B. are only of moderate relevance in today's modern international economy.
C. are highly relevant in today's modern international economy.
D. are the only theories that actually relevant to modern international
economy.
E. are not well understood by modern mathematically oriented theorists.
Answer: C
1
, 5. An important insight of international trade theory is that when countries exchange
goods and services one with the other it
A. is always beneficial to both countries.
B. is usually beneficial to both countries.
C. is typically beneficial only to the low wage trade partner country .
D. is typically harmful to the technologically lagging country.
E. tends to create unemployment in both countries.
Answer: B
6. If there are large disparities in wage levels between countries, then
A. trade is likely to be harmful to both countries.
B. trade is likely to be harmful to the country with the high wages.
C. trade is likely to be harmful to the country with the low wages.
D. trade is likely to be harmful to neither country.
E. trade is likely to have no effect on either country.
Answer: D
7. Benefits of international trade are limited to
A. tangible goods.
B. intangible goods.
C. all goods but not services.
D. services.
E. None of the above.
Answer: E
8. Attempts to explain the pattern of international trade
A. have been a major focus of international economists.
B. have proven to be hopeless.
C. have proven to be a trivial exercise.
D. have been the preoccupation of economic development theorists.
E. None of the above.
Answer: A
9. Which of the following does not belong?
A. NAFTA
B. Uruguay Round
C. World Trade Organization
D. None Tariff Barriers
2
