With other things unchanged, a rise in the average price of imports or a fall in the average price of exports will: A improve the terms of trade. B worsen the terms of trade. C expand the production possibilities frontier.
D contract the production possibilities frontier. Page 48 Table: The Prices of Ghana's Exports and Imports Suppose that the table gives values of price indices for Ghana's exports and imports in and in Did Ghana's terms of trade improve, deteriorate, or remain unchanged between and ?
A The terms of trade improved. B The terms of trade deteriorated. C The terms of trade remained unchanged. An increase in the price of imported goods will: A increase the volume of imports. B decrease the volume of imports. C shift the production possibility frontier inward. D shift the production possibility frontier outward. The Prebisch—Singer hypothesis concludes that: A because of unfair trading practices, labor in developing countries is exploited. B developing countries experience a long-run decline in their terms of trade, as the demand for primary products in higher-income countries declines relative to their demand for manufactured goods.
C OPEC has been responsible for a slowdown in the world's standard of living. D technology lowers the cost of manufactured products, so developing countries should see an increase in their terms of trade. The textbook authors conclude that the Prebisch—Singer hypothesis: A is not true.
B is true. C is valid in some instances but showed no consistent trend and cannot be considered a general rule. D is valid only since , when the World Trade Organization began its operations. Several economists have hypothesized that the terms of trade for developing countries will decline over time. Which of the following might be a cause of this decline? A Technological progress in manufactured goods has caused their prices to fall. B Some developing countries are able to keep the price of their exports high by restricting supplies on the world market.
C Increased demand for developing country exports has caused prices of developing country exports to rise. D The demand for primary product exports from developing countries has not risen as fast as the demand for manufactured exports of industrialized countries.
Page 49 What are the shapes of production possibilities frontiers in the Ricardian model? In an autarkic situation, demonstrate that a country will be at its optimal production if it produces where an indifference curve is tangent to the production possibilities frontier. Why is a country able to consume outside its production possibilities frontier when it engages in international trade?
If a country has a comparative advantage in producing rice and a comparative disadvantage in producing pencils, does the Ricardian model predict that the real wage in rice production will fall and the real wage in pencil production will rise as a result of international trade?
Demonstrate how one can derive the autarkic price of cars in this economy. Suppose that: 1. Malaysia requires 1 hour of labor to produce 1 pound of rice and 2 hours of labor to produce 1 pencil; 2.
Indonesia requires 2 hours of labor to produce 1 pound of rice and 4 hours of labor to produce 1 pencil; 3. Which country has an absolute advantage in rice production? In pencil production? Which country has a comparative advantage in rice production?
Will trade between the two countries be mutually beneficial? Why does the United States import textiles from Asian nations when it has an absolute advantage in textile production? Page 50 Use the following table to determine the absolute and comparative advantages of China and the United States in producing wheat and textiles.
In the Ricardian model, what is expected to happen to real wages in each country as trade occurs? Figure: International Trade Equilibrium Which is the before-trade point of production and consumption? Page 51 Figure: International Trade Equilibrium Which line shows the before-trade relative price in this nation? Figure: International Trade Equilibrium Which point shows the after-trade point of consumption?
Page 52 Figure: International Trade Equilibrium Before trade, how many units of wheat will this nation produce? Page 53 Figure: International Trade Equilibrium Before trade, how many units of wheat will this nation consume? Figure: International Trade Equilibrium Before trade, how many units of cloth will this nation produce? Page 54 Figure: International Trade Equilibrium Before trade, how many units of cloth will this nation consume?
Figure: International Trade Equilibrium Assume that this country specializes in the good in which it has comparative advantage. After trade, how many units of wheat will this nation produce? Page 55 Figure: International Trade Equilibrium After trade, how many units of wheat will this nation consume? Figure: International Trade Equilibrium Assume that the country specializes in the good in which it has comparative advantage. After trade, how many units of cloth will this nation produce?
Page 56 Figure: International Trade Equilibrium After trade, how many units of cloth will this nation consume? Figure: International Trade Equilibrium How many units of wheat will this nation export or import? Page 57 Figure: International Trade Equilibrium How many units of cloth will this nation export or import? Compare the absolute advantages in U. Suppose that: Malaysia requires 1 hour of labor to produce 1 pound of rice and 2 hours of labor to produce 1 pencil; Indonesia requires 2 hours of labor to produce 1 pound of rice and 3 hours of labor to produce 1 pencil; each country has 10, hours of labor to allocate between the production of rice and pencils; and in autarky, Malaysia consumes 5, pounds of rice and 2, pencils.
In Malaysia, what are the marginal productivities of labor in rice and pencil production? In Indonesia, what are the marginal productivities of labor in rice and pencil production? What are the autarkic prices of rice and pencils in each country? In which product will each specialize?
What happens to wages in each country when trade occurs? Page 58 Suppose that the following table gives export and import price indexes for Zimbabwe in , , and The base year is , so all values are in that year.
Year Export price index Import price index 90 I. How did Zimbabwe's terms of trade change between and ? Between and ? Do these changes represent deterioration or improvement in Zimbabwe's terms of trade? What are the implications of a terms-of-trade deterioration for the Zimbabwean economy?
Suppose that China and the United States only trade wheat and textiles with each other. The following graph gives the U. How many tons of wheat did the United States produce prior to trade with China? How many tons of wheat did China produce prior to trade with the United States? What is the international price of wheat in U. What will happen to the international price of wheat and Chinese imports from the United States if there is a severe drought that reduces the size of the U.
What will happen to the international price of wheat and Chinese imports if there is a severe drought in China that reduces the size of its wheat harvest? Page 59 Suppose that the following table shows autarkic production and consumption in Country A and in Country B.
What are the autarkic prices of wheat and cloth in each country? Suppose the indifference curves of the two countries are identical. Will trade occur? Suppose the indifference curves of the two countries are NOT identical, with Country A showing a marked preference for wheat and Country B a marked preference for cloth. Under these conditions, will trade occur? The authors provide evidence that wages rose at roughly the same rates as labor productivity in seven countries between and In China, many observers believe that wages have been increasing faster than labor productivity in recent years.
If true, what are some implications for Chinese trade patterns? Consider the following table. Which country has an absolute advantage in wheat production? Which country has an absolute advantage in cloth production? Which country has a comparative advantage in wheat production? Which country has a comparative advantage in cloth production? In what range must the international price of wheat fall? Page 60 Answer Key 1. Page 65 1. Exchange rates affect: I. The price of a foreign currency expressed in terms of the home currency is called the: A exchange rate.
B rate of depreciation. C dollar—yen ratio. D opportunity cost. Normally, exchange rates are expressed as: A the number of units of the currency per one ounce of gold. C the price of one unit of foreign currency expressed in terms of the domestic currency.
D ratios of the value of one nation's wealth compared with the other. When interpreting the meaning of an exchange rate, the first step is to always: A know exactly what the exchange rate signifies in terms of which currency is the denominator. B watch for ways the currency might lose value. C learn about recent behavior of the exchange rate. D know exactly what the rate is at any moment in time. Generally, exchange rates are quoted as a single price of a unit of foreign currency rather than a ratio because: A the ratio of the units of home currency to units of foreign currency is always equal to one.
B the denominator is always equal to one. C the price is fixed by the government. D the rate is adjustable in increments of 25 basis points. B 1 dollar buys a pound. C 2 pounds buy 1 dollar. D 1 dollar buys 1 pound. C yen buy 1 pound. When we look at exchange rates between two countries, what is the relationship between the exchange rate expressed in units of the domestic currency and the exchange rate expressed in units of the foreign currency?
A They are both equal to one. B They cancel each other out. C One is always the reciprocal of the other. D They can never coexist. Page 2 A More American tourists will find it cheaper to travel to Europe. B More Europeans will stay home as visits to the United States become more expensive. C Europeans will import fewer products from the United States. D Americans will import fewer products from Europe. B 2 euros. If a nation's currency buys fewer units of a foreign currency today than yesterday, we say the value of its currency has: A appreciated.
B depreciated. C stagnated. D become inverted. When a nation's currency appreciates, it purchases its currency is said to. A fewer; strengthen B more; strengthen C fewer; weaken D more; weaken units of a foreign currency and If one nation's currency strengthens against a foreign currency, the other nation's currency must against the domestic currency. A strengthen B equalize C weaken D appreciate Page 4 When the dollar declines in value against a foreign currency, it is called a n : A appreciation.
B depreciation. C inflation. D deflation. In European terms, when the exchange rate for the U. B the dollar has depreciated. C the euro has appreciated.
D the dollar has weakened. Which of the following statements is equivalent to an appreciation of the dollar relative to the euro? A The dollar buys fewer euros now. B The euro buys fewer dollars now. C The dollar costs less. D The euro buys more dollars now. A depreciating B appreciating C equalizing D holding its own against the A Both the dollar and euro have depreciated. B The dollar has appreciated and the euro has depreciated.
C The dollar has depreciated and the euro has appreciated. D Both the dollar and euro have appreciated. It is customary to express changes in the exchange rates of two currencies over time, as: A the loss of purchasing power of one currency divided by the loss of purchasing power of the other currency.
B the percentage change expressed as an appreciation or depreciation of one against the other. C a ratio of the absolute values without signs. D a ratio of the price of gold in each nation. In general, the percentage of appreciation of one nation's currency is equal to: A its rate of growth of real GDP. B its purchasing power. C its population growth. D the percentage of depreciation of the foreign nation's currency. Slight discrepancies in the rates of appreciation versus depreciation of two currencies are related to: A a mathematical quirk that percentage increases are always larger than percentage decreases because, in the first case, the denominator is smaller.
B the imprecise nature of the calculations. C the lack of reliable information. D the volatile nature of exchange rates. Changes in exchange rates are usually expressed in percentage terms. The percentage rate of appreciation for one currency will be close to the rate of depreciation for the other nation whenever: A the change in the rate is very small.
B the exchange rates are very different in quantitative terms. C the change in the rate is very large. C — Page 7 and the Table: Currency Values I In , how many euros would it take to buy one pound? A It appreciated. B It held steady. C It depreciated. D Not enough information is provided to know how well the euro did.
Table: Currency Values I If you want, ceteris paribus, to invest dollars in and then convert them back into dollars in , which is the best currency to invest in?
A B C D the euro the real the pound the rupee A bilateral exchange rate is an exchange rate: A that has two sides: maximal and minimal. B that has exhibited both appreciation and depreciation. C that is a hybrid between fixed and floating. D between two currencies. What is a multilateral exchange rate? A It is an exchange rate that is measured by using a number of different techniques.
B It is an exchange rate that calculates the overall movement of the rate against more than just one other currency. C It is an exchange rate that is measured once every 10 years. D It is a rate that is set by the IMF for many different nations. The average of the bilateral rate changes for a nation, weighted by the importance of the trading partner, is known as the: A real exchange rate.
B nominal exchange rate. C effective exchange rate. D direct exchange rate. To calculate the multilateral effective exchange rate for a nation for each trading partner: A add the share of trade to the percent change in the exchange rate and add the sums.
B divide the share of trade by the percent change in the exchange rate and add the dividends. C subtract the share of trade from the percent change in the exchange rate and add the differences. D multiply the share of trade by the change in the exchange rate and add the products. What is it? A a random selection of currencies B currencies that are low-valued and unstable C currencies that represent the average increase in value for all currencies D currencies most used by the nation in its trade and other transactions, weighted by their importance We use the effective exchange rate calculation to tell us: A the underlying rate of inflation.
B how international finance affects a nation's exchange rate. C how the overall international purchasing power of a nation has changed. D the natural real exchange rate taking out the effects of inflation. The U. However, it didn't weaken as much against ALL currencies as it did against the currencies of the major developed countries which include the pound and the euro. This could be because: A the U. B the large trading partners, China and Japan, did not allow their currencies to appreciate greatly against the U.
C the rate of appreciation is always somewhat greater than the rate of depreciation. D the United States does not trade with some nations, so the effective rate is biased.
When exchange rates change and prices stay the same: A relative prices of traded goods in the two nations are unchanged. B the price of foreign goods expressed in the home currency will always rise. C imports get more expensive as the home currency depreciates. D the price of foreign goods expressed in the home currency will always fall. The fall in the U. B China has reduced its exports. C China has depreciated its currency.
D China has pegged its currency to the dollar. Page 11 Using exchange rates, it is possible to price-compare in different nations. A The iPod would be cheaper in France. B The iPod would be cheaper in the United States. C The iPod would cost the same in both countries. D From the information provided, it is impossible to answer this question.
A term that categorizes patterns of exchange rate behavior is known as: A exchange rate regimes. B exchange rate realms. C exchange rate principles. D exchange rate observations. If a government wishes to limit or prohibit fluctuations in exchange rates, it will choose: A to fix, or peg, the value of its currency to some base currency over a sustained period. B to allow its currency to rise or fall in price, depending on a variety of supply and demand factors. C to suspend purchases and sales of its currency.
D to allow the rate to be set by international banks. A flexible or floating exchange rate system is one in which the: A government closely monitors and controls the value due to trade flows. B government makes no attempt to fix it against any base currency. C government actively tries to achieve fluctuations in the rate. D government fixes the rate against the currency of its largest trading partner. Page 12 When exchange rates are limited to small fluctuations, but not totally fixed, economists refer to the situation as: A essentially fixed.
B essentially floating. C relatively floating. D intermediate regimes. A floating, fixed, managed float B fixed, floating, managed float C managed float, floating, fixed D fixed, managed float, floating When exchange rates are very volatile, with a wide range of variation, the currency is said to be: A in limbo.
B in free float. C perfectly flexible. D in sluggish float. What is a currency band? A a limit below which the currency is not allowed to fall B a limit above which the currency is not allowed to rise C a fixed rate regime with some small variations up or down allowed D a very rigid control of the currency—no variation allowed A middle-ground exchange rate regime, between fixed and floating, is NOT called: A a managed float. B a dirty float.
C limited flexibility. D a free float. A large and sudden currency depreciation is widely known as: A a managed float. B a crawling peg. C an exchange rate or currency crisis. A sudden and pronounced loss of value of one nation's currency against others is known as a: A currency crisis.
B forced devaluation. C thinning of value. D default. An exchange rate crisis is when: A the currency is stable. B the value of a currency declines dramatically. C the value of a currency increases dramatically. D a country fixes the price of its currency.
A crawling peg refers to: A a large and sudden currency depreciation. B a fixed exchange rate regime in which the currency is adjusted very frequently to reflect market conditions. C a managed or dirty float, depending on the business cycle. D a drag on exchange rate adjustment caused by imperfect markets. Which nation took the bold step of abandoning its own currency and adopting the U.
Which European nation has kept its own currency and maintains a fixed value against the euro? B a large devaluation and crisis. C limited flexibility, after which it was kept in a narrow band with the dollar.
D a currency union. Page 14 A nation that allowed its currency to steadily depreciate crawl over a six-year period is: A France. B Canada. C the United Kingdom. D Colombia. Some nations such as Ecuador chose dollarization because: A the currency was depreciating so rapidly it became nearly worthless.
B Ecuadorians wanted to save dollars for eventual emigration to the United States. C the Ecuadorian currency was backed by gold, which was confiscated by government officials. D All of these are reasons why such countries chose dollarization. In , Ilzetzki, Reinhart, and Rogoff classified economies, comparing the: A value of their currencies.
B percentage of women in the workforce. C effectiveness of governance and institutions. D flexibility of their exchange rate regimes. Across the globe, exchange rate regimes are: A mostly fixed. B a mix of fixed and floating. C mostly floating. D hard to pinpoint. A currency board is set up to: A manage free-floating currencies. B gradually eliminate currency pegs. C give a peg added durability.
D immediately eliminate currency pegs. Some nations use a currency board to manage their currencies. How does this work? A It is all in the hands of international banks. B The International Monetary Fund manages the currency. C There is a fixed rate regime with a set of strict rules and policy guidelines to keep the currency's value stable. D The currency is allowed to float, but its fluctuations are reviewed periodically by a board of economists.
Eurozone countries: A have no separate legal tender. B are pegged to the euro. C are pegged to the dollar. D are fixed against a single currency. If a nation abandons its own currency and decides to use another nation's currency as its own circulating currency, this is known as: A euro-zoning.
B dollarization. C a managed float. D a Western regime. Dollarization refers to: A increased trade with the United States, resulting in a glut of dollars circulating in the domestic economy. B the fall of the U. C the dominance of the U.
D the adoption of any foreign currency as an official currency by nations outside the United States, such as El Salvador and Ecuador. The foreign exchange market refers to: A a physical place in the heart of New York City's financial district, where traders come to trade other currencies. B a collection of all purchases and sales of one currency for another, where exchange rates are determined. C the discount window of the Federal Reserve.
D the commodity futures market. From to , the volume of currency traded worldwide: A slumped due to the world recession. B has steadily increased. C fluctuated wildly due to investor expectations. D was concentrated in trades in the developing world. Page 16 Which of the following correctly ranks the size of the three largest foreign currency trading centers in dollar volume? Paris; 2. Miami; 3. London B 1. New York; 2. Solutions to the problems of Chapter 7. Unlike static PDF International Macroeconomics 3rd Edition solution manuals or printed answer keys, our experts show you how to solve each problem step-by-step.
Buy International Macroeconomics 3rd edition by Robert C. Feenstra has been teaching international trade at the undergraduate and graduate levels at UC Davis since , where he holds the C. Text : International Macroeconomics by R. Feenstra and A. Taylor, third edition. Web Page : For lecture outlines, homework assignments, solution keys, calendar of due.
GMT international macroeconomics feenstra and pdf - feenstra and taylor international trade pdf. Economics, Krugman and.. Trade and Technology The Ricardian Model. These files are related to international macroeconomics taylor feenstra solutions manual. Full download all chapters instantly please go to Solutions Manual, Test Bank site: testbanklive. For Unlike static PDF International Macroeconomics 3rd Edition solution manuals or printed answer keys, our experts show you how to solve each problem step-by-step.
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