International Economics solved MCQs

chapters
1 of 14

1. Trade In differentiated products refers to

a. intra industry trade

B. inter industry trade

c. trade based on economies of scale

d. non of the above

2. The terms of trade of developing countries have a secular tendency to

a. improve

B. deteriorate

c. first improve and then deteriorate

d. remain the same

3. The opportunity cost theory assumes that

a. labour is the only factor of production

B. the price or the cost of a commodity can be determined by the labour content in it

c. labour is homogeneous

d. non of the above

4. If a nation gains from trade its consumption point is

a. on the production possibility frontier (ppc

B. inside the ppc

c. above the ppc

d. any of the above

5. Given below is a table whowing the maximum amount of wheat and cloth that the UK and U S could produce if they fully utilize all the factors of production with the best technology available indicate the comparative advantage of U K and U S. U K U S Bushels of wheat 50 120 Meters of Cloth 150 80

a. us have comparative advantage in cloth and u k have comparative advantage in wheat

B. u k have comparative advantage in cloth and us have comparative advantage in wheat

c. us have comparative advantage in cloth and wheat

d. uk have comparative advantage in cloth wheat

6. If a nations terms of trade is ½ its trade partners terms of trade is

a. 4

B. 2

c. 1

d. ½

7. The H O theory postulates that as a result of trade the differences in factor pricesbetween nations

a. diminishes

B. increases

c. remains unchanged

d. any of the above

8. Leontiff paradox refers to the result that the U S

a. exports are more capital intensive than imports

B. exports are more capital intensive than u s import substitutes

c. imports are more capital intensive than u s exports

d. import substitutes are more capital intensive than u s exports

9. The Exchange rate is kept the same in all parts of the market through

a. exchange rate arbiterage

B. interest arbiterage

c. hedging

d. speculation.

10. Hedcging refers to

a. acceptance of foreign exchange risk

B. covering foreign exchange risk

c. foreign exchange speculation

d. foreign exchange arbiterage

11. If { } > { } when K= capital and L= labour, and A and B are countries then

a. counry a is labour abundant

B. counry a is capital abundant

c. counry b is labour abundant

d. counry b is capital abundant

12. If { } > { } when K= capital and L= labour, and A and B are countries then

a. in counry a relative price of labour is low

B. in counry a relative price of capital is low

c. in counry b relative price of labour is low

d. non of the above

13. In Autarchy a nations PPC also shows its

a. consumption function

B. sales frontier

c. profit frontier

d. factor endowment

14. Opportunity cost theory

a. is anti thesis of recardian theory

B. is a synthesis of recardian and smiths theory

c. is a reconstruction of the recardian theory in terms of alternative cost.

d. non of the above

15. The paradox that Growth can make a country worse off is termed as

a. leontiff paradox

B. rybezinsky theorem

c. immiserising growth

d. triffin dilemma

16. “Free trade between two countries in H O model will equalize relative factor pricesprovided there is incomplete specialization.” This is

a. the factor price equalization theorem

B. rybezinsky theorem

c. leontiff paradox

d. cascading effect

17. The absolute slope of a concave PPC is given by

a. internal equilibrium price ratio

B. the marginal rate of transformation

c. increasing returns to scale

d. all the above

18. If { } > { } when K= capital and L= labour, Pk is price of capital and Pl is priceof labour and A and B are countries then

a. counry a is labour abundant

B. counry a is capital abundant

c. counry b is labour abundant

d. counry b is capital abundant

19. Devaluation works best when

a. it is accompanied by a decline in short term interest rate

B. foreign demad for exports is is elastic

c. demand for forign imports is inelastic

d. non of the above

20. BOP includes

a. current account

B. capital account

c. official reserve account

d. all the above

21. international trade refers to trade between

a. two regions of a country

B. two countries

c. two commodities produced in different countries

d. non of the above

22. The trade theory that states that nations should accumulate financial wealth, usuallyin the form of gold, by encouraging exports and discouraging imports is called

a. keynesianism

B. individualism

c. socialism

d. mercantilism.

23. Which among the following are the central themes of Mercantilism?

a. export or perish.

B. strict focus on the wealth accumulation through protectionism.

c. no simultaneous gains or sharing of gains among countries are possible. one country can benefit only at the cost of other countries.

d. all the above.

24. “An Enquiry in to the nature and causes of Wealth of Nations” is written by

a. j s mill

B. david recardo

c. karl marx

d. non of the above

25. Adam Smith identified the basic reason for trade between two nations as

a. the difference in absolute advantage

B. the difference in comparative advantage

c. difference in factor endowments

d. non of the above.

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