The International Economy And Globalization

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1.In which type of goods do Less Developed Countries (LDCs) typically hold a comparative advantage?

Raw materials and basic commoditiesSemi-finished goodsFinished manufactured itemsBanking and financial services

2.Why did output decline drastically in the economies undergoing transition?

Financial institutions failed to operate effectivelyCorporate governance was largely absentEssential infrastructure was lackingAll of these factors contributed

3.When products are sold abroad at prices below the marginal cost of production and the marginal benefit to local consumers, which policy is most likely supporting this situation?

a subsidy on imported goodsa limit on the quantity of goods importedan advantage based on relative efficiencya financial support for exports

4.How do tariffs affect the production levels of domestic companies and the consumption habits of consumers?

Produce more than necessary, consume less than beforeIncrease production and consumption simultaneouslyReduce production and decrease consumptionLower production but increase consumptionNone of the above

5.The equilibrium exchange rate adjusts to neutralize disparities in which of the following international economic factors?

6.What do differences in opportunity costs between countries result in?

Comparative advantageElevated currency exchange ratesRestrictions on tradeLimits on import quantities

7.Which action can a government take to stop the value of its currency from declining in the foreign exchange market?

Lower the interest ratesExchange its currency by selling itUse foreign reserves to purchase its own currencyRaise government expenditure

8.What is the definition of the marginal propensity to consume?

Overall expenditure divided by total consumptionTotal consumption divided by total earningsThe change in consumption divided by the change in incomeThe change in consumption divided by the change in savings

9.What do the terms of trade represent?

The comparative income levels between two nationsThe comparison of GDP figures between countriesThe volume of exports between different nationsThe ratio of export prices to import prices