Classical

Advanced Questions - Section 2

31:  

The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions. Which type of cost reduction would not lead to offsetting welfare gains for the overall economy

A.

R&D generating welfare improved technology

B.

development of more productive machinery

C.

new work rules promoting worker efficiency

D.

lower wages extracted from workers

 
 

Option: D

Explanation :


32:  

Investors engage in ____ when they move funds into foreign currencies in order to take advantage of interest rates abroad that are higher than domestic interest rates.

A.

currency arbitrage

B.

interest arbitrage

C.

short positions

D.

long positions

 
 

Option: B

Explanation :


33:  

The difference between a country's balance of payments and its balance of international indebtedness

A.

is equal to official reserve transactions

B.

occurs because of foreign exchange fluctuations

C.

reflects statistical discrepancies

D.

reflects the difference between flow and stock concepts

 
 

Option: D

Explanation :


34:  

Which exchange rate mechanism is intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions?

A.

dual exchange rates

B.

managed floating exchange rates

C.

adjustable pegged exchange rates

D.

crawling pegged exchange rates

 
 

Option: A

Explanation :


35:  

Criticisms against the North American Free Trade Agreement include all of the following except

A.

wages in the United States will rise relative to Mexican wages

B.

American jobs will be lost to workers in Mexico

C.

the environment is not adequately protected by NAFTA

D.

none of the above

 
 

Option: A

Explanation :




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