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38 Cards in this Set
- Front
- Back
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If the same basket of goods costs $400 in the United States and 200 pounds in Britain, then according to the purchasing power parity theory, |
the exchange rate should approach $2/pound |
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The fact that exchange rates are nearly identical in different markets around the world is due to |
the actions of arbitrageurs |
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: Suppose the exchange rate is such that 1 U.S. dollar equals 1 euro in New York and 0.9 euros in Paris. An arbitrageur would sell euros |
in Paris and buy U.S. dollars in New York |
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If interest rates fall in country A, other things constant,
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demand for that country's currency will fall and the currency will depreciate |
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If the purchasing power parity theory were literally true
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the price of a traded good should be the same everywhere in the world |
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A fixed exchange rate is enforced by
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central banks, who buy and sell appropriate currencies
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When the international financial system operated under the gold standard
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the currencies of most countries were convertible into gold
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The Bretton Woods system
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fixed exchange rates in terms of U.S. dollars
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Under the Bretton Woods agreement,
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the dollar was selected as the key reserve currency |
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Under the Bretton Woods agreement
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the United States stood ready to convert foreign holdings of dollars into gold at a fixed rate of $35 per ounce |
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One signal that the U.S. dollar was overvalued in the early 1970s was
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the recurring balance of trade deficits in the United States |
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The current international monetary system is
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a system combining fixed and flexible exchange rates
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Today's exchange rate system can be described
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a managed float |
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The yardstick most often used to compare living standards across nations is
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GDP per person
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Which of the following is true about GNI?
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measures the market value of all goods and services produced by resources supplied the home country’s residents and firms, regardless of the location of the resource
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The World Bank sorts countries into the following three major groups:
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high-income economies, middle-income economies, low-income economies
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Compared to industrial market countries, developing countries usually have
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exports consisting mostly of agricultural products and raw materials, faster population growth, higher unemployment, higher rates of illiteracy
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Which of the following groups has the highest infant mortality rate?
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low-income economies
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Labor productivity depends on the
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quality of the labor, the amount of capital, the amount of natural resources, the amount of other inputs, such as technology
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The average value added per U.S. farm worker is about how many times that of farm workers in low- and middle-income countries.
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seventy-five
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A requirement for development is
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low and predictable inflation that encourages saving
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Production and exchange depend on a reliable infrastructure of
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transportation, communication, sanitation, electricity
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Which of the following resources is necessary to combine efficiently the other resources to produce goods and services?
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Entrepreneurial ability
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Sjen Mavago, the economics minister of the country of X-Marks-the-Spot, has concluded that entrepreneurs are unable to generate the kind of growth the country needs. Her decision to create state enterprises might be motivated by the desire to
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provide jobs for friends and relatives of government officials |
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Social capital is
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the shared values and trust that promote cooperation in the economy
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Developing countries
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must acquire foreign exchange in order to pay for imports
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The bulk of exports from industrial countries are
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manufactured goods
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problem for developing countries is that the prices of primary products fluctuate more widely than do the prices of finished goods because
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crop supply fluctuates with the weather
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If the country of Deficitland is experiencing trade deficits, they are more likely to cut imports of
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capital goods
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One of the reasons that import substitution is popular is that
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it benefits suppliers of the favored domestic industries
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When a developing country relies on import substitution,
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other countries often retaliate with their own trade restrictions, domestic producers, shielded from foreign competition, usually fail to become efficient, replaces low-cost foreign goods with high-cost domestic goods, it sacrifices the gains from specialization and comparative advantage
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When a developing country relies on export promotion
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it builds its technological and educational base and then can make more complex products for export
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Which of the following creates an obstacle to pursuing freer international trade?
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Consumers do not recognize their potential gains
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An economic system that includes private ownership of most resources and the coordination of economic activity by price signals generated by market forces is
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capitalism
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In centrally-planned economies, most prices are not
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based on consumer demand
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Which of the following occurred when there was a shortage of supply in a centrally planned economy?
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Shop operators expected “tips” or bribes for supplying scarce consumer goods, Store shelves were empty, Shoppers waited in long lines at retail stores, Central planners reduced the amount supplied to each sector
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One thing that did not happen in the former Soviet Union was
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consumers paying fair market prices to get desired products |
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Privatization is the
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process of turning public enterprises into private enterprises |
