433 f05 fnl - Economics 433: Advanced International Trade...

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Economics 433: Advanced International Trade Final Exam December 12, 2005 Please print name _______________________________________________________ This exam has two parts . Please answer all questions in part I and any 5 of the 6 questions in Part II . If you attempt all six questions in part II, be sure to cross out the question you do not want to have graded. Otherwise, the first 5 questions will be graded. (There is no extra credit for doing all 6 questions.) Each part will be weighted in proportion to its allotted time. Be sure to read the questions carefully, and provide concise explanations when they are solicited.
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Part I: Multiple Choice (45 minutes) 1. Which of the following statements best summarizes recent trends in international trade and foreign direct investment (FDI)? a. Economies are becoming increasingly self-reliant, and so both trade and FDI have been falling. b. Increasingly, firms have been supplying their foreign buyers by building production facilities in these buyers’ countries, so falling trade flows have been offset by rising FDI flows. c. Both trade and FDI have been growing more rapidly than global production, but FDI has outstripped trade. d. Both trade and FDI have been growing more rapidly than global production, but trade has outstripped FDI. 2. Suppose two countries begin trading with each other, and one of the goods they trade is subject to increasing internal returns to scale at the industry level. Which of the following statements is correct? a. These countries will gain from the trade only if they differ in their factor endowments. b. At least one of these countries must lose from trade. c. Both countries will gain from trade so long as they both continue to produce the good subject to increasing returns. d. Production of the good subject to increasing returns will tend to be concentrated in one country. 3. Suppose two countries produce and consume X and Y. If these countries go from autarky to free trade with one another, and the ratio of X consumption to Y consumption in each country is unaffected, the gains from trade must be coming from: a. gains from specialization. b. improvements in output per worker. c. increasing returns to scale. d. gains from exchange. 4. When a country’s terms of trade improve: a. the global price of its exported good rises relative to the global price of its imported good. b. the terms of trade for its trading partners must have improved as well. c. it is usually a result of a global increase the supply of its abundant factor. d. it may suffer from immizerizing growth. 5. Evidence on the factor content of trade flows suggests that: a. countries typically export the factors in which they are poorly endowed. b.
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433 f05 fnl - Economics 433: Advanced International Trade...

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