Final07-answers - UNIVERSITY OF BRITISH COLUMBIA Department...

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Unformatted text preview: UNIVERSITY OF BRITISH COLUMBIA Department of Economics International Finance (Econ 356) Winter 2006 Term 2 Prof. Amartya Lahiri Final Exam The points corresponding to each question are indicated in parenthesis and add up to 80. All questions have to be attempted. Read through the exam before starting and budget your time carefully. You have 120 minutes to &nish the exam. GOOD LUCK! I. (20 points) Indicate whether the following questions are TRUE, FALSE OR UN- CERTAIN giving brief explanations for your answers. Note that answers without proper explanations do not get any credit in exams!! 1. A trade surplus implies a current account surplus. False . A trade surplus can be accompanied by a net receipt of payments on assets held abroad so that the current account is in surplus. 2. Measured di/erences in physical capital across countries can account for the observed income di/erences between them. False . The di/erences in per capita incomes across countries are too large to be explained by di/erences in capital alone. 3. A country with a healthy economy should have a balanced current account. Uncertain . A healthy economy with very pro&table investment opportunities should be borrowing abroad to &nance them. Hence, it should be running a current account de&cit since the that is the best way to use scarce world capital ¡allocate it to its best use. 4. The price-specie-¢ow mechanism ensured that the price level remained stable both in the short run and the long run under the gold standard....
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This note was uploaded on 04/17/2011 for the course COMM 299 taught by Professor Desrochers during the Spring '08 term at UBC.

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Final07-answers - UNIVERSITY OF BRITISH COLUMBIA Department...

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