International Trade and Capital Flows

9 questions

1. 1. Which of the following is most likely the difference between GDP and GNP?
   Factor incomes to foreign-owned firms in the United States are included in GNP Depreciation is excluded from GNP Factor incomes to foreign-owned firms in the United States are included in GDP
2. 2. Assume that two countries A and B have the following outputs per worker in producing two goods X and Y.

   

   Based on this data, we can say that Country B has:

   Comparative advantage in producing good XComparative advantage in producing good YAbsolute advantage in producing good X
3. 3. Which of the following models assumes that comparative advantage results from the relative availability to two factors, namely, capital and labor?
   The Ricardian modelHeckscher and Ohlin modelBoth A and B
4. 4. Which of the following is the case where trading partners mutually agree to limit the amount of a product that will be exported?
   QuotaVoluntary export restraintMinimum domestic production
5. 5. Which of the following trade restrictions is most likely to decrease national welfare?
   QuotasTariffsExport subsidies
6. 6. In this type of trade bloc, the members eliminate internal trade barriers, adopt common external trade barriers and allow free movement of resources, for example, labor, among member countries.
   Free Trade AreaCommon MarketCustoms Union
7. 7. Which of the following will most likely decrease the current account deficit?
   High private savingsHigh domestic investmentsLarge government deficit
8. 8. The balance on current account includes all of the following items except:
   Merchandise exports minus merchandise imports Changes in U.S. assets owned abroad and foreign assets owned in the U.S. Unilateral transfers of currency by individuals
9. 9. If the current account for a country is in deficit, then which of the following is most likely TRUE?
   There will be a surplus in the government budget There will be low interest rates There will be a capital account surplus