Exam (elaborations)
ECON 340 Midterm 1 Detailed Questions and Expert Answers
- Course
- ECON 340
- Institution
- University Of Michigan
ECON 340 Midterm 1 Detailed Questions and Expert Answers
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ECON 340 Midterm 1 Detailed Questions andExpert Answers
A rise in the price level ________ the buying power of money and ________ the
quantity of real GDP demanded. - ANS lowers; decreases
If the real wage rate increases over time, this means that the - ANS buying power
of an hour's work has increased over time.
What does the H-O model explain? - ANS The Heckscher-Ohlin model offers a
reasonable explanation of the pattern of trade and the gains from trade.
If the value of a nation's imports is more than the value of its exports, then the
nation is experiencing: - ANS a trade deficit.
Most foreign direct investment among industrialized countries is: - ANS horizontal
FDI
If the inflation rate is less than the nominal interest rate, then the - ANS real
interest rate will be positive.
Which of the following entries is considered to be a service export? - ANS Mexican
tourists visiting the Grand Canyon
, If we measure scarcity or abundance correctly, we should use the concept of
"effective factor endowment." This means: - ANS the actual factor endowment
multiplied by the average productivity of workers compared with its share of world
GDP.
Which of the following is classified as reverse-vertical FDI? - ANS A Korean steel
producer purchases an iron ore mine in Minnesota.
1) France and Italy only trade with each other; (2) each produces wine and bread;
(3) The production of bread is relatively capital intensive, and the production of
wine is relatively labor intensive, and (4) France is relatively abundant in capital,
while Italy is relatively abundant in labor. - ANS The ratio of Italy's total capital
stock to its labor force is smaller than the same ratio for France.
If nothing else changes, real GDP and the standard of living will both increase
when - ANS labor productivity increases.
If agriculture is a capital-intensive industry in the United States and a labor-
intensive industry in India, then: - ANS there is factor-intensity reversal in
agricultural production between the two countries.
NAFTA is: - ANS a free trade area among Mexico, Canada, and the United States.
Why is the PPF bowed out in the Heckscher-Ohlin model? - ANS There are
increasing opportunity costs of producing each good.
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