Answer the following statements true (T) or false (F)
1) The law of increasing opportunity costs limits international specialization.
2) Answer the question on the basis of the following information. Assume that by devoting all its
resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its
resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y.
Refer to the given information. Alpha should specialize in Y and Beta in X.
3) Answer the question on the basis of the following information. Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y.
Refer to the given information. The terms of trade will be at or within the 1X = 1½Y to 1X = 2 / 3 Y range.
4) Answer the question on the basis of the following information. Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y.
Refer to the given information. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.
1) T
2) T
3) T
4) F
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According to the purchasing power parity, if the price level in the US rises relative to Mexico
a. The dollar will appreciate relative to the peso b. The dollar will depreciate relative to the peso c. There is no effect on either currency d. None of the above
Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and the nominal value of the domestic currency in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns
to complete equilibrium. a. Real GDP rises and nominal value of the domestic currency remains the same. b. Real GDP falls and nominal value of the domestic currency remains the same. c. Real GDP and nominal value of the domestic currency remain the same. d. Real GDP rises and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.