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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Set 1

Q1 | Trade In differentiated products refers to
  • intra industry trade
  • inter industry trade
  • trade based on economies of scale
  • non of the above
Q2 | The terms of trade of developing countries have a secular tendency to
  • improve
  • deteriorate
  • first improve and then deteriorate
  • remain the same
Q3 | The opportunity cost theory assumes that
  • labour is the only factor of production
  • the price or the cost of a commodity can be determined by the labour content in it
  • labour is homogeneous
  • non of the above
Q4 | If a nation gains from trade its consumption point is
  • on the production possibility frontier (ppc
  • inside the ppc
  • above the ppc
  • any of the above
Q5 | Given below is a table whowing the maximum amount of wheat and cloth that the UK and U S could produce if they fully utilize all the factors of production with the best technology available indicate the comparative advantage of U K and U S. U K U S Bushels of wheat 50 120 Meters of Cloth 150 80
  • us have comparative advantage in cloth and u k have comparative advantage in wheat
  • u k have comparative advantage in cloth and us have comparative advantage in wheat
  • us have comparative advantage in cloth and wheat
  • uk have comparative advantage in cloth wheat
Q6 | If a nations terms of trade is ½ its trade partners terms of trade is
  • 4
  • 2
  • 1
  • ½
Q7 | The H O theory postulates that as a result of trade the differences in factor pricesbetween nations
  • diminishes
  • increases
  • remains unchanged
  • any of the above
Q8 | Leontiff paradox refers to the result that the U S
  • exports are more capital intensive than imports
  • exports are more capital intensive than u s import substitutes
  • imports are more capital intensive than u s exports
  • import substitutes are more capital intensive than u s exports
Q9 | The Exchange rate is kept the same in all parts of the market through
  • exchange rate arbiterage
  • interest arbiterage
  • hedging
  • speculation.
Q10 | Hedcging refers to
  • acceptance of foreign exchange risk
  • covering foreign exchange risk
  • foreign exchange speculation
  • foreign exchange arbiterage
Q11 | If { } > { } when K= capital and L= labour, and A and B are countries then
  • counry a is labour abundant
  • counry a is capital abundant
  • counry b is labour abundant
  • counry b is capital abundant
Q12 | If { } > { } when K= capital and L= labour, and A and B are countries then
  • in counry a relative price of labour is low
  • in counry a relative price of capital is low
  • in counry b relative price of labour is low
  • non of the above
Q13 | In Autarchy a nations PPC also shows its
  • consumption function
  • sales frontier
  • profit frontier
  • factor endowment
Q14 | Opportunity cost theory
  • is anti thesis of recardian theory
  • is a synthesis of recardian and smiths theory
  • is a reconstruction of the recardian theory in terms of alternative cost.
  • non of the above
Q15 | The paradox that Growth can make a country worse off is termed as
  • leontiff paradox
  • rybezinsky theorem
  • immiserising growth
  • triffin dilemma
Q16 | “Free trade between two countries in H O model will equalize relative factor pricesprovided there is incomplete specialization.” This is
  • the factor price equalization theorem
  • rybezinsky theorem
  • leontiff paradox
  • cascading effect
Q17 | The absolute slope of a concave PPC is given by
  • internal equilibrium price ratio
  • the marginal rate of transformation
  • increasing returns to scale
  • all the above
Q18 | If { } > { } when K= capital and L= labour, Pk is price of capital and Pl is priceof labour and A and B are countries then
  • counry a is labour abundant
  • counry a is capital abundant
  • counry b is labour abundant
  • counry b is capital abundant
Q19 | Devaluation works best when
  • it is accompanied by a decline in short term interest rate
  • foreign demad for exports is is elastic
  • demand for forign imports is inelastic
  • non of the above
Q20 | BOP includes
  • current account
  • capital account
  • official reserve account
  • all the above
Q21 | international trade refers to trade between
  • two regions of a country
  • two countries
  • two commodities produced in different countries
  • non of the above
Q22 | The trade theory that states that nations should accumulate financial wealth, usuallyin the form of gold, by encouraging exports and discouraging imports is called
  • keynesianism
  • individualism
  • socialism
  • mercantilism.
Q23 | Which among the following are the central themes of Mercantilism?
  • export or perish.
  • strict focus on the wealth accumulation through protectionism.
  • no simultaneous gains or sharing of gains among countries are possible. one country can benefit only at the cost of other countries.
  • all the above.
Q24 | “An Enquiry in to the nature and causes of Wealth of Nations” is written by
  • j s mill
  • david recardo
  • karl marx
  • non of the above
Q25 | Adam Smith identified the basic reason for trade between two nations as
  • the difference in absolute advantage
  • the difference in comparative advantage
  • difference in factor endowments
  • non of the above.