International Economics Set 1 MCQs

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.