Question 26 The gravity model predicts that China and India will trade with Sele

Question

Question 26

The gravity model predicts that China and India will trade with

Select one:

a. smaller economies that are close by.

b. smaller economies that are distant.

c. larger economies that are distant.

d. larger economies that are close by.

Question 27

The international institution that serves as a lender of last resort is called the

Select one:

a. WTO.

b. IBRD.

c. IMF.

d. GATT.

e. World Bank.

Question 28

An example of expansionary fiscal policy would be

Select one:

a. an increase in tax collection to reduce budget deficits.

b. a decrease in government spending to reduce budget deficits.

c. a decrease in interest rates to help stimulate the economy.

d. an increase in interest rates to encourage private savings.

e. an increase in government spending on infrastructure to create jobs and improve the economy.

Question 29

Proponents of ISI assumed that governments

Select one:

a. could control the terms of trade.

b. should enact orthodox stabilization plans.

c. were capable of identifying and correcting market failures.

d. were capable of identifying and correcting the excesses of economic populists.

Question 30

In order to protect against foreign exchange risk, firms can use

Select one:

a. the J-curve.

b. the forward market for foreign exchange.

c. the spot market for foreign exchange.

d. purchasing power parity.

e. interest rate arbitrage.

Explanation / Answer

26)

According to the gravity model, trade volume is directly proportional to the product of the GDPs of the trading partners and inversely related to the distance from each other.

Hence, India and China according to this model would trade with large economies which are close by.

the correct option is (d)

27)

The international organization which serves as a lender of last resort is called IMF or International monetary fund.

the correct option is (c)

28)

An expansionary fiscal policy is either increase in government spending or reduction in taxes or both.

the correct option is (e)

29)

ISI is import substitution industrialization which focuses on industries which produce goods which are substitutes for imported goods to lessen the need for foreign exchange and could control terms of trade.

the correct option is (a)

30)

In order to protect against the foreign exchange risk as it keeps fluctuation in the currency market, firms can use forward market for foreign exchange.

the correct option is (b)

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.