INTERNATIONAL ECONOMICS MID-TERM EXAM CHAPTERS 1-14 R. ZIEGLER/DCB/WARREN/FALL 99 Matching __1. arbitrage __14. GATT __2. Offer curve __15. WTO __3. community indifference curve __16. MITI __4. Heckscher-Ohlin Theory __17. EX-IM BANK __5. Stolper-Samuelson Theorem __18. NAFTA __6. Leontief Paradox __19. EU __7. Rybczynski Theorem __20. North-South Controversy __8. Monopsony power __21. free rider problem __9. computable general equilibrium __22. OPEC __10. Montreal Protocol __23. NIEO __11. Engel's Law __24. UNC-TAD __12. MFN Principle __25. NIC's __13. nominal protection coefficient __26. Dutch Disease A. growth in a country's endowment of one factor of production results in an increase in the output of the good that uses the growing factor extensively and a decrease in the output of other goods -- a currency appreciates from the exploitation of a domestic resource that was previously imported and the resulting loss of international competitiveness in the nation's traditional sector. B. the windfall of a new natural resource erodes profits and production in the industrial sector as the new sector bids resources away from it by putting upward pressure on wages and bids away capital by putting upward pressure on interest rates causing the industrial sector to seem to contract. C. purport to show how economic well-being of a whole group depends on the whole group's consumption and used to demonstrate overall welfare through contours on a production possibility curve which may ignore individual situations within the society. D. commodities requiring for their production much of abundant factors and little of scarce factors are exported in exchange for goods that call for factors in the opposite proportions so that factors in abundance are exported while those which are scarce are imported. E. given certain conditions and assumptions, an event that changes product prices in a country unambiguously raises the real returns to the factor used intensively in the rising price industry and lowers the real returns to the factor used intensively in the falling price industry in the long run regardless of which goods the sellers of the two factors prefer to consume. F. countries such as Hong Kong, Singapore, South Korea, and Taiwan that are growing very rapidly based mostly on export growth. G. agreement to establish an economy of scale relatively free of trade restrictions among the US, Canada, and Mexico. H. extension to all trade partners of any reciprocal tariff reduction negotiated by US with any other nation. I. customs union formed by fifteen countries in Europe often referred to as the Common Market. J. international organization devoted to the promotion of freer trade through multilateral trade negotiation K. shows how much of its import commodity a nations demands to be willing to supply various amounts of its export commodity, or the willingness of the nation to import and export at various relative commodity prices. L. purports to explain that US exports labor intensive goods while importing capital intensive ones, precisely opposite of what most theories of trade might suggest should happen. M. in some cases, a nation has a large enough share of the world market for one of its imports to be able to affect the world price unilaterally, such as US auto market ability to force Toyota to sell its cars here more cheaply or build them here. N. the Geneva based institutionalization of the GATT. O. 1987 agreement by fifty countries to ban substances that supposedly harmed the ozone layer (which was probably not being harmed by them). P. push by Third World nations to raise income levels and development by negotiating a global agreement to raise, set, and stabilize primary products they export and open industrial nation markets to manufactured goods they produce. Q. association or cartel of less developed countries which are major oil producers to set prices and production level quotas for them. R. in the long run, per capita income rises and demand shifts toward luxuries and away from staples. S. the UN institution to the NIEO based in Geneva. T. the ratio of the price received by domestic producers to the world price of the same product at the nation's border. U. US government agency that extends subsidized loans to foreigners to finance US exports. V. quasi-public national board in Japan which seeks to promote economic development strategies for the country. W. estimates based on large computer models of the economy that can pick up subtle income and price repercussions that are hidden by some diagrams predicting about 10% gains to nations from freer trade. X. purchase of a currency in the monetary center where it is cheaper for immediate resale in the monetary center where it is more expensive in order to make a profit. Y. involves a range of issues around desire for economic development of Third World or less developed nations seeking greater access to markets, technology, and capital primarily controlled by the developed sector and somewhat limited to them by their debt burden. Z. arises whenever benefits of a group fall on everyone in a large group regardless of how much they spend in effort, time, money, vote, etc. toward achieving the objective. 15-17 D 18-20 C 21-23 B 24-26 A INTERNATIONAL ECONOMICS FINAL EXAM FALL 1999/R.ZIEGLER/DCB WARREN MATCHING SET # 1 MATCHING SET # 2 __1. balance of payments __1. international trade shock __2. current accounts balance __2. monetary-fiscal mix __3. capital accounts balance __3. international capital flow shock __4. IMF __4. domestic spending shock __5. conditionalities __5. sterilization __6. appropriate technologies __6. capital account deterioration __7. net foreign investment __7. debtor nation __8. money multiplier process __8. ECU __9. depreciation __9. FE curve __10. appreciation __10. LM curve __11. devaluation __11. equilibrium GDP __12. revaluation __12. real domestic investment __13. capital controls spending __14. sterilized intervention __13. uncovered interest parity __15. speculation bubble __14. forward premium __16. floating exchange rate system __15. hedging __17. dirty float __16. Bretton Woods __18. snake and tunnel __17. price gaps __19. quantity theory equation __18. spending multiplier __20. twin towers __19. J curve __21. price discipline __20. public finance effect __22. net fiscal effect __21. Third World __23. immigration cost/benefit analysis __22. world debt crisis __24. World Depression of 1982 __23. host country __25. default consequences __24. refinancing __26. Hyman View/defensive investment __25. restructuring __26. North/South Controversy 46-50 A 41-44 B 36-40 C 31-35 D MATCHING SET # 1 ANSWERS A. foreign investors seek to protect market power B. summary statement of all international transactions of residents of a nation with the rest of the world during a particular time frame. C. a decrease in the domestic currency price of the foreign currency. D. under UN auspices, it oversees nations toward following a set of agreed upon rules of conduct in international trade and finance and provides borrowing facilities for nations in temporary balance of payments difficulties. E. postulates that the nation's money supply times the velocity of circulation is equal to the general price level times the physical output at full employment. F. managing a nation's exchange rate to achieve aims other than simply smoothing out short term fluctuations, keeping the currency undervalued so as to stimulate exports. G. requirements imposed by IMF for nations to take advantage of its loans H. the net flow of currently used goods and services -- it is positive if the nations earns more in extra assets or reduced liabilities in it foreign trade dealings, and negative if the country must pay by giving up assets or increasing its liabilities. I.movement in exchange rates reflecting investor action making trends in exchange rates a self-fulfilling phenomenon, at least temporarily, even appearing to contradict economic fundamentals. J.supposed interrelationship of balance of payments deficit and governmental budgetary deficits. K. does not include official reserves transactions. L. among the most harmful of conditionalities are requirements for countries receiving loans that they limit their 'expectations' to levels of technology which 'fit' their development level. M. according to some, the poor economic conditions of the late seventies and early eighties resulted in part from the inability of LDC's to meet their debt obligations, and they were left in untenable economic straits which had dilatory effects on international trade and production. N. among the results of LDC inability to meet debt service requirements is the loss of credit worthiness and continued loans. O. a fixed rate system in which most nations take part may impose forced lowering of the average global rate of price inflation because if they do not accede, they may exhaust their reserves and credit worthiness. P. migrants switch from one set of public goods to another (in another country). Q. deliberate increase in the exchange rate by a nation's monetary authority from one fixed or pegged level to another. R. the net accumulation of foreign assets minus foreign liabilities. S. comparison of positive and negative impacts of immigration in economic, social, political and other terms. T. the multiple expansion of the money supply with fractional reserve banking. U. effort by a government to effect an increase in money supply to compensate for it monetary authority's action to buy domestic currency in foreign exchange which effectively reduces its domestic money supply. V. EU action to set agreed limits to currency value change versus other member's depreciated currency. W. an increase in the domestic currency price of the foreign currency. X. system which allows market forces to set foreign currency exchange. Y. governmental policy which alters its currency's foreign exchange rate. Z. governmental policies regarding the ability of capital to flow to impact on currency values by design to control exchange rates; restricts ability of financial investors to transfer money in and out of the country. MATHCING SET # 2 ANSWERS A. planned common currency for the European Union. B. fixed or adjustable peg exchange rate system set up after World War II which lasted until 1971. C. country which is a net borrower D. the condition for a nation at which production equals desired aggregate dmeand and desired national expenditure plus net exports. E. for a given set of basic economic conditions that can influence a country's balance of payments, it shows the set of all interest and income combinations that result in a zero value for its official settlements balance. F. shows all combinations of interest rate and national product that are equilibrium between money supply and money demand. G. the actual effective investment rate after it has been adjusted for inflation. H. another term for developing or underdeveloped nations. I. bad lending structuring has left many developing countries unable to readily meet their repayment schedules. J. typical pattern of the current account balance as it responds to a drop in home currency. K. a position exposed to rate risk as the act of reducing or eliminating a net asset or liability position in the foreign currency. L. proportionate difference between the current forward exchange rate value of the pound and its current spot value. M. a currency is expected to appreciate or depreciate by as much as its interest rate is lower or higher than the interest rate in the other country. N. differential of purchasing power from parity between nations. O.expectation that an increase in some component of GDP has a larger effect on national production than its actual change. P. arranging new loans to nations which pay off existing ones but also provide capital for further economic development. Q. practice of taking an action to reverse or offset the effect of official interventionn on the domestic money supply. R. international outflow causes negative movement in the balance. S. combining money supply and budgetary policies so as to achieve a combination of national product and overall payments balance in the short run. T. development in foreign trade changing aggregate demand. U. leads to a change in national product by altering domestic real expenditure as a change in fiscal policy. V. unpredictable shift in international mobile funds in response to events (capital flight) W. the 'struggle' among industrialized developed nations and the developing countries which want to have access to technologies and capital which will allow them to progress; is based on the comparative positioning of LDC's and the developed sector on the globe. X. countries from which people migrate may suffer a loss in public finance from their departure. Y. with regard to such multi-national corporations as Sony, Toyota, etc., the US is one of these. Z. arrangements to provide new loans to nations to allow them to pay off existing debt service with the loans. Return