IS and Econ 13 - Final Exam Sample d. both a and b.
Questions (correct answers starred “*”) e. none of the above
Please note that these are just sample questions
that indicate the types of questions that you can 8. Joe and Drew can both produce hats and
expect, not the questions that you will be asked shoes (and no other goods) and there is no else
in the exam around. If Joe has a comparative advantage in
producing shoes, what else do we know for
1. The Democratic Republic of the Congo certain?
(former Zaire) a. Joe has an absolute advantage in
a. has few natural resources and is one of the
poorest countries on earth. b. Drew has an absolute advantage in
b. has a large amount of natural resources but producing shoes.
is one of the poorest countries on earth.* c. Drew has a comparative advantage in
c. has few natural resources and is one of the producing hats.*
richest countries in sub-Saharan Africa. d. Joe has a comparative advantage in
d. has a large amount of natural resources producing hats.
and is one of the richest countries in sub-Saharan e. None of the above.
e. is smaller but richer than South Africa. 9. Restrictions on international trade
a. have increased since WWII.
2. Corporations b. include taxes on imported goods.*
a. were the main form of firm organization c. were uncommon before WWII.
since the beginning of the industrial revolution. d. a and b.
b. have always been the most efficient form e. All of the above.
of firm organization.
c. arose in the late Middle ages and have Suppose each of two countries, say China and
been dominant since then. the U.S., can either pursue free trade or engage
d. became the dominant form of firm in trade protection. If both countries were to
organization in the US in the late 19th century.* engage in free trade, they would each see their
e. a and c. income grow by $50 billion. If both were to
engage in trade protection, they would each grow
4. Which of these attributes is NOT associated by $10 billion. If China were to choose free
with the rise of agriculture? trade and the U.S. trade protection, China would
a. less protein, more carbs consumption. not grow at all and the U.S. would grow by $60
b. nomadic lifestyle* billion. Conversely, if the U.S. were to choose
c. more generalized trade free trade and China trade protection, China
d. emergence of states would grow by $60 billion and the U.S. would
e. increasing specialization in production not grow at all. Please use this information in
the following four questions. (In answering
6. The Industrial Revolution began in these questions, you might find helpful to draw
a. Great Britain.* the matrix of different outcomes.)
b. The United States.
c. France. 10. Which of the following combination of
d. Japan. policies maximizes the sum of growths for the
e. Scandinavia U.S and China?
a. China chooses free trade and the U.S.
7. John can solve 20 math problems per hour chooses trade protection.
while Frank can only solve 17 math problems in b. China chooses trade protection and the
the same time period. Which of the following U.S. chooses free trade.
are true? c. They both choose free trade.*
a. John has a comparative advantage in d. They both choose trade protection.
solving math problems. e. Either a or b should occur.
b. John has an absolute advantage in solving
c. Frank has an absolute advantage in
solving math problems 11. It would be in the U.S.’s interest to 17. In the country of Walachia, a market basket
a. pursue free trade regardless of what of goods and services cost $120 in 2009 and
China does. $180 in 2011. Based on this information and
b. pursue trade protection regardless of considering 2009 as the base year, the price
what China does.* index in 2011 was:
c. pursue free trade only if China were to a. 66.67
pursue free trade. b. 100
d. pursue trade protection only if China c. 130
were to pursue trade protection. d. 150*
e. pursue either free trade or protection,
depending on the level of sunspots.
18. Every working day at least 1 trillion dollars
12. It would be in China’s interest to are traded in all foreign exchange markets. Most
a. pursue free trade regardless of what the of this trading is due to
U.S. does. a. to the currency needs of those who
b. pursue trade protection regardless of import and export goods and services.
what the U.S. does.* b. short-term speculation on currency
c. pursue free trade only if the U.S. were to rates.*
pursue free trade. c. those who make long-term investments
d. pursue trade protection only if the U.S. outside their own country.
were to pursue trade protection. d. the currency needs of tourists.
e. pursue either free trade or protection, e. currency trading by governments.
depending on the level of sunspots.
19. The Eurozone consists of
13. Then, if the U.S. and China were to choose a. 18 countries that share a common
their policies independently of one another so as currency.
to maximize their own growth, we would expect b. countries that do not have a common
a. China to choose free trade and the U.S. fiscal policy.
to choose trade protection. c. countries that do not have common bank
b. China to choose trade protection and the supervision and regulation.
U.S. to choose free trade. d. a and b.
c. both to choose free trade. e. All of the above.*
d. both to choose trade protection.*
e. Either a or b would occur. 20. The “party of Davos” refers to
a. the participants of the World Business
14. When a quota is imposed on an import, Forum.
typically in the importing country b. the participants of the World Social
a. consumers lose. Forum.
b. domestic producers gain c. the party that takes place every March in
c. foreign exporters lose. Davos, Switzerland.
d. b and c. d. a hypothesized emerging world-wide
e. All of the above.* elite.*
e. a and c.
16. If United Airlines were to sell one of its used
jets to Aero Boliviano, the transaction would 21. A point outside a production possibilities
a. not be included in U.S. GDP.* frontier
b. be included in Bolivian GDP. a. indicates that some resources are
c. be included in U.S. GDP. unemployed.
d. lower U.S. GDP. b. is unattainable for production
e. lower Bolivian GDP. purposes.*
c. is worse than points on the production
d. implies that too much capital and not
enough labor are used.
e. None of the above. 22. Changes in the following variable shift the b. has led to the creation of a global
demand curve for a good. government that supersedes national
a. Marketing and advertising. governments.
a. The preferences of the consumers. c. is correlated with lower US median
b. The prices of related goods. incomes for males.*
c. The income of consumers. d. b and c.
d. All of the above.* e. all of the above
23. Suppose that to produce one pound of rice in 28. Globalization is associated with the
Japan requires 4 hours of labor, whereas in the
following tendencies EXCEPT
U.S. it requires 2 hours of labor. As a result, we a. economic growth in China.
can conclude that b. some loss of sovereignty on the part of
a. Japan has a comparative advantage state.
(“CA”) in producing rice. c. increasing competition for natural
b. Japan has the absolute advantage in resources.
producing rice. d. less movement of capital across
c. The U.S. has a CA in producing rice. countries*
d. The U.S. has the absolute advantage in e. greater information transmission and
producing rice.* cultural exchanges across countries.
e. None of the above
29. The Great Recession
24. When a country has a trade surplus, a. officially began in December 2007 and
a. The capital account must necessarily be ended in mid-2009.
negative. b. has had long-term lingering effects on
b. The current account is positive. unemployment.
c. the value of its exports is higher than c. was preceded by the largest housing
the value of its imports.* bubble in U.S. history.
d. The capital account is positive. d. a and c.
e. a and c. e. All of the above.*
25. A reduction in the U.S. price level can be 30. U.S. national house prices
expected to lead to a. peaked in 2006.*
a. the depreciation of the dollar and the b. peaked in 2011.
appreciation of other currencies. c. have been increasing ever since the early
b. the appreciation of the dollar and the 1990s.
appreciation of other strong currencies. d. have been decreasing since 2001.
c. the depreciation of the dollar and the e. have been increasing since 2007.
depreciation of the euro.
d. the appreciation of the dollar and the
depreciation of other currencies.* 31. During the last couple of decades, in “new”
e. the appreciation of the dollar and the banking and finance
appreciation of the euro. a. the securitization of loans has been
26. We discussed the following aspects of b. financial institutions typically keep the
globalization EXCEPT: loans they make in their books.
c. financial institutions depend on personal
a. Political globalization
b. Economic globalization relationships to manage their risk.
c. Religious globalization* d. institutional investors depend on rating
d. Financial globalization agencies for the management of risk.
e. Cultural globalization e. a and d.*
27. The modern era of globalization
a. has been present continuously since the
late 1950s. 32. Examples of “moral hazard” include the 37. Modern economic growth is correlated with
behavior of the following characteristics EXCEPT for
a. all loan officers of banks in the 1950s. a. investment in economic infrastructure.
b. many mortgage brokers during the b. the reduction of government’s share in
housing bubble years.* GDP.*
c. most bank CEOs during the 1950s. c. the expansion of social safety nets.
d. most investment bank CEOs during the d. government investment in sewers and
1970s. public health.
e. all loan officers of bank in the 1970s. e. an increase in life expectancy.
33. Recent total U.S. employment is 38. If output is growing at 7% per year,
a. 1% higher than it was at the beginning approximately how many years will it take for
of the Great Recession. output to double?