1. In the specific factors model, a 10% increase in the price of food accompanied by a 0% increase in the price of cloth will cause wages to ________, the production of cloth to _______, and the production of food to _______. A) increase by more than 10%; increase; remain unchanged B) increase by less than 10%; increase; remain unchanged C) increase by less than 10%; remain unchanged; remain unchanged D) increase by less than 10%; decrease; increase E) increase by less than 10%; increase; decrease 2. In the specific factors model, what will happen to the wage rate when a country's labour market is in equilibrium? A) It will be higher in the sector where product price is lower. B) It will be higher in the sector where product price is higher. C) It will be the same in both sectors. D) It will be higher in the export-competing sector. E) It will be higher in the import-competing sector. 3. The relative price of a unit of cloth in the small isolated country of Mimo is 3 units of food. When the central city, Minimo, puts in an airstrip, the country is able to engage in trade. If the relative price of cloth in the outside world is 2 units of food, according to the prediction of the specific factors model, then Mimo will export _______ and _______ factors used in the production of ________ will benefit. A) cloth; mobile; cloth B) food; mobile; food C) food; immobile; cloth D) cloth; immobile; cloth E) food; immobile; food 4. Assume that only two countries, A and B, exist. Refer to the table 1. If good S is capital intensive, then following the Heckscher-Ohlin Theory, Table 1 Countries Factor Endowments A B Capital Stock 20 10 Labour Force 60 20 A) country A will export good S. B) country B will export good S. C) both countries will export good S. D) both countries will import good S. E) trade will not occur between these two countries. 5. Assuming South Africa has relatively more capital per worker, and Eswatini has relatively more land per worker. If trade between these two countries begins, the Page 4 of 6 ECS4865 Oct/Nov 2022 A) the relative price of the capital-intensive product would increase in South Africa. B) relative product prices would diverge between Eswatini and South Africa. C) the relative price of the land-intensive product would decrease in Eswatini. D) the relative price of the land-intensive product would increase in South Africa. E) the relative price of the capital-intensive product would increase in Eswatini. 6. The meaning of "terms of trade" is A) the amount of exports sold by a country. B) the relative price of exports in terms of imports. C) the quantities of imports received in free trade. D) the price conditions bargained for in international markets. E) the price of a country's imports divided by the price of its exports. 7. In the Standard Trade Model, when the production possibility frontier shifts out relatively more in one direction, we have A) immiserizing growth. B) unbiased growth. C) biased growth. D) imbalanced growth. E) balanced growth. 8. If South Africa (a small country in world trade terms) imposes a tariff on its imported good, this will tend to A) have no effect on terms of trade. B) worsen the SA terms of trade. C) improve the SA terms of trade. C) improve the terms of trade of her trading partners. D) raise the world price of the good imported by SA. 9. The U.S. imports textile products from China. If the U.S. imposes tariff on this good, then it A) raises the price of the good in both countries. B) lowers the price of the good in both countries. C) raises the price in the U.S. and cannot affect its price in China. D) lowers the price of the good in the U.S. and could raise it in China. E) raises the price of the good in the U.S and lowers it in China. 10. If the tariff on computers is not changed, but domestic computer producers shift from imported components to domestically produced semiconductors, then the effective rate of protection in the computer industry will A) increase. B) decrease C) remain the same. D) depend on whether computers are PCs or "Supercomputers." E) no longer apply.CONFIDENTIAL Page 5 of 6 ECS4865 Oct/Nov 2022 11. The monetary approach to the exchange rate makes the general prediction that A) the money supply in South Africa will adjust to American monetary equilibrium. B) the exchange rate, which is the relative price of South African and American money, is fully determined in the long run by the relative supplies of those monies. C) the exchange rate, which is the relative price of South African and American money, is fully determined in the short run by the relative supplies of those monies and the relative demands for them. D) the exchange rate, which is the relative price of South African and American money, is fully determined in the long run by the relative supplies of those monies and the relative demands for them. E) the exchange rate, which is the relative price of South African and American money, is fully determined in the short run and long run by the relative supplies of those monies and the relative demands for them. 12. Under Purchasing Power Parity (and by the Fisher Effect), all else equal A) a rise in a country's expected inflation rate will eventually cause a more-than proportional rise in the interest rate that deposits of its currency offer in order to accommodate for the higher inflation. B) ) a rise in a country's expected inflation rate will eventually cause a less than proportional rise in the interest rate that deposits of its currency offer to accommodate the rise in expected inflation. C) a rise in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer. D) a fall in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer. E) a fall in a country's expected inflation rate will eventually cause an inversely proportional rise in the interest rate that deposits of its currency offer to accommodate the rise in expected inflation. 13. Under a flexible-price monetary approach to the exchange rate, when the domestic money supply falls, A) the price level would fall right away, causing a decrease in the interest rate. B) the price level would fall right away, causing a rise in the interest rate. C) the price level would fall right away, keeping the interest rate constant. D) the price level would eventually fall, increasing the interest rate. E) the price level would eventually fall, keeping the interest rate constant. 14. What temporary effect will fiscal contraction have under fixed exchange rates,? A) Pressure on currency revaluation. B) Pressure on currency devaluation. C) The money supply will increase. D) Output will increase. E) There will be no effect. 15. Under fixed exchange rates, monetary policy can have long-run effect on A) Money supply. B) Output. C) Employment. D) Exports. E) International reserves.