In the long run, both exports and imports tend to be:

A)unresponsive to changes in exchange rates.

B)responsive to changes in exchange rates.

C)both a) and b).

D)none of the above.

Under the theory of comparative advantage, liberalization of international trade will:

A)enhance the welfare of the world's citizens.

B)create unemployment and displacement of workers permanently.

C)result in higher prices in the long run as monopolist are able to charge higher prices after eliminating their competitors.

D)all of the above.

The massive privatization that is currently taking place in formerly socialist countries, will likely:

A)eventually enhance the standard of living for these countries' citizens.

B)depend on private investment.

C)increase the opportunities available to these countries' citizens.

D)all of the above.

Foreign-owned manufacturing companies in the world's most highly developed countries:

A)generally are more productive and pay their workers more than do comparable locally-owned businesses.

B)generally are less productive and therefore pay their workers less than do comparable locally-owned businesses.

C)tend to specialize in different articles of manufacture than they produce in their home countries.

D)usually do not build their own production facilities but simply buy existing domestic manufacturing firms.

Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms to:

A)carefully manage their exchange risk exposure.

B)carefully measure their exchange risk exposure.

C)both a) and b)

D)

Under a purely flexible exchange rate system:

A)supply and demand set the exchange rates.

B)governments can set the exchange rate by buying or selling reserves.

C)governments can set exchange rates with fiscal policy.

D)answers b) and c) are correct.

Factor income:

A)consists largely of interest, dividends, and other income on foreign investments.

B)is a theoretical construct of the factors of production, land, labor, capital, and entrepreneurial ability.

C)is generally a very minor part of national income accounting, smaller than the statistical discrepancy.

D)none of the above.

If the United States imports more than it exports, this means that:

A)the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.

B)the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus.

C)the U.S. dollar would be under pressure to appreciate against other currencies.

D)both b) and c) are correct.