Financial Economics
Midterm Exam
Course Introduction
Financial Economics explores the fundamental principles governing the allocation of resources in financial markets and the behavior of financial institutions. The course examines concepts such as asset valuation, risk and uncertainty, market efficiency, and decision-making under conditions of imperfect information. Topics include the functioning of bond and stock markets, the role of financial intermediaries, derivatives pricing, and the impact of monetary and fiscal policies on financial markets. Students will develop analytical tools grounded in microeconomic theory to understand and analyze real-world financial phenomena, preparing them for further studies or careers in finance, banking, and investment.
Recommended Textbook
International Finance Theory and Policy 10th Edition by Paul R. Krugman
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12 Chapters
706 Verified Questions
706 Flashcards
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Chapter 1: Introduction
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Source URL: https://quizplus.com/quiz/20417
Sample Questions
Q1) From 1960 to 2012
A) the U.S. economy roughly tripled in size.
B) U.S. imports roughly tripled in size.
C) the share of US Trade in the global economy roughly tripled in size.
D) U.S. Imports roughly tripled as compared to U.S. exports.
E) U.S. exports roughly tripled in size.
Answer: C
Q2) Which of the following is NOT a major concern of international economic theory?
A) protectionism
B) the balance of payments
C) exchange rate determination
D) bilateral trade relations with China
E) the international capital market
Answer: D
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3
Chapter 2: National Income Accounting and the Balance of Payments
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Sample Questions
Q1) Disposable income is National income
A) less taxes collected from households and firms by the government.
B) plus net taxes collected from households and firms by the government.
C) less net taxes collected from firms by the government.
D) less net taxes collected from households by the government.
E) less net taxes collected from households and firms by the government.
Answer: E
Q2) The official settlements balance or balance of payments is the sum of
A) the current account balance, the capital account balance, the non reserve portion of the financial account balance, the statistical discrepancy.
B) the current account balance and the capital account balance.
C) the current account balance, the capital account balance, the non reserve portion of the financial account balance.
D) the current account balance and the non reserve portion of the financial account balance.
E) the current account balance and the interest in all investments.
Answer: A
Q3) What is the national income identity for an open economy?
Answer: Y = C + I + G + EX - IM
Page 4
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Chapter 3: Labor Productivity and Comparative Advantage:
The Ricardian Model
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Sample Questions
Q1) Given the information in the table above,Home's opportunity cost of cloth is A) 0.5.
B) 2.0.
C) 6.0.
D) 1.5.
E) 3.0.
Answer: A
Q2) A country engaging in trade according to the principles of comparative advantage gains from trade because it
A) is producing exports indirectly more efficiently than it could alternatively.
B) is producing imports indirectly more efficiently than it could domestically.
C) is producing exports using fewer labor units.
D) is producing imports indirectly using fewer labor units.
E) is producing exports while outsourcing services.
Answer: B
Q3) Given the information in the table above.What is the opportunity cost of cloth in terms of Widgets in Foreign?
Answer: 2 widgets.
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Chapter 4: Specific Factors and Income Distribution
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Sample Questions
Q1) Those who will unambiguously gain from free trade are ________ factors in sectors that produce goods that are ________.
A) immobile; exported
B) immobile; also imported
C) mobile; also imported
D) mobile; exported
E) mobile; untraded
Q2) Immigration into the U.S.over the past century has caused the percentage of immigrants in the U.S.population to
A) fall steadily until the 1970s and increase thereafter.
B) remain relatively constant over the time period.
C) fall steadily over the entire century.
D) rise steadily over the entire century.
E) rise steadily until the 1970s and fall thereafter.
Q3) The specific factors model was developed by
A) Paul Samuelson and Ronald Jones.
B) Adam Smith and David Ricardo.
C) Richard Nixon and Robert Kennedy.
D) C.B. deMille and Gordon Willis.
E) Bill Clinton and Monica Lewinsky.
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Chapter 5: Resources and Trade: The
Heckscher-Ohlin Model
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Sample Questions
Q1) In the Heckscher-Ohlin model,when there is international-trade equilibrium
A) the relative price of the capital intensive good in the capital rich country will be the same as that in the capital poor country.
B) the capital rich country will charge less for the capital intensive good than the price paid by the capital poor country for the capital-intensive good.
C) the capital rich country will charge more for the capital intensive good than the price paid by the capital poor country for the capital-intensive good.
D) workers in the capital rich country will earn more than those in the poor country.
E) the workers in the capital rich country will earn less than those in the poor country.
Q2) According to the Heckscher-Ohlin model
A) the gainers from trade could compensate the losers and still retain gains.
B) everyone gains from trade.
C) the scarce factor gains from trade and the abundant factor loses.
D) a country gains from trade if its exports have a high value added.
E) only the country with the more advanced technology gains from trade.
Q3) Why do we observe the Leontief paradox?
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Chapter 6: The Standard Trade Model
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Sample Questions
Q1) An export subsidy will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.
A) exports; decrease; exports; increase
B) imports; decrease; imports; increase
C) imports; increase; imports; decrease
D) exports; increase; exports; decrease
E) exports; increase; imports; decrease
Q2) An increase in the real interest rate,all other things held constant,will cause a country's ________ to ________.
A) current consumption: increase
B) current consumption: decrease
C) terms of trade; improve
D) terms of trade; worsen
E) welfare level; improve
Q3) If a small country were to levy a tariff on its imports then this would
A) decrease the country's economic welfare.
B) have no effect on that country's economic welfare.
C) increase the country's economic welfare.
D) change the terms of trade.
E) raise prices on its exports in other countries.
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Chapter 7: External Economies of Scale and the
International Location of Production
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Sample Questions
Q1) External economies of scale will ________ average cost when output is ________ by ________.
A) reduce; increased; the industry
B) reduce; increased; a firm
C) increase; increased; a firm
D) increase; increased; the industry
E) reduce; reduce; the industry
Q2) If a firm's output doubles when all inputs are doubled,production is said to occur under conditions of
A) increasing returns to scale.
B) imperfect competition.
C) intra-industry equilibrium.
D) constant returns to scale
E) decreasing returns to scale.
Q3) A learning curve relates ________ to ________ and is a case of ________ returns.
A) unit cost; cumulative production; dynamic increasing returns
B) output per time period; long-run marginal cost; dynamic increasing returns
C) unit cost; cumulative production; dynamic decreasing returns
D) output per time period; long-run marginal cost; dynamic decreasing returns
E) labor productivity; education; increasing marginal returns
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Chapter 8: Firms in the Global Economy: Export
Decisions,Outsourcing,and Multinational Enterprises
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69 Verified Questions
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Sample Questions
Q1) The most common form of price discrimination in international trade is A) dumping.
B) non-tariff barriers.
C) Voluntary Export Restraints.
D) preferential trade arrangements.
E) product boycotts.
Q2) An imperfectly competitive firm has the following demand curve: Q = 100 - 2P.What is marginal revenue equal to when P = 30?
Q3) Intra-industry trade will tend to dominate trade flows when which of the following exists?
A) small differences between relative country factor availabilities
B) large differences between relative country factor availabilities
C) homogeneous products that cannot be differentiated
D) constant cost industries
E) uneven distribution of abundant resources between two countries
Q4) It is possible that trade based on external scale economies may leave a country worse off than it would have been without trade.Explain how this could happen.
Q5) What are the consequences of outsourcing production on the welfare of countries?
Page 10
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Chapter 9: The Instruments of Trade Policy
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Sample Questions
Q1) What is a TRUE statement concerning the imposition in the U.S.of a tariff on cheese?
A) It lowers the price of cheese domestically.
B) It raises the price of cheese internationally.
C) It raises revenue for the government.
D) It will always result in retaliation from abroad.
E) it leads to higher domestic demand for cheese.
Q2) A problem encountered when implementing an "infant industry" tariff is that
A) domestic consumers will purchase the foreign good regardless of the tariff.
B) the industry may never "mature."
C) most industries require tariff protection when they are mature.
D) the tariff may hurt the industry's domestic sales.
E) the tariffs fail to protect the domestic producers.
Q3) Refer to above figure.What is the amount of efficiency loss resulting from imposition of the tariff?
Q4) Refer to above figure.In the absence of trade,what is the country's consumer surplus?
Q5) Refer to above figure.Given a tariff of $3 per unit,what is the country's consumer surplus?
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Chapter 10: The Political Economy of Trade Policy
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63 Verified Questions
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Sample Questions
Q1) The prohibitive tariff is a tariff that
A) is so high that it eliminates imports.
B) is so high that it causes undue harm to trade-partner economies.
C) is so high that it causes undue harm to import competing sectors.
D) is so low that the government prohibits its use since it would lose an important revenue source.
E) is so low that it causes domestic producers to leave the industry.
Q2) In 1990 the United States imposed trade embargoes on Iraq's international trade.The negative effect on Iraq's consumer surplus would be greater the
A) less elastic Iraq's demand schedule.
B) more elastic Iraq's demand schedule.
C) greater Iraq's dependence on foreign products.
D) more inelastic Iraq's supply schedule.
E) less elastic Iraq's labor force is.
Q3) Refer to above figure.Assume that Boeing is the first to enter the Hungarian market.Without a government subsidy what price would they demand,and what would be their total profits?
Q4) Refer to above figure.What would be the cost of the subsidy to European taxpayers?
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Chapter 11: Trade Policy in Developing Countries
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Sample Questions
Q1) Brazil's export record in 1999 illustrated the principle that A) a large country will tend to have few exports.
B) a small country will tend to have a high export ratio.
C) protectionist policies tend to discourage exports.
D) export-promoting policies do not tend to work.
E) import substitution policies helped the Brazilian economy.
Q2) Refer to above figure.Why would workers not shift from agriculture to manufacturing in the initial situation where wages are higher in the latter?
Q3) The growth successes of the high performance Asian economies
A) supports the belief that economic development requires import substitution policies. B) rejects the belief that export-oriented industrialization is likely to promote economic development.
C) rejects the belief that economic development requires import substitution policies. D) suggests that free trade policies are required for successful economic development.
E) enforces United States' hesitation to trade with developing countries.
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Chapter 12: Controversies in Trade Policy
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Sample Questions
Q1) The Shipbreakers of Alang represent a perfect example of how a developing country can apply the principles of the Heckscher-Ohlin model,since
A) shipbreaking is generally considered to be a capital-intensive operation and India, being a large country has much capital.
B) shipbreaking is a labor-intensive operation in India, and India has many workers since it is such a large country.
C) shipbreaking is a labor-intensive operation in India, and India's availability of capital per worker is less than that of its trade partners.
D) shipbreaking is a capital-intensive operation elsewhere in the world, and therefore represents a case of a factor intensity reversal.
E) India's climate lends itself to the work involved in shipbreaking.
Q2) It is still the conventional wisdom in the U.S.that compliance with NAFTA requirements is having a deleterious effect on U.S.highway safety standards,on U.S.pollution and other environmental standards,and on U.S.jobs.What facts would proponents of an expansion of NAFTA (e.g.,to include all of Central and South American countries)need to marshall in order to convince you?
Q3) What is a pollution haven?
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