Financial Markets and Institutions
Review Questions
Course Introduction
This course examines the structure, functions, and operations of financial markets and institutions within the global economy. It explores the roles of various financial intermediaries, such as banks, insurance companies, investment firms, and regulatory bodies, as well as the major types of financial instruments traded in these markets. Students will analyze how financial markets facilitate the flow of funds between savers and borrowers, the process of interest rate determination, and the management of risk. Current issues, including regulatory frameworks, financial crises, and the impact of technological innovations on financial systems, are also addressed to provide a comprehensive understanding of the modern financial landscape.
Recommended Textbook
International Finance Theory and Policy 10th Edition by Paul R. Krugman
Available Study Resources on Quizplus
12 Chapters
706 Verified Questions
706 Flashcards
Source URL: https://quizplus.com/study-set/1029 Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/20417
Sample Questions
Q1) Trade theorists have proven that the gains from international trade
A) must raise the economic welfare of every country engaged in trade.
B) must raise the economic welfare of everyone in every country engaged in trade.
C) must harm owners of "specific" factors of production.
D) will always help "winners" by an amount exceeding the losses of "losers."
E) usually outweigh the benefits of protectionist policies.
Answer: E
Q2) 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
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: National Income Accounting and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/20428
Sample Questions
Q1) Assume:
C = 50 + 0.6 (Y - T)
G = 15
I = 15
T = 2
(a)Calculate Y at equilibrium
(b)Calculate C
(c)Assume
EX = 4 + 3EP*/P
IM = 8 + 0.1 (Y - T)- 2EP*/P
E = 3
P *= 1
P = 1.5
Find equilibrium Y.
Answer: (a)Y = C + I + G
Y = 50 + 0.6(Y - 2 + 15 + 15)
Y = 197
(b)C = 50 + 0.6 (197 - 2)= 117
(c)Y = 170
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Labor Productivity and Comparative Advantage:
The Ricardian Model
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/20418
Sample Questions
Q1) If the world terms of trade equal those of country F,then
A) country H but not country F will gain from trade.
B) country H and country F will both gain from trade.
C) neither country H nor F will gain from trade.
D) only the country whose government subsidizes its exports will gain.
E) country F but not country H will gain from trade.
Answer: A
Q2) The earliest statement of the principle of comparative advantage is associated with A) David Hume.
B) David Ricardo.
C) Adam Smith.
D) Eli Heckscher.
E) Bertil Ohlin.
Answer: B
Q3) Given the information in the table above.If these two countries trade these two goods with each other in context of the Ricardian model of comparative advantage,what is the lower limit for the price of cloth?
Answer: One half a widget.
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Specific Factors and Income Distribution
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/20419
Sample Questions
Q1) In the four-quadrant diagram of the specific factors model,the graph in the upper right quadrant is a country's
A) production possibility frontier.
B) labor allocation constraint.
C) production function for food.
D) production function for cloth.
E) labor supply curve.
Q2) In the specific factors model,the effects of trade on welfare overall are ________ and for fixed factors used to produce the exported good they are ________.
A) positive; positive
B) negative; positive
C) positive; negative
D) ambiguous; positive
E) positive; ambiguous
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Resources and Trade: The Heckscher-Ohlin Model
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/20420
Sample Questions
Q1) In the Heckscher-Ohlin model,countries are assumed to differ only in terms of their
A) factor endowments.
B) tastes and preferences.
C) available technologies.
D) factor productivities.
E) physical size.
Q2) The Leontief Paradox
A) failed to support the validity of the Heckscher-Ohlin model.
B) supported the validity of the Ricardian theory of comparative advantage.
C) supported the validity of the Heckscher-Ohlin model.
D) failed to support the validity of the Ricardian theory.
E) proved that the U.S. economy is different from all others.
Q3) Starting from an autarky (no-trade)situation with Heckscher-Ohlin model,if Country
H is relatively labor abundant,then once trade begins
A) wages should rise and rents should fall in H.
B) wages and rents should rise in H.
C) wages and rents should fall in H.
D) wages should fall and rents should rise in H.
E) rent will be unchanged but wages will rise in H.
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: The Standard Trade Model
Available Study Resources on Quizplus for this Chatper
48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/20421
Sample Questions
Q1) An export subsidy has the opposite effect on terms of trade to the effect of an import tariff.Domestically a tariff will raise the price of the import good,deteriorating the domestic terms of trade.A production subsidy for the export product will lower the local price of the export good,lowering the domestic terms of trade for the country.Hence the export subsidy and the import tariff have the same effect.This analysis seems to contradict the first sentence in this paragraph.Discuss this paradox.
Q2) Refer to above figure.Now,suppose that the relative price of A is actually not higher than Albania's autarkic level of 1,but quite the opposite (e.g.,PA/PB = 0.5).Would Albania still be able to gain from trade? If so,where would be its production point? Given the information in this question,where is Albania's comparative advantage?
Q3) A country will be able to consume a combination of goods that is not attainable solely from domestic production if
A) the world terms of trade differ from its domestic relative costs.
B) the country specializes in one product.
C) the country avoids international trade.
D) the world terms of trade equal the domestic relative costs.
E) the country's domestic production value equals world relative value.
Q4) What is intertemporal comparative advantage?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: External Economies of Scale and the
International Location of Production
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/20422
Sample Questions
Q1) 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.
Q2) Patterns of interregional trade are primarily determined by ________ rather than ________ because factors of production are generally ________.
A) external economies; natural resources; mobile
B) internal economies; external economies; mobile
C) external economies; population; immobile
D) internal economies; population; immobile
E) population; external economies; immobile
Q3) Explain why positive economies of scale in one (of two)sectors may establish a comparative advantage for the large (as compared to the small)country in the production of the commodity which exhibits positive scale economies.
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Firms in the Global Economy: Export
Decisions,Outsourcing,and Multinational Enterprises
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/20423
Sample Questions
Q1) When a multinational affiliate replicates elements of a production process in a foreign country it is called ________ foreign direct investment.
A) vertical
B) horizontal
C) transitional
D) bisectional
E) direct
Q2) What is the nature of the proximity-concentration tradeoff that firms have to deal with then making decisions regarding foreign direct investment?
Q3) 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.
Q4) Intra-industry trade is most common in the trade patterns of A) the industrial countries of Western Europe.
B) the developing countries of Asia and Africa.
C) raw material producers.
D) China with the rest of the world.
E) labor-intensive products.
Q5) What are the consequences of outsourcing production on the welfare of countries?
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: The Instruments of Trade Policy
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/20424
Sample Questions
Q1) The imposition of tariffs will help a nation attain which of the following goals?
A) decreased domestic consumer prices
B) increased domestic employment
C) increased amount and variety of goods available for consumers
D) increased competition between domestic and foreign producers
E) gains for domestic producers
Q2) Should the home country be "large" relative to its trade partners,its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms of the trade rectangle exceed the sum of the
A) revenue effect plus redistribution effect.
B) protective effect plus revenue effect.
C) consumption effect plus redistribution effect.
D) production distortion effect plus consumption distortion effect.
E) terms of trade gain.
Q3) Some argue that tariffs always hurt the imposing country's economic welfare,and are typically designed to shift resources from one sector to another,protected or preferred one,within an economy.Find and discuss a counter example to this argument.
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: The Political Economy of Trade Policy
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/20425
Sample Questions
Q1) Refer to above figure.What would be the cost of the subsidy to European taxpayers?
Q2) The reason protectionism remains strong in the United States is that
A) economists can produce any result they are hired to produce.
B) economists cannot persuade the general public that free trade is beneficial.
C) economists do not really understand how the real world works.
D) the losses associated with protectionism are diffuse, making lobbying by the public impractical.
E) economists cannot agree on trade policy recommendations.
Q3) The strongest political pressure for a trade policy that results in higher protectionism comes from
A) domestic workers lobbying for import restrictions.
B) domestic workers lobbying for export restrictions.
C) domestic workers lobbying for free trade.
D) domestic consumers lobbying for export restrictions.
E) domestic consumers lobbying for import restrictions.
Q4) The U.S.is probably the most open international market among the industrialized countries.What then does the U.S.have to gain by joining the WTO?
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Trade Policy in Developing Countries
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/20426
Sample Questions
Q1) The infant industry argument is that
A) comparative advantage is irrelevant to economic growth.
B) developing countries have a comparative advantage in agricultural goods.
C) developing countries have a comparative advantage in manufacturing.
D) developing countries have a potential comparative advantage in manufacturing.
E) developing countries have no chance to compete with industrialized countries.
Q2) To help developing nations strengthen their international competitiveness,many industrial nations have granted tariff reductions to developing nations under the A) international commodity agreements program.
B) multilateral contract program.
C) generalized system of preferences program.
D) export led growth program.
E) import substitution policy.
Q3) The "East Asian Miracle" of the "Four Tigers" in the 1960s was replicated by A) developing countries around the world.
B) other East Asian countries.
C) Sub Sahara African countries.
D) Industrialized countries.
E) Eastern European countries.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Controversies in Trade Policy
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/20427
Sample
Questions
Q1) Spencer and Brander's model highlights the conventional assumption that
A) government involvement in business or in the economy tends to fail.
B) government subsidies tend to waste taxpayer's money.
C) government subsidies cannot create a successfully competing export.
D) government tends to distort when it displaces Adam Smith's Invisible Hand.
E) government subsidies can produce profits that exceed the subsidy's value.
Q2) The reason Airbus succeeded in the Brander Spencer example is that
A) Boeing made the first move in this strategic game.
B) Europeans tend to be better strategists than corn-fed Americans.
C) the Airbus actually was a better plane than the Boeing 747.
D) U.S. laws actually prohibit U.S. exporters from bribing foreign officials.
E) the subsidy removed the advantage that Boeing gained with their head start in production.
Q3) The United States
A) does not provide more support for R&D as compared to other forms of investment.
B) provides support for R&D by imposing high tariffs on R&D intensive products.
C) provides support for R&D by providing direct subsidies for such activities.
D) provides support for R&D through tax legislation.
E) provides support for R&D through grant incentives.
To view all questions and flashcards with answers, click on the resource link above.
Page 14