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1 | |
Exchange rate limits describe the |
| | A) | maximum amount the exchange rate can be before triggering a devaluation. |
| | B) | degree to which a trading partner's monetary policies can be considered "fair". |
| | C) | exchange rate that must exist in a country (given the wage rates of the two countries) for trade to be mutually advantageous. |
| | D) | endpoints of the range within which the exchange rate can vary without eliminating the basis for trade. |
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2 | |
Use the following table to answer Questions 2 - 4:
| Country | Wage per day | Days per unit of output | | Silicon chips | Rice | | Bangladesh | 30 takas | 20 | 5 | | Pakistan | 40 rupees | 10 | 6 |
Assuming the exchange rate is 1 taka = 0.833 rupees, what are the Bangladesh's wage rate limits? |
| | A) | 16.67 takas and 40 takas |
| | B) | 24 takas and 57.6 takas |
| | C) | 20.83 takas and 50 takas |
| | D) | 30 rupees and 72 rupees |
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3 | |
Assuming the exchange rate is 1 taka = 0.833 rupees, what are Pakistan's wage rate limits? |
| | A) | 30 rupees and 72 rupees |
| | B) | 16.67 rupees and 40 rupees |
| | C) | 20.83 rupees and 50 rupees |
| | D) | 24 takas and 57.6 takas |
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4 | |
What are Bangladesh's exchange rate limits? |
| | A) | 1 taka = 1.11 rupees; 1 taka = 2.67 rupees |
| | B) | 1 taka = 0.375 rupees; 1 taka = 0.9 rupees |
| | C) | 1 taka = 0.625 rupees; 1 taka = 1.5 rupees |
| | D) | 1 taka = 0.67 rupees; 1 taka = 1.6 rupees |
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5 | |
Use the following table to answer Questions 5 - 8:
| Country | Wage per hour | Hours required per unit of output | | | coffee | timber | beets | livestock | cheese | | Vanuatu | 300 vatu | 1 | 3 | 6 | 7 | 4 | | New Zealand | 9 NZ$ | 6 | 4 | 6 | 2 | 3 |
If the exchange rate is NZ$1 = 40 vatu, then Vanuatu should export |
| | A) | timber, beets, and livestock. |
| | B) | coffee and timber. |
| | C) | livestock and cheese. |
| | D) | coffee, timber, and beets. |
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6 | |
If the exchange rate is NZ$1 = 30 vatu, then Vanuatu should export |
| | A) | timber, beets, and livestock. |
| | B) | coffee and timber. |
| | C) | livestock and cheese. |
| | D) | coffee, timber, and beets. |
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7 | |
If the New Zealand's wage rate rises to $15, and the exchange rate is NZ$1 = 40 vatu, then Vanuatu should export |
| | A) | timber, beets, coffee, and cheese. |
| | B) | Livestock. |
| | C) | timber, beets, coffee. |
| | D) | coffee, timber, and beets. |
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8 | |
Suppose we now add transportation costs to the model. If transportation cost per unit of each of the 5 goods is equivalent to 1 labor hour (paid by the importer), the exchange rate is NZ$1 = 40 vatu, and wages are as given in the table, then |
| | A) | coffee will no longer be traded. |
| | B) | coffee and livestock will no longer be traded. |
| | C) | no goods will be traded. |
| | D) | cheese will no longer be traded. |
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9 | |
Use the following table to answer Questions 9 and 10:
| Country | Days required per unit of output | | Textiles | Beef | | Tanzania | 10 | 6 | | Uganda | 4 | 6 | | Kenya | 4 | 2 |
If the international terms of trade are 1 beef = 1 textile, |
| | A) | Uganda should export textiles; Kenya and Tanzania should export beef. |
| | B) | Tanzania should export textiles; Uganda and Kenya should export beef. |
| | C) | Kenya should export textiles; Uganda and Tanzania should export beef. |
| | D) | Kenya and Tanzania should export textiles; Uganda should export beef. |
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10 | |
If the international terms of trade are 1 textile = 1.8 beef, |
| | A) | Tanzania and Uganda should export textiles; Kenya should export beef. |
| | B) | Tanzania should export textiles; Uganda and Kenya should export beef. |
| | C) | Kenya should export textiles; Uganda and Tanzania should export beef. |
| | D) | Kenya and Tanzania should export textiles; Uganda should export beef. |
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