Download Exam II Fall 2008 with answers

ECON 2100
Exam II
Consider the following scenario. There are two economies (A and B) and there are two products
(X and Y). The cost of producing one unit of X in country A is 2 worker-hours, while the cost of
producing one unit of X in country B is 3 worker-hours. The production of one unit of Y in
country A takes 8 worker-hours, while the production of one unit of Y in country B takes 6
worker hours.
1)
Based on the information presented above which nation has the absolute advantage in
the production of X?
a. A
b. B
c. Both
d. None
2)
Based on the information presented above which nation has the comparative
advantage in the production of good X?
a. A
b. B
c. Both
d. None
3)
Which of the following principles is based on the opportunity cost concept?
a. Absolute Advantage
b. Comparative Advantage
c. Both
d. None
4)
A bank currency quote consists of ASK and BID prices. If you are purchasing the
currency from the bank do you pay
a. The ASK price
b. The BID price
c. None of the above
5)
If you expect the Canadian dollar to appreciate in value against the US dollar then
you should
a. Purchase a Call option on the Canadian dollar
b. Purchase a Put option on the Canadian dollar
c. None of the above
6)
Consider the following option quote on MSFT stock: CALL Option, Strike Price of
19 dollars, Expiration January 17, 2009, current ASK price – $3.55, current BID
price – $3.45. Based on this information if you were a holder of this option and were
to exercise it, what would happen?
a. You would purchase shares of MSFT at 19/share
b. You would sell shares of MSFT at 19/share
c. You would purchase shares of MSFT at 3.55/share
d. You would purchase shares of MSFT at 3.45/share
e. None of the above
7)
If you were to sell this option right now in the market (option from question 6), what
would the price likely to be?
a.
b.
c.
d.
19
3.55
3.45
None of the above
8)
A credit default swap is similar to
a. A put option
b. A call option
c. None of the above
9)
If US investment overseas increases then we can argue that
a. The dollar will depreciate because the supply of USD in the ForEx market
increases
b. The dollar will depreciate because the demand for USD in the ForEx market
increases
c. The dollar will appreciate because the supply of USD in the ForEx market
increases
d. The dollar will appreciate because the demand for USD in the ForEx market
decreases
e. None of the above
10)
If the demand for US exports increases then we should expect
a. The dollar to appreciate because the demand for USD in the ForEx market
increases
b. The dollar to appreciate because the supply of USD in the ForEx market
increases
c. The dollar to depreciate because the demand for USD in the ForEx market
increases
d. The dollar to depreciate because the demand for USD in the ForEx market
increases
e. None of the above
11)
Both, Iceland and Hungary have significant foreign debt that is denominated in
foreign currencies (in the case of Iceland the foreign debt exceeds 12 times the GDP
of Iceland). In light of this heavy debt burden would you be willing to recommend
that these countries allow their currencies to depreciate right now and hence help
their export sectors remain competitive internationally?
a. No
b. Yes
c. Foreign Debt has nothing to do with currency policy recommendations
12)
Russia has considerably lower foreign debt presence than Iceland and Hungary. In
fact, as a percentage of the GDP the foreign debt is relatively small compared to most
Eastern European states and emerging economies. Would you be more inclined to
recommend that the Russian government allow some Rouble depreciation to bolster
its exports?
a. No
b. Yes
c. Foreign Debt has nothing to do with currency policy recommendations
13)
Russia is a member of
a.
b.
c.
d.
NAFTA
EU
CIS
None of the above
14)
During the 1990’s the Eastern European economies went through a transition from a
a. Market economy to a centrally planned economy
b. Centrally planned economy to a market economy
c. Centrally planned economy to a command economy
d. Command economy to a centrally planned economy
e. None of the above
15)
The Berlin Wall came down in
a. 1985
b. 1989
c. 1990
d. 1991
e. 1992
16)
Which of the following states was not part of the USSR?
a. Russia
b. Ukraine
c. Poland
d. Lithuania
17)
Which of the following former Soviet Republics of the USSR is NOT a member of
the EU today?
a. Estonia
b. Latvia
c. Georgia
18)
The Soviet Block economies historically emphasized
a. Industry
b. Service sector
c. Agricultural sector
19)
Both, Russia and China proceed through a similar transition, and yet there is one
principal difference
a. Russian transition included both economic and political transformation at
the same time
b. Chinese transition increase both economic and political transformation at the
same time
c. Russian transition took place in steps with the economic reforms being
performed prior to the initiation of the political reforms
d. None of the above
20)
Which of the following about the BRIC economies is not correct
a. BRIC economies are characterized as rapidly emerging economies
b. The BRIC group includes Brazil, Russia, India and China
c. The BRIC group includes all developing economies
d. None of the above
21)
It can be argued that the transition of the economies of the former Soviet
Republics was more difficult than the transition of the former Soviet
Eastern European states because
a)
the USSR put a heavier emphasis on the heavy industry, dominated by large
in terms of employment firms, many of which were producing military
equipment
b)
the USSR experienced command economy for a considerably longer period
of time
c)
choices a and b
d)
there is no possible economic explanation for the differences in the
experience of the transition
For the following three questions please select from the answer list below:
a)
Nationalization
b)
Privatization
c)
Principal-Agent problem
d)
Command Economy
e)
Market Economy
22) A situation where the state sells (distributes) state-owned productive assets to
private individuals B
23) A situation where the state purchases (or takes away) private productive assets
and thus transfers their ownership to the public sector (government) A
24) An economic system based on central planning where the fundamental economic
questions (what, how and for whom to produce) are answered by the government
D
25) An economic system where private forces of supply and demand determine
allocation of resources and output and prices E
True/False
26) Russia is one of the largest producers of oil and natural gas in the world
today
27) Many former Soviet Block states are now members of the EU
28) Most commodity transactions on Earth are settled in USD terms today
29) An increase in US imports will lead to an increase in the demand for the USD in
the ForEx market
30) The spot market makes up more than 50% of all currency (ForEx) transactions.