We expect PPP to hold better
A) for annual data than monthly data.
B) for high-inflation countries.
C) in the long run.
D) All of the above.
Question 2 - Refer to the figure above. If A imposes a per unit tariff of 10 on imports from both B and C, it will import
A) 400 units from B.
B) 200 units from C.
C) 200 units from each.
D) 400 units from B and 200 units from C.
Question 3 - If country A produces S at a lower relative price than country B, A is said to have a comparative advantage in S.
Indicate whether the statement is true or false
Question 4 - All of the following involve a moral hazard problem EXCEPT
A) an individual driving carelessly after buying a comprehensive insurance policy for a Ford Pinto.
B) the IMF bailing Mexico out of a financial crisis, with promises to do the same for other nations that might face financial problems.
C) making regular visits to your doctor because you know that you have full healthcare coverage.
D) the requirement of banking institutions that owners invest a substantial portion of their own capital in their bank.
E) membership in FDIC (Federal Deposit Insurance Corporation) by your local bank.
Question 5 - A countervailing duty is a tariff that is levied to counteract
A) the dumping of goods in the domestic market by foreign firms.
B) a sudden surge of imports which hurt a domestic industry.
C) subsidies given to foreign firms by their own governments.
D) the tariff on domestic goods that are enacted by foreign governments.
E) low prices for imported goods that are made in countries with low wages.
Question 6 - What did Adam Smith perceive was primarily responsible for improving standard of living?
What will be an ideal response?
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