Question Details

Before the Europeans increased their investment in our bonds 



1. To produce 2 tons of steel the U.S. must forego 10 tons of bricks and to produce 5 tons of steel Canada must forego 30 tons of bricks. Canada and the U.S. will specialize in their comparative advantage and trade if the prevailing price of a ton of steel is, in tons of bricks, between 
a) 2 and 5 b) 5 and 6 c) 5 and 15 d) 10 and 30 
2. To produce 2 TVs the U.S. must forego 10 stoves whereas to produce 3 TVs Canada must forego 27 stoves. If the prevailing world price of TVs in terms of stoves is 
a) 4, both Canada and the U.S. should produce TVs 
b) 6, Canada should produce stoves and the U.S. should produce TVs 
c) 8, Canada should produce TVs and the U.S. should produce stoves 
d) 10, both Canada and the U.S. should produce stoves 
3. "Because the dollar is appreciating and official reserves are rising, it seems evident that demand for the dollar _________ and the central bank was trying to cushion this by __________ dollars on the foreign exchange market." The blanks are best filled with 
a) rose; selling b) rose; buying c) fell; selling d) fell; buying 
4. "Before the Europeans increased their investment in our bonds our current account was balanced. With our flexible exchange rate system it was inevitable that our dollar would ______ and our current account would move into ________. The blanks are best filled with 
a) fall; deficit b) fall; surplus c) rise; deficit d) rise; surplus 
5. "Alan Blinder, the Fed's newish vice-chairman, insisted that central banks could use interest rates to reduce unemployment, at least for a few years. "____ dollars" said a former European finance minister, summing up many economists' feelings." The blank is best filled with 
a) sell, because lower interest rates will reduce capital inflows and the dollar will fall 
	buy, because higher interest rates will induce capital inflows and the dollar will rise 
	sell, because lower unemployment will decrease imports and cause the dollar to fall 

d) buy, because lower unemployment will strengthen the economy and cause the dollar to rise



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