International Economics by Thomas Pugel 17th Edition-Test Bank

International Economics by Thomas Pugel 17th Edition-Test Bank

International Economics, 17e (Pugel)
Chapter 7 Growth and Trade

1) Which of the following is one of the fundamental sources of long-run economic growth?
A) An expansion of foreign gross domestic product (GDP)
B) An increase in demand for the country’s importable product
C) An improvement in production technologies
D) An reduction in local purchasing of the country’s exportable products

2) In the figure below, we see an expansion of the production-possibility curve (from PPC1 to PPC2). The two goods produced are wheat and cloth, which are land-intensive and labor-intensive, respectively. The outward shift of the production-possibility curve shows

A) biased growth.
B) balanced growth.
C) a move from a no-trade situation to free trade.
D) an increase in the production costs of both goods.

3) In the figure below, we see an expansion of the production-possibility curve (from PPC1 to PPC2). The two goods produced are wheat and cloth, which are land-intensive and labor-intensive, respectively. The outward shift of the production-possibility curve is likely the result of

A) a fall in the average cost of producing cloth.
B) an increase in the price of cloth.
C) an increase in the size of the labor force, the area under cultivation remaining unchanged.
D) an increase in the national amount of usable land, the size of the labor force remaining unchanged.

4) Which of the following statements is true?
A) Increases in a country’s endowments of land, labor, and capital will lead to long-run economic growth.
B) Improvements in the technology used in production can lead to increases in current output levels but are not a source of long-run economic growth.
C) Improvements in production technology do not affect the shape or position of the production-possibility curve.
D) Biased growth leads to a proportionate shift in the production-possibility curve.

5) In a country that produces only wine and guns, which of the following is least likely to lead to biased growth?
A) The amount of usable land has increased substantially.
B) The relaxation of migration laws has led to a huge influx of unskilled workers.
C) The technology used to produce guns improves while the technology used to produce wine does not change.
D) The relative price of guns in the international market changes.

6) The Rybczynski theorem asserts that in a two-good model, assuming that product prices stay constant, growth in the endowment of one factor of production with the other factor remaining unchanged, will result in
A) an equal increase in the output of both goods.
B) an increase in the output of the good that uses the growing factor intensively and a decrease in the output of the other good.
C) an increase in the output of both goods, but a relatively greater increase in the output of the good that uses the growing factor intensively.
D) an increase in the output of the good that uses the growing factor intensively, but the output level of the other good will remain unchanged.

7) Assume that a capital-abundant country trades only two goods with the rest of the world, medical equipment and corn. Medical equipment is relatively capital-intensive. According to the Rybczynski theorem, with the relative price of the goods remaining unchanged, an increase in the country’s endowment of capital will cause the output of medical equipment to ________ and the output of corn to
A) rise; fall.
B) fall; rise.
C) rise; remain the same.
D) remain the same; fall.

8) Assume that a large capital-abundant country trades only two goods with the rest of the world, medical equipment and corn. Medical equipment is relatively capital-intensive. An increase in the country’s endowment of capital will cause the price of medical equipment relative to the price of corn to
A) rise.
B) fall.
C) stay the same.
D) rise at first and then fall.