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Model A: Damietta University Faculty of Commerce Department of Economics 2 Semester Final Exam 2020/ 2021
Model A: Damietta University Faculty of Commerce Department of Economics 2 Semester Final Exam 2020/ 2021
Model A: Damietta University Faculty of Commerce Department of Economics 2 Semester Final Exam 2020/ 2021
Faculty of Commerce
Department of Economics
2nd Semester Final Exam 2020/ 2021
English Section Level: Second year
Money & Banking 2 International Trade Code: ECON203
Date 8 / 6 / 2021 Total Marks: 70
Time: 120 Minutes Total Pages: 6
MODEL A
d. A post-trade price ratio (terms of trade) of 1 wheat:1.5 clothing is a feasible equilibrium post-trade
price ratio.
7. Two important assumptions contained in David Hume's price specie-flow adjustment mechanism are that
a. countries are at full employment and the demands for traded goods are "inelastic".
b. countries are at full employment and the price level of a country moves in inverse proportion to
movements in the country's money supply.
c. a country with a balance-of-payments deficit will experience a gold outflow and countries are at a
level of employment that is below full employment.
d. the demands for traded goods are "elastic" and countries are at full employment.
8. The policy of minimum government interference in or regulation of economic activity, advocated by Adam
Smith and the Classical economists, was known as
a. the law of comparative advantage. b. laissez-faire.
c. the labor theory of value. d. Mercantilism.
9. In David Hume's price-specie-flow doctrine or adjustment mechanism, the assumption is made that
changes in the money supply have an impact on __________. Further, the demand for traded goods is
assumed to be __________ with respect to price .
a. prices rather than on output; elastic b. prices rather than on output; inelastic
c. output rather than on prices; elastic d. output rather than on prices; inelastic
10. In Adam Smith's view, international trade
a. benefited both trading countries. b. was based on absolute cost differences.
c. reflected the resource base of the countries in question. d. all of the above.
11. In the price-specie-flow adjustment mechanism, a country with a balance-of-trade surplus experiences
a. a gold inflow and a decrease in the price level.
b. a gold outflow and an increase in the money supply.
c. an increase in the money supply and a decrease in exports.
d. a decrease in the money supply and a decrease in imports.
12. The "paradox of Mercantilism" reflected that fact that
a. trade surpluses were fostered by protective tariffs.
b. rich countries were comprised of large numbers of poor people.
c. gold inflows led to higher prices and reduced exports.
d. gold could not be hoarded and provide money for the economy at the same time.
13. In the price-specie-flow mechanism, there is a gold __________ a country with a balance-of-trade surplus,
and this gold flow ultimately leads to __________ in the surplus country's exports .
a. inflow into; an increase b. outflow from; an increase
c. inflow into; a decrease d. outflow from; a decrease
14. Given the following Classical-type table showing the number of days of labor input required to obtain one
unit of output of each of the two commodities in each of the two countries:
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MODEL A
there are __________ opportunity costs in the production of good X, and there are __________ opportunity
costs in the production of good Y .
a. increasing; increasing b. increasing; constant
c. constant; increasing d. constant; decreasing.
19. If, for a consumer, (MUA /PA) is greater than (MUB/PB), then the consumer
a. has an incentive to consume relatively more of good A, which will increase his MUA.
b. has an incentive to consume relatively more of good A, which will decrease his MUA.
c. has an incentive to consume relatively more of good B, which will increase his MUB.
d. has an incentive to consume relatively more of good B, which will decrease his MUB.
20. In the following table of production possibilities for a country,
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MODEL A
there are _______opportunity costs when moving to greater production of good X and _______ when moving
to greater production of good Y .
a. increasing; decreasing. b. decreasing; constant.
c. constant; increasing. d. increasing; increasing.
21. Suppose that, in the context of the Edgeworth box diagram in production, there are constant returns to scale
in each of the two industries and that one good is relatively labor-intensive in its production process and
the other good is relatively capital-intensive in its production process. In considering this Edgeworth box
diagram and the PPF that can be derived from it ,
a. all points on the "diagonal" of the Edgeworth box diagram will have corresponding points on the PPF
b. no point on the "diagonal" of the Edgeworth box diagram will correspond to a point on the PPF.
c. the PPF will show increasing opportunity costs. d. the PPF will show constant opportunity costs.
22. The equilibrium condition for consumer behavior pertaining to goods A and B is .__________
a. (MUB/PA) = (MUA/PB) b. MUB = MUA
c. (MPB/MPA) = (PB/PA) d. (MUB/MUA) = (PB/PA)
23. A production isoquant shows the various combinations
a. of two factors of production that can produce the same amount of output of a good.
b. of two factors of production that can be hired by a firm for the same cost.
c. of two goods that can be produced by the firm with the same quantity of the factors of production.
d. of two goods that bring an equivalent satisfaction level to an individual consumer.
24. In the Edgeworth box diagram in production with two goods and two factors of production ,
a. a movement from any point off the "production efficiency locus" ("contract curve") to any point on
the locus must involve greater production of one good and less production of the other good.
b. a movement from any point on the "production efficiency locus" ("contract curve") to another point
on the locus must involve greater production of one good and less production of the other good.
c. a point that is off the "production efficiency locus" ("contract curve") must be associated with
unemployment of at least one of the factors of production.
d. a movement from any point on the "production efficiency locus" ("contract curve") to any point off
the locus must involve less production of both goods.
25. The slope of a consumer indifference curve at any given point on the curve reflects
a. the marginal rate of transformation (MRT) in production of one commodity into the other commodity
b. the marginal rate of technical substitution (MRTS) between the factors of production.
c. the marginal rate of substitution (MRS) of the consumer between the two goods.
d. the relative prices of the commodities in the consumption bundle of goods.
26. The equilibrium condition for producers (i.e., the condition that exists when the isocost line is tangent to
an isoquant) is .__________
a. (MPL/r) = (MPK/w) b. (MPL/MPK) = (w/r)
c. (MUB/MUA) = (PB/PA) d. (MUB/PA) = (MUA/PB)
27. Given the following table showing various combinations of goods X and Y that bring equal satisfaction
to an individual consumer:
In this table, as the individual consumes a greater amount of X, a __________ amount of good Y is given up
for each additional unit of good X. This pattern suggests that, as more of good X is consumed and less of good
Y is consumed, the ratio MUX/MUY is .__________
a. larger; increasing, which contradicts economists' usual expectations.
b. larger; decreasing, which conforms to economists' usual expectations.
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MODEL A
a. isoquant; - w/r b. isoquant; - MPL/MPK c. isocost line; - w/r d. isocost line; MPL/MPK
29. In the following graph showing an isoquant and an isocost line, at point X,
MPL/MPK is ________w/r and the producer has an incentive to use relatively more ______ in producing the
given output .
a. greater than; capital b. greater than; labor c. less than; capital d. less than; labor
A movement from point S to point T will lead to __________ in the capital/labor ratio used in the production
of good A and __________ in the capital/labor ratio used in the production of good.
a. an increase; will lead to a decrease. b. an increase; also will lead to an increase.
c. a decrease; also will lead to a decrease. d. a decrease; will lead to an increase.
31. During the price-specie-flow adjustment process to a trade imbalance, if demands for goods are inelastic,
then, when the price level ________ in the country with the trade deficit, the value of that country's exports
will ________as the price-specie-flow process takes place .
a. falls; increase b. falls; decrease c. rises; increase d. rises; decrease.
32. A Mercantilist policymaker would be in favor of which of the following policies relating to his country ?
a. an increase in the percentage of factors of production devoted to adding value to imported raw
materials in order to later export the resulting manufactured goods.
b. a decrease in the size of the population. c. a prohibition on the export of manufactured goods.
d. a minimum wage bill to protect the standard of living of workers.
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MODEL A
33. Given the following Classical-type table showing the number of days of labor input required to obtain one
unit of output of each of the two commodities in each of the two countries:
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