Question

1. The controls in cross-border flows of capital are most often aimed at slowing or eliminating movements of
   1. reserve assets.
   2. foreign direct investment.
   3. foreign portfolio investment.
   4. non-reserve government assets.

1. Producer surplus is equal to the area
   1. under the demand curve and above the supply curve.
   2. above the supply curve and below the price line.
   3. under the supply curve.
   4. under the demand curve and above the price line.

2. Which of the following would be a deadweight loss from a tariff?

1. The shift of consumer surplus to government
2. The decrease in consumer surplus due to a drop in consumption
3. The increase in producer surplus
4. The decrease in consumer surplus

3. Which of the following is NOT correct about the effects of a tariff on an imported product?
   1. Tariffs increase government revenue.
   2. Tariffs increase the efficiency of how resources are allocated.
   3. Tariffs benefit domestic producers by raising price and domestic output.
   4. Tariffs mean higher prices and less consumption for consumers of the product.

Answer 1

1. The correct option is C. Foreign portfolio investment.

The controls in cross-border flows of capital are most often aimed at slowing or eliminating movements of capital portfolio investment.

2. The correct option is B. Above the supply curve and below the price line.

Producer surplus refers to the area under the market price above the supply curve.

3. The correct option is B. The decrease in Consumer surplus due to drop in consumption.

This is because when tariff is imposed the prices of the items Increase this results in decrease in the Consumer surplus because of the decrease in consumption.

4. The correct option is B. Tariffs Increase the efficiency of how resources are to be allocated.

Tariffs has no effect on the efficiency of resource allocation. This all the others are correct this is not.

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