Question

Question 19

If a government requires domestic banks to lend to certain industries, creating a situation in which the firms know they will receive funding no matter how they use the funds, then the government has created a problem called:

Select one:

a. regulatory arbitrage.

b. herding behavior.

c. contagion.

d. structural moral hazard.

Question 21

If a nation's rate of growth of economic growth is 3 percent and its rate of population growth is 2 percent, then its rate of growth in aggregate real income is:

Select one:

a. 1.5 percent.

b. 1 percent.

c. 5 percent.

d. 6 percent.

Parallel imports are goods or services brought into a country:

Select one:

a. by the owner of an existing copyright, trademark, or patent duplicating the intellectual property right in the importing nation.

b. without authorization of the owner of a copyright, trademark, or patent after initially being legitimately placed into circulation in some other locale.

c. by the domestic government alongside domestic private individuals and firms.

d. by a foreign government alongside domestic private individuals and firms.

Question 29

A set of laws aimed at promoting specific industries within a nation is an example of:

Select one:

a. anti-predatory-pricing laws.

b. industrial policies.

c. antitrust laws.

d. anti-price-discrimination laws.

Question 30

The factor proportions theory predicts that when country A, which as a relative factor abundance of unskilled workers, begins to engage in international trade with country B, which as a relative factor abundance of skilled workers,

Select one:

a. skilled workers in country B will perceive that they will begin to gain ground (in terms of wage incomes) relative to unskilled workers in country B.

b. unskilled workers in country A will perceive that they will begin to gain ground (in terms of wage incomes) relative to skilled workers in country A.

c. relative wages of skilled workers in the two countries will diverge.

d. relative wages of unskilled workers in the two countries will converge.

Answer 1

1. Moral hazard refers to the situation when a party in transaction knowingly gets involved in a risky event,knowing that it is protected from risk by the other party which will bear the cost. When a government imposes a regulation on banks to provide credit to certain industries regardless of how they use these funds,this will lead to structural moral hazard. The industries would spend these funds recklessly knowing that the government is going to bear the cost.

   So, Option D is the correct answer.

2. The rate of economic growth is given at 3% and rate of population growth is 2%.

   Thus,rate of growth of real income is 1.5%.

   So,the correct answer is Option A.

3. Parallel imports are often termed as gray market imports. It refers to the situation when a good is legitimately purchased in a country and then is imported to another country without the permission of the patent or copyright holder. Parallel imports are not pirated copies but identical to legitimate product except for maybe packing and warranty.

   So, Option B is the correct answer.

4. Industrial policy is a strategic effort by the government of a nation to promote growth of its industries. It consists of rules and regulations to encourage investment in certain specified industries. It can be described as a statement of goals and targets that are needed to be achieved in the industrial sector.

   So,the correct answer is Option B.

5. According to factor proportions theory, when two countries with different factor endowment trade with each other the price of two goods being traded will be equalized eventually. With product prices becoming equal, the factor prices will also tend to converge. This means that wages or factor price of unskilled workers in country A will tend to converge with wages of skilled workers in country B. This will lead to a divergence in the wages of skilled workers in both countries.

   So,the correct answer is Option C.