True and False. 1. For most nations, trade as a share of domestic output has bee

Question

True and False. 1. For most nations, trade as a share of domestic output has been decreasing since 1970 and as a result the global market for goods and services has been contracting at the rate of about 6% per year since 1950. a. True b. False 2. A nation using union labor monopolies to produce a product can export its surplus at a lower global price to those nations that are more efficient producers of the same product and as a result make the consumers in the exporting nations better off. a. True b. False 3. All else held constant, an improvement in technology in the production of a given product leads to a decrease in equilibrium price and greater competitiveness in the global market place. a. True b. False 4. In terms of a nation's level of income and domestic production, voluntary market exchange that leads to consumer surplus is always good but producer surplus is always bad. a. True b. False 5. Foreign direct investment is of shorter duration and tends to be much more volatile than other forms of private financial investment in foreign nations. a. True b. False 6. A major component of globalization is the extent and strength of real and financial sector linkages among national economies. a. True b. False 7. All non-price factors of supply held constant, an increase in price will tend to increase the quantity supplied within a period. a. True b. False 8. Global trade in goods and services has generally been on the decline due to the need to protect jobs. a. True b. False 9. The market clearing equilibrium price maximizes the total area of consumer and producer surpluses. a. True b. False 10. If everyone did what they weren't good at so as to have more work to do, we'd have more domestic production and a correspondingly higher standard of living. a. True b. False

Explanation / Answer

b. False :

2. A nation using union labor monopolies to produce a product can export its surplus at a lower global price to those nations that are more efficient producers of the same product and as a result make the consumers in the exporting nations better off.

  b. False

Monopolized unions engage in wage negotiations favorable to unions. This is likely to be higher than market rates of wages. Therefore cost of production will be higher in such countries.

a. True

Marginal cost of production and Marginal productivity improves because of technological improvements. Therefore, ceteris paribus, equilibrium prices are lower and output is higher, leading to competitiveness

4. In terms of a nation's level of income and domestic production, voluntary market exchange that leads to consumer surplus is always good but producer surplus is always bad.

b. False

The existence of Consumer’s surplus reveals the existence of higher demand. ( consumer is willing to buy more at current prices). The opposite is true if producer’s surplus exists. ( Producer is willing to supply more at current prices.) This is not a stable equilibrium.

5. Foreign direct investment is of shorter duration and tends to be much more volatile than other forms of private financial investment in foreign nations.

a. True

FDI fluctuates often violently with fluctuation of interest rates, anywhere in the world. His is called “flight of capital’ or “hot money”

6. A major component of globalization is the extent and strength of real and financial sector linkages among national economies.

a. True

This is the definition of globalization

7. All non-price factors of supply held constant, an increase in price will tend to increase the quantity supplied within a period.

a. True

This is the definition of Supply curve

8. Global trade in goods and services has generally been on the decline due to the need to protect jobs

b. False

US economy is experiencing a downturn in international trade because of the prolonged depression in the economy. The joblessness in the economy is due to lack of Aggregate Demand. International trade has fallen in the US because of the strong Dollar which has risen relative to most currencies in the world.

9. The market clearing equilibrium price maximizes the total area of consumer and producer surpluses.

b. False

At the equilibrium price there is neither any consumer or produce demand (ceteris paribus)

10. If everyone did what they weren't good at so as to have more work to do, we'd have more domestic production and a correspondingly higher standard of living.

b. False

If all factors of production employed were inefficient, marginal productivity would be lower and Costs would be higher. This will bring in lower than equilibrium level of output. This reduces wages, increases prices, and lowers per capita income.

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