Econ 340 Alan Deardorff Winter Term 2010 Second Midterm Page 1 of 14 NAME: ____________________________________ Student ID No.: ____________________________ Economics 340 International Economics Prof. Alan Deardorff Second Midterm Exam March 29, 2010 INSTRUCTIONS: READ CAREFULLY!!! 1. Please do not open the exam until you are told to do so. 2. PLACE YOUR NAME AND STUDENT ID NO. (THE EIGHT DIGIT NUMBER FROM YOUR M-CARD) ON THE EXAM AND ON THE SCANTRON SHEET. 3. After you are told to open the exam, find the FORM NUMBER at the top of page 2 and copy it to the scantron sheet. 4. This exam has 100 points and you have approximately 80 minutes to complete it. Check that you have all ?? pages of the exam, including this cover sheet. 5. Part 1 consists of 25 multiple choice questions worth 2 points each. Answers to these should be marked on the scantron sheet using a #2 pencil. There are no penalties for guessing. 6. Part 2 consists of short-answer questions for which you must provide written answers on these sheets. Point values for questions in Part 2 are indicated in parentheses. Part 2 has 48 points total. 7. That leaves 2 points unaccounted for. You will get these if (and only if) you put your name and ID number on both this exam booklet and the scantron sheet, and if you enter the form number (see above) on the scantron. 8. Good luck!Econ 340 Alan Deardorff Winter Term 2010 Second Midterm Page 2 of 14 FORM 0 Economics 340 Second Midterm Exam Part 1: Multiple Choice (2 points each) Select the best answer of those given. Answers to this part should be marked on the scantron sheet using a #2 pencil. There is only one correct answer per question, and there is no penalty for guessing. 1. How does the presence of strong labor unions in a country affect the amount of immigration into it? a. Strong unions increase immigration because unions seek larger membership. b. Strong unions decrease immigration because migrants prefer to avoid paying union dues. c. Strong unions have ambiguous effect on immigration because they attract more workers from abroad but also resist letting them in. d. Strong unions are irrelevant to immigration because immigrants are not eligible to join them. e. Strong unions increase immigration because immigrants advocate for worker rights. 2. A “guest worker” program is a. A factory that pays workers with room and board, rather than with money wages. b. A type of employment offered by multinational corporations who hire workers for only a limited time period. c. A means of producing labor-intensive goods for export in an industry that normally would not employ labor. d. A firm in a developing country that uses information technology so that its workers can replace workers in developed countries. e. A government program that permits workers to enter a country from abroad to work temporarily where there is a labor shortage.Econ 340 Alan Deardorff Winter Term 2010 Second Midterm Page 3 of 14 3. By devoting more resources to keeping illegal immigrants from crossing the U.S.-Mexico border, the U.S. has caused a. Wages in Mexico to rise. b. Immigrants to be exploited by those who offer to help them cross the border. c. Increased taxes to be collected from legal immigrants in the U.S. d. Increased illegal immigration. e. Working conditions in Mexico to improve. 4. Foreign direct investment does not necessarily involve a net capital flow from one country to another because a. Acquisition of assets abroad can also be financed in the host country. b. Investors may simply reinvest their earnings from their home-country operations. c. FDI need not include ownership of financial assets. d. FDI need not include ownership of real assets. e. Credits and debits in the balance of payments must be equal. 5. Which of the following receives more than $10 of FDI for every dollar of FDI that goes abroad? (That is, for which of the following are FDI inflows, as host country, more than ten times its FDI outflows, as source country?) a. United States b. Japan c. Europe d. Other Asia e. Latin America 6. Tariff Jumping occurs when a. A firm that otherwise would have exported to a country invests there instead in order to avoid paying the country’s tariff. b. A country raises a tariff against a foreign exporter who sells to it below cost. c. Countries raise (and lower) their tariffs in an effort to stabilize the price of a product on the domestic market. d. A firm buys inputs from domestic firms rather than importing them from abroad subject to a tariff. e. A government levies a tariff, adding to the price of a good that already has been increased by another tariff.Econ 340 Alan Deardorff Winter Term 2010 Second Midterm Page 4 of 14 7. Which of the following is included in the current account? a. Interest payments b. Gifts c. Imports of services d. All of the above e. None of the above 8. The assigned reading by Griswold points out that the US economy has usually __________ when the US trade deficit was growing. The reason for this is that a trade deficit is __________ growing income. a. Expanded; a cause of. b. Contracted; a hindrance to. c. Expanded; a result of. d. Contracted; reduced by. e. Been stable; irrelevant to. 9. Which of the following would not be included as contributing negatively to the U.S. balance of trade on goods and services? a. Purchase of a case of French wine by a member of the Arizona Highway Patrol. b. Purchase of shares of stock in an Egyptian corporation by a retired school teacher in Flint, Michigan. c. Sale of an insurance policy by the British Firm, Lloyds of London, to the city council of Lubbock, Texas. d. The hiring of a Canadian trucking company by a U.S. firm to transport horseradish into Canada. e. Sale of 1.4 tons of ripe tomatoes by a Mexican farmer to members of a fraternity at the University of Michigan. 10. Which of the following would have an incentive to buy euros on the 30-day forward market? a. A speculator who expects the euro to appreciate substantially during the next month. b. A speculator who expects the euro to depreciate substantially during the next month. c. An American exporter who will be paid in euros 30 days from now. d. An American exporter who will be paid in dollars 30 days from now. e. A French importer who will make a payment in dollars 30 days from
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