MINISTRY OF EDUCATION AND TRAINING FINAL EXAM

NATIONAL ECONOMICS UNIVERSITY

INTERNATIONAL ECONOMICS

Mode of study: Full time Intake: 61

Exam date: November 23, 2021
Allowed time: 90 minutes

School of Advanced Education Programs

Version: 01

Question 1 (2.0 marks): Indicate whether each statement below is True (T) or False (F)
1. International economics studies the economic interdependence among countries
2. Adam Smith agreed with the mercantilists that if one nation benefits from trade its
trading partner would lose.
3. A tax of 15 cents per unit of imported toys would be an example of ad valorem
tariff.
4. An import quota is defined as a specific sum of money on certain imports
5. The Heckscher-Ohlin theory predicts that a capital-abundant country will export
relatively labor - intensive products.
6. In the balance-of-payments account, a transaction resulting in receipt of a payment
is recorded as a credit, whereas a transaction resulting in a payment to other
nations is recorded as a debit.
7. Under the managed float system of exchange rates, a fall in the market price of a
currency is called devaluation.
8. A currency appreciation tends to make a nation's exports more competitive.

Question 2 (3.0 marks): What is meant by economic integration? Explain the

difference between a customs union and a free trade area, and give examples?

Question 3 (2.0 marks): What is meant by the balance of payment? Why would it
be useful to examine a country’s balance of payments data?

Question 4 (3.0 marks): Assume that the functions of a demand curve and of a supply
curve of a small country A for commodity X are Dx = 150 – 5Px and Sx = -30 +4Px
respectively. The unit price of commodity X imported from the rest of the world is 10 US
Dollars (USD) in the condition of the free trade. Draw the graph and calculate the
increase in producer surplus and the decrease in the consumer surplus if the country A
would impose the import tariff at the rate of 40% on the commodity X imported from the
rest of the world?

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Note: Opened book examination