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York UniversityECON 34733473 FALL 2014 FINAL sol

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York University Department of Economics Faculty of Liberal Arts and Professional Studies AP/ECON3473 3.0 – Global Business Economics Fall 2014 George J. Georgopoulos FINAL EXAM December 20, 2014 INSTRUCTIONS: 1. Total time for this test is 3 hours . 2. Total marks = 100. 3. Aids allowed: Calculator 4. Answer all questions. 5. Please put your name and student number below. Name: ________________________________________________________ Student Number: __________________________________________________PART I: MULTIPLE CHOICE. (total 40 marks; 2 marks each) Circle the correct answer. 1. Which of the following capital transactions are entered as debits in the US balance of payments? a. A US resident transfers $100 from his account at Credit Suisse in Basel (Switzerland) to his account at a San Francisco branch of Wells Fargo Bank. b. A French resident transfers $100 from his account at Wells Fargo Bank in San Francisco to his Credit Suisse account in Basel. c. A US resident sells his IBM stock to a French resident. d. A US resident sells his Credit Suisse stock to a French resident. ANSWER: B 2. An increase in a nation's financial liabilities to foreign residents is a __________. a. Reserve inflow. b. Reserve outflow. c. Capital inflow. d. Capital outflow. ANSWER: C 3. In the two-country, two-good model, which of the following is true? 1. As a result of trade, at least one country is better off and that country’s gain does not reduce the economic welfare of the other country. 2. Both countries can gain from trade by dividing the benefits of the enhanced global production. a. (1) b. (2) c. Both (1) and (2) d. Neither (1) nor (2) ANSWER: C 4. As long as __________ and __________ are low enough, foreign direct investment can be used to reduce total costs by locating different stages of overall production in different countries. a. Foreign taxes; transport costs b. Transport costs; trade barriers c. Trade barriers; domestic taxes d. Domestic taxes; foreign taxes ANSWER: B5. All of the reasons below are in favour of buying from outside specialists EXCEPT: a. Market firms (outside specialists) may have patents/proprietary information that makes low cost production possible b.Market firms can achieve economies of scale that in-house units cannot c. not sharing information to reduce the hold up problem d.Market firms are subject to market discipline, whereas in-house units may be able to hide their inefficiencies behind overall corporate success

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