QUESTION 1. If Commonwealth Bank, an Australian Bank, borrows short-term funds from the United States Government, then from the United States point of view, this would be called: (a) Inward Foreign Direct Investment (FDI). (b) Inward Portfolio Investment. (c) Outward Foreign Direct Investment (FDI). (d) Outward Portfolio Investment. Explain why.
QUESTION 1.
If Commonwealth Bank, an Australian Bank, borrows short-term funds from the United States Government, then
from the United States point of view, this would be called:
(a) Inward Foreign Direct Investment (FDI).
(b) Inward Portfolio Investment.
(c) Outward Foreign Direct Investment (FDI).
(d) Outward Portfolio Investment.
Explain why.
QUESTION 2.
Consider a standard Heckscher-Ohlin model with two countries: Germany is capital-abundant; Malaysia is labour-
abundant. Each country uses labour and capital to produce two goods: Good 1 is labour-intensive and Good 2 is
capital-intensive. Under free trade, the world relative price of Good 2 will be:
(a) Lower than the relative price of Good 2 under autarky in Malaysia.
(b) Lower than the relative price of Good 2 under autarky in Germany.
(c) Lower than the autarky relative price of Good 2 in both countries.
(d) Higher than the autarky relative price of Good 2 in both countries.
Explain why.
QUESTION 3.
If Indonesia (which is a small country) imposes an import tariff on textile imports, we can conclude that:
(a) The world price of textile rises, and Indonesia imports less.
(b) The world price of textile stays constant, and Indonesia imports less.
(c) The world price of textile falls, and Indonesia imports less.
(d) The world price of textile stays constant, and Indonesia imports the same as before.
Explain why.
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