Question

1. Suppose the U.S. equilibrium price of beef is $2 per kilo and Japan equilibrium price of beef is $4 per kilo; international equilibrium would be established by

A. The intersection of U.S. excess supply and Japan excess demand of beef.

B. The intersection of Japan excess supply and U.S. excess demand of beef.

C. The intersection of U.S. and Japan excess supply of beef.

D. The intersection of U.S. and Japan excess demand of beef.

2. Other things being equal, the effects of a an increase in income upon the demand, or supply, the equilibrium price, and the equilibrium quantity of a normal good.

	A.	increase demand, increase price, and increase quantity supplied.
	B.	increase demand, increase price, and increase quantity demanded.
	C.	increase supply, increase price, and increase quantity demanded.
	D.	decrease demand, decrease price, and decrease quantity demanded.

3. Other things being constant, if the U.S. inflation rate exceeds that of our trading partners, we expect

	A.	political instability in the U.S.
	B.	an improvement in the U.S. balance of payments.
	C.	a deterioration in the U.S. balance of payments.
	D.	a "dirty float" will emerge.

4. It is estimated that the price elasticity of demand for farm products is .2. Therefore, in order for consumers to increase their quantity demanded of farm products by 10 percent, the prices of these products would have to fall:

	A.	10 percent
	B.	20 percent
	C.	50 percent
	D.	90 percent

5. Modern socialist theory

	A.	emphasises the government ownership of the factors of production.
	B.	is not compatible with democracy.
	C.	emphasises government control rather than government ownership of the factors of production
	D.	can only exist under dictatorship.

Answer 1

1) Intersection of excess supply ( lower price) and excess demand ( high price)

2) Increase in income will increase demand a(t shuft of demand curve)lead to increase in price and increase in Quantity supplied ( movement along supply curve)

3) Decrease in interest rate will reduce foreign portfolio Investment , leading to deterioration of balance of payments in short run.

4) Elasticity of demand=% change in demand/% change in price

-0.2=10/% change in price

% change in price=10/-0.2=-50%{ negitive sign shows Decrease in price}