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Final exam

1) The share of a country’s trade which is intra-industry is measured by the Grubel Lloyd index. Which of the following facts about the Grubel Lloyd index does not hold empirically? (Hint: remember that industries are more precisely defined at the 5 than at the 3-digit level. For example, 3-digit would be “fruits” while 5-digit may be “grapefruit” or “lemon”.)
Determine the stock price at each `node' of the tree.
Typically, developed countries have a higher Grubel Lloyd index than very poor countries.
The share of world trade which is intra-industry has been increasing over the last 50 years.
The Grubel Lloyd index is mechanically higher when defined at the 3-digit than at the 5-digit industry level.
Most of the intra-industry trade happens in primary commodities.

2) Country A imports for 10 dollars of good 1 and exports for 10 dollars of good 2. There are only two goods in the economy. Consider the following two statements.
I. If country A does not import good 2 and does not export good 1, the Grubel Lloyd index is equal to zero.
II. If country A exports for 5 dollars of good 1 and imports for 5 dollars of good 2, the Grubel Lloyd index is strictly smaller than 1.
Both I. and II. are correct.
I. is correct, II. is wrong.
I. is wrong, II. is correct.
Both I. and II. are wrong.

3) Country A and country B both import for 10 dollars of good 1 and export for 10 dollars of good 2. There are only two goods in the economy. Country A exports for 5 dollars of good 1 and imports for 5 dollars of good 2 while country B exports for 10 dollars of good 1 and imports for 10 dollars of good 2. Which of the following statements is correct?
Country A has more intra-industry trade than country B and the Grubel Lloyd index of country B is equal to 1.
Country A has less intra-industry trade than country B and the Grubel Lloyd index of country A is equal to 1.
Country A has more intra-industry trade than country B and the Grubel Lloyd index of country A is equal to 1.
Country A has less intra-industry trade than country B and the Grubel Lloyd index of country B is equal to 1.

4) If there are only two goods in the economy (goods 1 and 2), the Grubel Lloyd index of a country is given by:

Where X1 and X2 refer to the exports of goods 1 and 2, while M1 and M2 stand for the imports of goods 1 and 2. Which of the following statements is correct?
I. If country A does not import good 2 and does not export good 1, the Grubel Lloyd index is equal to zero.
II. If country A exports for 5 dollars of good 1 and imports for 5 dollars of good 2, the Grubel Lloyd index is strictly smaller than 1.
Both I. and II. are correct.
I. is correct, II. is wrong.
I. is wrong, II. is correct.
Both I. and II. are wrong.