Explanation​:
The Human Development Index (HDI) is a measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable, and having a decent standard of living.

Choice B is correct because Kiribati's higher mean years of schooling, possibly from greater education expenditures, result in a higher HDI than Honduras.

Choices A & C are incorrect because they suggest factors that would lead to a lower HDI for Kiribati compared to Honduras.

Choice D is incorrect because Honduras' life expectancy is higher than Kiribati's even though Kiribati spends a higher percentage of GDP on healthcare. Therefore, spending on healthcare does not contribute to Kiribati's higher HDI.

Explanation​:
Choice D is correct because the government’s spending on education and health—two factors that affect human capital—has increased.

Choice A is incorrect because higher HDI values reflect an improvement in a nation's economic development.

Choice B is incorrect because a higher HDI ranking suggests a worsening in a nation's economic development compared to other nations.

Choice C is incorrect because a lower Gini coefficient indicates an improvement in income inequality.

Explanation​:
Statement I: Trading partners often retaliate with their own forms of trade protection and this may set off a trade war.

Statement II: Tariffs and other forms of trade protection often lead to higher prices and create a welfare loss, thus resulting in an inefficient global allocation of resources.

Statement III: Protecting domestic jobs is a commonly cited argument for trade protection, because competition against lower-priced imports can lead to job losses in domestic industries.

Statement IV: If trading partners retaliate with their own trade protection measures then the country’s exports will be more expensive and less competitive, not more competitive.

Explanation​:
Statement I: an argument for trade protection is infant industries may be unable to compete against cheap imports from abroad, so tariffs keep infant industries competitive until they are fully established.

Statement II: national security concerns are a commonly-cited argument for trade protection, especially in the case of drugs, weapons, and essential goods.

Statement III: tariffs can be used to counter dumping by other countries, which happens when they sell their product at prices below cost as a way of getting rid of their surplus. This is unfair to domestic industries who may not be able to compete.

Statement IV: Less choice for consumers is an argument against trade protection, as it creates less variety in the imports of goods that are made available to domestic consumers.

Explanation​: 

The above green area is the deadweight loss incurred due to the quota. When the quota is removed, overall economic welfare increases by that amount.

Choice B is wrong, as domestic consumers pay PWORLDPWORLD​ after the quota is eliminated.

Choice C is wrong, as the domestic consumer surplus decreases by the blue area.

Choice D is wrong, as the value of net exports should decrease, as the country imports more now (Q1Q5>Q1Q3​).

Explanation​:
A sharp fall in net exports would cause a depreciation of the currency. In order to maintain a fixed exchange rate, interest rates can be increased in order to revalue the currency by attracting inward portfolio investment.

Choices B and C are incorrect as a fall in net exports is deflationary (AD shifts left).

Choice D is incorrect as a higher money supply would cause a further depreciation by lowering interest rates, reducing inward portfolio investment, which is the opposite of what is needed in order to maintain the fixed exchange rate.

Explanation​:
The current account of the BOP includes:

• Exports and imports of goods and services
• Net current transfers
• Net incomes

Foreign direct investments are included in the financial account of the BOP

Options A, B, and C are components of the current account:

• Option A is an export of goods
• Option B is an export of services
• Option C is a component of net incomes

Explanation​:
Before the imposition of the tariff, 10 000 units were imported at the price of $\pounds 1$. After the imposition, 5 000 units are exported at the price of $\pounds 2$, with half of the revenue going to those foreign producers, and half to the government levying the tax.

£5000−£10000=−£5000

Explanation​:
Trade diversion happens when the formation of a trading bloc shifts production from a low-cost producer to a high-cost producer. For example, joining a customs union can require a common external tariff, raising the price of imports from low-cost producers. As a result, trade diverts to higher cost members of the customs union.

Choice B is incorrect because trade creation happens when the entry of a country into a trading bloc shifts production from a high-cost producer to a low-cost producer.

These answer choices do not specifically address the impact of joining trading blocs:

• Choice C refers to comparative advantage which is the reason production costs are high or low. It does not explain why production shifts from one producer to another.
• Choice D refers to increased competition, but production moving from low-cost to high-cost producers results from reduced competition.

Explanation​:
The WTO aims at liberalising trade and discourages trade protection.

The WTO’s stated goals include choices A, B, and C.

Explanation​:
Common markets are trading blocs that feature:

• common external tariffs for non-member countries
• removal of trade barriers among member countries
• free movement of goods, labour, capital, and technology

(Choice B) Customs unions do not allow free movement of labour and capital
(Choice C) Monetary unions also have a common currency
(Choice D) Free trade areas do not include common external tariffs or free movement of goods, labour, capital and technology.

Explanation​:
C is correct because an overvalued currency's exchange rate is kept artificially high, above the equilibrium in a floating exchange rate regime.

A and B are incorrect because they imply appreciation or depreciation, not overvaluation.

D is wrong because it defines an undervalued currency.

Explanation​:
Invisible exports refers to the export of services. If a Korean tourist spends money on his meals in a restaurant, then the restaurant provides services to the Korean; hence, it is an invisible export for the US.

Options A, B, and D are incorrect:

• Option A purchasing a firm is not a service and if an American firm purchases a British firm, it is recorded as foreign direct investment in the BOP of the US
• Option B sending aid is a current transfer and not a service
• Option D receiving dividends is a component of net incomes

Explanation​:
The current account is the sum of the following values:

• exported goods - imported goods
• exported services - imported services
• net current transfers
• net incomes

Plugging in the given values:

Balance on current account = 450 −120−500 = −$170 million

The following options apply the formula incorrectly and include the capital transfers (a component of the capital account):

• Option B is calculated as 450−500+120+45
• Option C is calculated as 450−120+45
• Option D is calculated as 450−120−500+45

Choice A is incorrect, as a low amount of foreign exchange would inhibit a country's ability to manage its exchange rate, meaning the would have to adopt a floating exchange rate.

Choice B is incorrect as a floating exchange rate would grant central banks the freedom to pursue other goals as interest rates impact the exchange rate.

Choice D is incorrect as a floating exchange rate can correct an external imbalance, where the current account either has too high a deficit or surplus.

Explanation​:
C will not cause the CAD to appreciate (e11​ to e22​). Selling more CAD in the foreign exchange market (FOREX) shifts the supply curve of domestic currency to the right leading to its depreciation.

A and B have the same effect of decreasing the supply of CAD in FOREX causing the CAD to appreciate (e1​ to e2​).

D shifts the demand for domestic currency rightward, leading to its appreciation (e1​ to e2​).

Explanation​:
The HDI is a composite indicator measuring economic development across three dimensions:

• Standard of living, measured by GNI per capita (PPP) (Choice B)
• Education, measured by mean years of schooling (Choice C) and expected years of schooling
• Health, measured by life expectancy at birth (Choice D)

Explanation​:
Statement I: Debt servicing refers to the required regular loan payments needed to cover the interest and principal repayments. Acquiring new debt to service outstanding debt compounds the problem by increasing the total amount of debt owed and the interest payments.

Statement II: Governments cannot sustainably finance their annual expenditures by borrowing money. Funding must ideally come from tax revenues.

Statement III: When a country lacks funding for human and physical capital investments, it may resort to borrowing money to finance long-term investments as they have the potential to increase the country's revenue and income, which could be used to pay off its debts in the future.

To devalue its currency, the country must:

• Sell the domestic currency, which increases its supply on foreign exchange markets. This eliminates choices A and B.
• Buy pounds. This causes demand for the pound to increase, causing it to appreciate against the local currency. This eliminates choice C.

Explanation​:

Domestic producer surplus declines by area $b$ once tariffs are removed.

Choice A is wrong as consumer surplus increases by area b+d+e+f.

Choice B is wrong as imports would increase (from Q2Q3​ to Q1Q4​).

Choice C is wrong as overall economic welfare increases by d+f, as those areas were deadweight losses when tariffs were in place.

Explanation​:
Statement I: Import tariffs are a form of trade protection, as they are taxes that increase the price of imports, which cause domestic consumers to switch toward consuming domestically produced goods.

Statement II: Import quotas are a form of trade protection as they directly limit the quantity of imports of a particular good into a country.

Statement III: While austerity measures can be used to make a country's output more competitive globally through reducing the overall price level, their explicit goal is not to favour domestic production over foreign production.

Explanation​:
Sustainable development is defined as development that meets the needs of present generations without compromising the needs of future generations.

Options A, B, and D are incorrect:
Option A: as it doesn't mention the needs of future generations
Option B: as it doesn't mention the needs of present generations
Option D: as it does state that the needs of future generations are met but at the cost of the present generations

Explanation​:
Statement I: tariffs in this scenario will be an anti-dumping measure to counter Protopia’s dumping of its products at below-cost prices.

Statement II: Econland’s tariffs are a response to Protopia’s unfair competition, and many economists would argue that tariffs in this case are justifiable.

Statement III: Econland’s tariffs are used to counter Protopia’s dumping and will thus protect domestic jobs in those industries harmed by Protopia’s actions.

Statement IV: Trade protection leads to a misallocation of resources, even when in response to dumping by a trade partner. Countries can utilize diplomacy and political pressure to prevent dumping, rather than resort to tariffs.

Explanation​:

When there is a closed economy, domestic producers get $\pounds$30 000 in revenue (equal to the red, green and blue area), with a tariff they get $\pounds$14 000 (the red and green area) and with free trade they make $\pounds$5 000 (just the red area).

Explanation​:
While FDI may create job opportunities, these jobs can often be low-skilled positions, as FDI managers often keep the high-skilled positions for recruits from the home country. This prevents training of local workforce and minimizes the chances of improving the host country's human capital.

Choices A, B, and D are advantages of FDI for the host country.