Top 250+ Solved International Economics MCQ Questions Answer
Q. If there is an increase in the trade deficit, there must be
a. An increase in the current account.
b. An increase in the capital account.
c. a decrease in the capital account.
d. An increase in net transfers in the current account.
Q. To financelarge U.S. federal Budget deficits, the Federal Reserve increases the money supply. This leads to a surplus of dollars world wide. What happens to the U.S. dollar and trade?
a. The dollar appreciates in value, stimulating imports but curtailing exports.
b. The dollar appreciates in value, stimulating exports but curtailing imports.
c. The dollar depreciates in value, stimulating imports but curtailing exports.
d. The dollar depreciates in value, stimulating exports but curtailing imports.
Q. The Federal Reserve raises interestrates. What happens in the foreign Exchange market?
a. Capital flows into the United States from other countries.
b. Capital flows out of the United States in to other countries.
c. The U.S. dollar depreciates.
d. Thereis no change in the foreign Exchange market
Q. If the dollar depreciates, this likely will cause
a. U.S. aggregate supply to rise in the short run and rise in the longrun.
b. U.S. aggregate supply to rise in the short run but fall in the longrun.
c. U.S. aggregate supply to fall in the short run and fall in the longrun.
d. U.S. aggregate supply to fall in the short run but rise in the longrun
Q. Ifthe U.S. dollar depreciates against the British pound, what is likely to happen?
a. British people will buy more American goods.
b. Americans will buy more British goods.
c. Americans will take more vacations in Britain.
d. British people will stop vacationing in Florida
Q. Exchange rates are flexible and fiscal policy is held constant. An expansionary monetary policywill be
a. Reinforce dbyan open economy.
b. Mitigated byan open economy.
c. Unaffected byan open economy.
d. Multiplied byan outflow of gol
Q. Exchange rates are flexible and fiscal policy is held constant. A Contractionary monetary policywill be
a. Reinforced byan open economy.
b. Mitigated byan open economy.
c. Unaffected byan open economy.
d. Multiplied bya noutflow of gol
Q. In a floating exchange rate system:
a. The government intervenes to influence the exchange rate
b. The exchange rate should adjust to equate the supply and demand of the currency
c. The Balance of Payments should always be in surplus
d. The Balance of payments will always equal the government budget
Q. To prevent the external value of its currency rising the government could:
a. Sell its own currency
b. Increase interest rates
c. Buy its own currency
d. Sell foreign currency
Q. A fall in the external value of a currency:
a. May cause an outward shift in the demand for the currency
b. May cause an inward shift in the supply for the currency
c. May lead to a movement along the demand curve for a currency
d. May be due to an increase in demand for the country's export
Q. Which of the following is NOT an argument for a country allowing its currency to float freely?
a. It allows the country to have sovereignty over its currency.
b. It enables a country to allow its currency to depreciate if it faces balance of payments deficits.
c. It gives greater certainty to firms involved in trade in terms of future revenues.
d. It enables a country to have greater control over its fiscal and monetary policies.
Q. Starting from a position of internal and external balance, a reduction in aggregate demand will cause a current account _____________
a. deficit
b. surplus
c. revaluation
d. devaluation
Q. A rise in the real exchange rate will ____________ the competitiveness of the domestic economy
a. increase
b. reduce
c. do nothing to
d. none
Q. Within the circular flow of income, an increase in domestic income will tend to increase
a. exports
b. taxes
c. inventories
d. imports