International Economics Unit 3 Set 3
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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Unit 3 Set 3
Q1 | If there were a balance of payments deficit then in a floating exchange rate system:
- The external value of the currency would tend to fall
- The external value of the currency would tend to rise
- The injections from trade are greater than the withdrawals
- Aggregate demand is increasing
Q2 | If the value of the pound in other currencies is strong, then other things being equal:
- The price of UK products abroad in foreign currency will fall
- The price of UK products abroad in foreign currency will rise
- The price of UK products in the UK will rise
- The price of UK products in the UK will fall
Q3 | If the value of the pound in terms of other currencies rises:
- The spending on UK exports in pounds must rise
- The spending on UK exports in foreign currency will rise if demand is price elastic
- The demand for UK exports will rise
- The spending on UK exports in foreign currency will fall if demand for UK exports is price elastic
Q4 | The supply of pounds to the currency market will be upward sloping if:
- The demand for UK exports is price elastic
- The demand for UK exports is price inelastic
- The demand for imports into the UK is price elastic
- The demand for imports into the UK is price inelastic
Q5 | A fall in the value of the pound is likely to decrease spending on imports if:
- The price elasticity of demand for imports is price elastic
- The price elasticity of demand for imports is price inelastic
- The price elasticity of demand for imports has a unit price elasticity
- The price elasticity of demand for exports is price elastic
Q6 | If the exchange rate is above the equilibrium level then in a floating exchange rate system:
- There is excess demand and the exchange rate should fall
- There is excess supply and the exchange rate should fall
- There is excess demand and the exchange rate should rise
- There is excess supply and the exchange rate should rise
Q7 | If the exchange rate is below the equilibrium level then in a floating exchange rate system:
- There is excess demand and the exchange rate should fall
- There is excess supply and the exchange rate should fall
- There is excess demand and the exchange rate should rise
- There is excess supply and the exchange rate should rise
Q8 | A depreciation of a currency occurs when:
- The value of the currency falls
- The value of the currency increases
- Inflation falls
- The balance of payments improves
Q9 | An appreciation of the currency is likely to occur if:
- Domestic interest rates fall
- There is an increase in demand for imports
- There is an increase in demand for exports
- There is an increase in the balance of payments deficit
Q10 | If the central bank purchases assets, it will result in:
- An increase in the money supply.
- An increase in the central bank's net worth.
- A decline in the money supply.
- A decline in the central bank's net worth.
Q11 | If there is a decline in output, to keep the exchange rate fixed, the central bank has to:
- Purchase foreign assets.
- Purchase domestic assets.
- Sell domestic assets.
- Sell foreign assets.
Q12 | What is the effect of an increase in taxes under fixed exchange rates and perfect assetsubstitutability in the short run?
- An increase in output and no change in interest rates.
- A decline in output and interest rates.
- A decline in output and no change in interest rates.
- An increase in output and interest rates.
Q13 | What is the effect of a currency devaluation under fixed exchange rates in the short run?
- A decline in output.
- An increase in imports.
- A decline in foreign reserves.
- An increase in exports.
Q14 | If a respectable source speculates that there is a possibility of devaluation:
- Output will increase.
- There will be a net private capital outflow.
- The central bank's foreign reserves will increase.
- Domestic interest rates will decline.
Q15 | Under imperfect asset substitutability:
- Central banks cannot keep the exchange rate fixed.
- Domestic interest rates should be equal to foreign interest rates.
- Central banks cannot affect money supply.
- Sterilized intervention affects money supply.
Q16 | Which of the following is NOT true about the reserve currency standard?
- The currency to which the rates are fixed should be the same as the currency the central bank holds.
- Exchange rates are all fixed.
- The reserve center can use monetary policy to keep exchange rates fix
Q17 | Which of the following is NOT true about the gold standard?
- Central banks have to hold gold as reserve assets.
- It does not lead to monetary policy spillovers.
- Exchange rates are all fix
Q18 | Which of the following is NOT a motive for international asset trade?
- Capital controls
- Intertemporal trade
- International portfolio diversification
- Tax avoidance
Q19 | Which of the following is NOT a part of a "policy trilemma"?
- International trade policy
- Capital controls
- Monetary policy
- Exchange rate regime
Q20 | Which of the following is NOT a type of offshore bank?
- Agency office
- Subsidiary bank
- Foreign branch
- Investment bank
Q21 | Which of the following is an example of "Eurocurrency" trade?
- Trade of euros in Europe
- Trade of dollars for euros anywhere
- Trade of dollars in Europe
- Intervention by the ESCB in the euro market
Q22 | What are "Eurobanks"?
- Banks that accept Eurocurrency deposits
- Banks located in Europe
- European-owned banks in the U.S.
- Banks that accept deposits in euros
Q23 | Which of the following is NOT true about the IBFs?
- They make loans to foreigners
- They are not subject to taxes
- They are only investment banks
- They accept deposits from foreigners
Q24 | What institution reduces the risk of bank runs in the U.S.?
- FDIC
- Federal Reserve System
- Congress
- S&Ls
Q25 | The Basel Committee:
- Coordinates monetary policy among 11 countries.
- Provides international deposit insurance.
- Provides supervision of the banks trading internationally.
- Provides LLR services to international banks.