International Economics Unit 4 Set 2
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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Unit 4 Set 2
Q1 | An Exchange rate is said to __________ when its short-run response to a change in marketFundamentals is greater than its long-run response. a
- Overshoot
- Undershoot
- Depreciate
- Appreciate
Q2 | Concerning exchange-ratedetermination, “market fundamentals” include all of the Following except:
- Monetary policy and fiscal policy
- Profitability and riskiness of investments
- Speculative opinión about future Exchange rates
- Productivity changes affecting production costs
Q3 | In the short run, Exchange rates respond tomarketforcessuch as:
- Inflation rates
- Expectations of future Exchange rates
- Investment profitability
- Government trade policy
Q4 | Long-run Exchange ratemovements are governed by all of the following except:
- National productivity levels
- Consumer tastes and preferences
- Rates of inflation
- Interest rate levels
Q5 | That identical godos should cost the same in all nations, assuming tis costless to ship godos between nations and there are no barriers to trade, is a reflection of the:
- Monetary approach to exchange-rate determination
- Law of one price
- Fundamentalist approach to exchange-ratedetermination
- Exchange-rate-overshooting principle
Q6 | The quantity of dollars supplied to the foreign Exchange market would increase if, other things remaining equal:
- Incomerises in Canada
- Manufacturing productivity increases in Canada
- Prices decrease in Canada
- Import tariffs rise in Canada
Q7 | The Gold Standard was prevalent in the world from:
- 15th century to 18th century
- 9th century to 18th century
- From 1870 till First World War
- From 1670 till First WorldWar
Q8 | When was the International Monetary Fund (IMF) set up?
- 1912
- 1214
- 1942
- 1944
Q9 | If there is an increase in the trade deficit, there must be
- An increase in the current account.
- An increase in the capital account.
- a decrease in the capital account.
- An increase in net transfers in the current account.
Q10 | 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?
- The dollar appreciates in value, stimulating imports but curtailing exports.
- The dollar appreciates in value, stimulating exports but curtailing imports.
- The dollar depreciates in value, stimulating imports but curtailing exports.
- The dollar depreciates in value, stimulating exports but curtailing imports.
Q11 | The Federal Reserve raises interestrates. What happens in the foreign Exchange market?
- Capital flows into the United States from other countries.
- Capital flows out of the United States in to other countries.
- The U.S. dollar depreciates.
- Thereis no change in the foreign Exchange market
Q12 | If the dollar depreciates, this likely will cause
- U.S. aggregate supply to rise in the short run and rise in the longrun.
- U.S. aggregate supply to rise in the short run but fall in the longrun.
- U.S. aggregate supply to fall in the short run and fall in the longrun.
- U.S. aggregate supply to fall in the short run but rise in the longrun
Q13 | Ifthe U.S. dollar depreciates against the British pound, what is likely to happen?
- British people will buy more American goods.
- Americans will buy more British goods.
- Americans will take more vacations in Britain.
- British people will stop vacationing in Florida
Q14 | Exchange rates are flexible and fiscal policy is held constant. An expansionary monetary policywill be
- Reinforce dbyan open economy.
- Mitigated byan open economy.
- Unaffected byan open economy.
- Multiplied byan outflow of gold.
Q15 | Exchange rates are flexible and fiscal policy is held constant. A Contractionary monetary policywill be
- Reinforced byan open economy.
- Mitigated byan open economy.
- Unaffected byan open economy.
- Multiplied bya noutflow of gold.
Q16 | In a floating exchange rate system:
- The government intervenes to influence the exchange rate
- The exchange rate should adjust to equate the supply and demand of the currency
- The Balance of Payments should always be in surplus
- The Balance of payments will always equal the government budget
Q17 | To prevent the external value of its currency rising the government could:
- Sell its own currency
- Increase interest rates
- Buy its own currency
- Sell foreign currency
Q18 | A fall in the external value of a currency:
- May cause an outward shift in the demand for the currency
- May cause an inward shift in the supply for the currency
- May lead to a movement along the demand curve for a currency
- May be due to an increase in demand for the country's export
Q19 | Which of the following is NOT an argument for a country allowing its currency to float freely?
- It allows the country to have sovereignty over its currency.
- It enables a country to allow its currency to depreciate if it faces balance of payments deficits.
- It gives greater certainty to firms involved in trade in terms of future revenues.
- It enables a country to have greater control over its fiscal and monetary policies.
Q20 | Starting from a position of internal and external balance, a reduction in aggregate demand will cause a current account _____________
- deficit
- surplus
- revaluation
- devaluation
Q21 | A rise in the real exchange rate will ____________ the competitiveness of the domestic economy
- increase
- reduce
- do nothing to
- none
Q22 | Within the circular flow of income, an increase in domestic income will tend to increase
- exports
- taxes
- inventories
- imports
Q23 | Perfect international capital mobility suggests that international funds will be responsive to _____________ differentials
- current account
- interest rate
- tax
- price
Q24 | When capital mobility is perfect, interest rate differentials will tend to be offset by ________
- price differences
- balance of payments differences
- current account differences
- expected exchange rate changes