Budget Deficits And The Trade Balance MCQs

Option A: A government budget deficit

Option B: Capital flight

Option C: An increase in Private saving

Option D: A tariff

Correct Answer: A tariff ✔

Option A: Eu consumers who buy electronics from Japan

Option B: EU farmers who export grain

Option C: employees of EU car manufacturers

Option D: Shareholders of German carmaker BMW

Correct Answer: EU farmers who export grain ✔

Option A: A country’s trade policy has no impact on the size of its trade balance

Option B: None of these answers

Option C: A restrictive import quota decreases a country’s net exports

Option D: A restrictive imports quota increases a country’s net exports

Correct Answer: A. A country’s trade policy has no impact on the size of its trade balance ✔

Option A: UK net foreign investment is unchanged because only UK residents can after UK net foreign investment

Option B: UK net foreign investment rises

Option C: UK net foreign investment falls

Option D: None of the above

Correct Answer: UK net foreign investment falls ✔

Option A: The demand for pounds decreases and the pound depreciates

Option B: The Supply of pounds increases, and the pound depreciates

Option C: The Supply of pounds decreases, and the pound appreciates

Option D: The demand for Pounds increases and the pound appreciates

Correct Answer: The demand for Pounds increases and the pound appreciates ✔

Option A: depreciate and would increase UK net exports

Option B: appreciate and would increase UK net exports

Option C: depreciate and would decrease UK net exports

Option D: appreciate, but the total value of UK net export stays the same

Correct Answer: appreciate, but the total value of UK net export stays the same ✔

Option A: has no impact on the real interest rate and fails to crowed out investment

Option B: decreases the real interest rate and crowds out investment

Option C: None of these answers

Option D: Increases the real interest rate and crowds out investment

Correct Answer: Increases the real interest rate and crowds out investment ✔

Option A: decreases a country’s net exports and increases its long-run growth path

Option B: increases a country’s net exports and increases its long-run growth path

Option C: increases a country’s net exports and decreases its long-run growth path

Option D: decreases a country’s net exports and decreases its long-run growth path

Correct Answer: C. increases a country’s net exports and decreases its long-run growth path ✔

Option A: Foreigners who wish to buy assets in the UK

Option B: BAe Systems wishing to sell aircraft to Saudi Arabia

Option C: UK residents wishing to buy foreign Produced cars

Option D: Lenders of loanable funds

Correct Answer: BAe Systems wishing to sell aircraft to Saudi Arabia ✔

Option A: A tariff on sugar

Option B: All are examples of trade policy

Option C: capital flight because it increases a country’s net exports

Option D: an increase in the government budget deficit because it reduces a country’s net exports

Correct Answer: A tariff on sugar ✔

Option A: increase Pakistan’s net exports and Pakistan’s net capital outflow the same amount

Option B: Increase Pakistan’s net exports and decrease Pakistan’s net capital outflow

Option C: decreases Pakistan’s net exports and Pakistan’s net capital outflow the same amount

Option D: decrease Pakistan’s net exports and increase Pakistan’s net capital outflow

Correct Answer: A. increase Pakistan’s net exports and Pakistan’s net capital outflow the same amount ✔

Option A: The pound appreciates, and UK net exports rise

Option B: The pound appreciates, and UK net exports fall

Option C: The pound depreciates, and UK net exports rise

Option D: The pound depreciates, and UK net exports fall

Correct Answer: The pound appreciates, and UK net exports fall ✔

Option A: Net exports will rise

Option B: None of these answers

Option C: Net exports will fall

Option D: Net exports will remain unchanged

Correct Answer: Net exports will remain unchanged ✔

Option A: An increase in Pakistan’s net capital outflow increase the supply of rupees and the rupees depreciate

Option B: An increase in Pakistan’s net capital outflow increase the demand of rupees and the rupees appreciate

Option C: An increase in Pakistan’s net capital outflow increase the demand of rupees and the rupees depreciate

Option D: An increase in Pakistan’s net capital outflow increase the supply of rupees and the rupees appreciate

Correct Answer: A. An increase in Pakistan’s net capital outflow increase the supply of rupees and the rupees depreciate ✔

Option A: An increase in Pakistan’s net exports decreases the supply of rupees and the rupees depreciates

Option B: An increase in Pakistan’s net exports increase the demand for rupees and the rupees appreciates

Option C: An increase in Pakistan’s net exports increases the Supply of rupees and the rupees depreciates

Option D: An increase in Pakistan’s net exports decrease the demand for rupees and the rupees appreciates

Correct Answer: B. An increase in Pakistan’s net exports increase the demand for rupees and the rupees appreciates ✔

Option A: A country’s trade deficit and its government budget deficit

Option B: The fact that if a country has a trade deficit, its trading partners must also have trade deficits

Option C: the equality of a country’s saving deficit and its investment deficit

Option D: a country’s trade deficit and its net capital outflow deficit

Correct Answer: A. A country’s trade deficit and its government budget deficit ✔

Option A: Increase Pakistan’s net exports and decrease Pakistan’s net capital outflow

Option B: decreases Pakistan’s net exports and Pakistan’s net Capital outflow the Pakistan’s same amount

Option C: Increase Pakistan’s net exports and Pakistan’s net capital outflow the same amount

Option D: decreases Pakistan’s net exports and increase Pakistan’s net capital outflow

Correct Answer: B. decreases Pakistan’s net exports and Pakistan’s net Capital outflow the Pakistan’s same amount ✔

Option A: A decrease in the government budget deficit increase the real interest rate

Option B: An increase in the government budget deficit shifts the supply of loanable funds to the right

Option C: An increase in private saving shifts the supply of loanable funds to the left

Option D: An increase in the government budget deficit shifts the supply of loanable funds to the left

Correct Answer: An increase in the government budget deficit shifts the supply of loanable funds to the left ✔

Option A: A decrease in a country’s net capital outflow shifts the demand for loanable funds to the left

Option B: An increase in domestic investment shifts the demand for loanable funds to the right

Option C: An increase in a country’s net capital outflow shifts the supply of loanable funds to the left

Option D: An increase in a country’s net capital outflow raises its real interest rate

Correct Answer: C. An increase in a country’s net capital outflow shifts the supply of loanable funds to the left ✔