Economics MCQs

Option A: Margaret Thatcher

Option B: Ronald Reagan

Option C: Milton Friedman

Option D: John Maynard Keynes

Correct Answer: Milton Friedman ✔

Option A: Money multiplier

Option B: liquidity ratio

Option C: bank’s line of credit

Option D: required reserve ratio

Correct Answer: Money multiplier ✔

Option A: the time that it takes for policy makers to recognize the existence of boom of bust

Option B: the time needed for parliament to agree to a tax cut.

Option C: the time that is necessary to put the desired policy into effect

Option D: the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented

Correct Answer: the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented ✔

Option A: delays in the response of the economy is stabilization policy

Option B: the foreign response to price changes

Option C: the change in exports and imports prices

Option D: the change in exchange rates

Correct Answer: delays in the response of the economy is stabilization policy ✔

Option A: debt burden

Option B: the Laffer curves

Option C: bracket creep

Option D: fiscal drag

Correct Answer: the Laffer curves ✔

Option A: increase: increase

Option B: decrease; decrease

Option C: increase; decrease

Option D: decrease; increase

Correct Answer: increase; decrease ✔

Option A: The government regulation of financial intermediaries

Option B: The spending and taxing policies used by the government to influence the economy

Option C: The actions of the central bank in controlling the money supply

Option D: The government’s attitude to taxation

Correct Answer: The spending and taxing policies used by the government to influence the economy ✔

Option A: exchange rates to be insensitive to the differential rates of inflation between countries

Option B: the currencies of relatively high-inflation countries to depreciate

Option C: the currencies of relatively high inflation countries to appreciate

Option D: the currencies of relatively low inflation countries to depreciate

Correct Answer: the currencies of relatively high-inflation countries to depreciate ✔

Option A: a weakening of a currency

Option B: A depreciation of a currency

Option C: An appreciation of a currency

Option D: a debasement of a currency

Correct Answer: An appreciation of a currency ✔

Option A: has no predictable effect on the price of the pound sterling?

Option B: does not affect the price of the pound sterling

Option C: tends to appreciate the pound sterling

Option D: tends to depreciate the pound sterling

Correct Answer: tends to appreciate the pound sterling ✔

Option A: floating exchange rates

Option B: pegged exchange rates

Option C: managed exchange rates

Option D: fixed exchange rates

Correct Answer: floating exchange rates ✔

Option A: of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed upon value of its currency

Option B: in which the value of currencies was fixed in terms of a specific number of ounces of gold, which in turn determined their values in international trading

Option C: of floating exchange rates determined of the supply and demand of one nation’s currency relative to the currency of other nations

Option D: That prohibited governments from intervening in the foreign exchange markets

Correct Answer: of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed upon value of its currency ✔

Option A: exchange rate

Option B: balance of trade

Option C: terms of trade

Option D: currency valuation

Correct Answer: exchange rate ✔

Option A: forward contracts occur in a specific locations-for example, the Chicago Mercantile Exchange

Option B: futures contracts have negotiable delivery dates

Option C: forward contracts can be tailored in amount and delivery date to the need of importers of exporters

Option D: futures contracts involve no brokerage fees or other transactions costs

Correct Answer: forward contracts can be tailored in amount and delivery date to the need of importers of exporters ✔

Option A: destabilizing

Option B: stabilizing

Option C: inflationary

Option D: deflationary

Correct Answer: stabilizing ✔

Option A: $0.0909

Option B: $0.1002

Option C: $0.2826

Option D: $1.1024

Correct Answer: $0.0909 ✔

Option A: sell; appreciation

Option B: sell; depreciation

Option C: buy; depreciation

Option D: buy; appreciation

Correct Answer: sell; depreciation ✔

Option A: forward contract

Option B: spot contract

Option C: money contract

Option D: bid contract

Correct Answer: forward contract ✔

Option A: profit

Option B: arbitrage

Option C: spread

Option D: forward transaction

Correct Answer: spread ✔

Option A: forward transaction

Option B: spot transaction

Option C: swap transaction

Option D: None of the above

Correct Answer: forward transaction ✔

Option A: hedging

Option B: speculation

Option C: intervention

Option D: arbitrage

Correct Answer: hedging ✔

Option A: increase in the demand for yen

Option B: decrease in the demand for yen

Option C: increase in the supply of yen

Option D: decrease in the Supply of yen

Correct Answer: increase in the demand for yen ✔

Option A: America’s demand for Swiss merchandise rises

Option B: America’s demand for Swiss merchandise falls

Option C: Switzerland’s demand for American merchandise rises

Option D: Switzerland’s demand for American merchandise falls

Correct Answer: C. Switzerland’s demand for American merchandise rises ✔

Option A: letter a credit

Option B: foreign currency option

Option C: cable transfer

Option D: bill of exchange

Correct Answer: foreign currency option ✔

Option A: constant

Option B: inelastic

Option C: elastic

Option D: Unitary elastic

Correct Answer: elastic ✔

Option A: decrease; depreciate

Option B: decrease; appreciate

Option C: increase; depreciate

Option D: increase; appreciate

Correct Answer: increase; appreciate ✔

Option A: upward sloping

Option B: downward sloping

Option C: vertical

Option D: any of the above

Correct Answer: upward sloping ✔

Option A: GDP usually decreases before it increases after a currency depreciation

Option B: the trade balance usually gets worse before it improves after a currency depreciation

Option C: the trade balance usually gets better before it gets worse after a currency appreciation

Option D: GDP usually decreases before it increases after a currency appreciation

Correct Answer: the trade balance usually gets worse before it improves after a currency depreciation ✔

Option A: depreciate under a system of fixed exchange rates

Option B: depreciate under a system of floating exchange rates

Option C: appreciate under a system of floating exchange rates

Option D: appreciate under a system of floating fixed rates

Correct Answer: depreciate under a system of floating exchange rates ✔

Option A: price feedback theory

Option B: trade feedback theory

Option C: J-curve theory

Option D: purchasing power parity theory

Correct Answer: purchasing power parity theory ✔

Option A: a depreciation of a currency

Option B: a strengthening of a currency

Option C: a floating of a currency

Option D: an appreciation of a currency

Correct Answer: a depreciation of a currency ✔

Option A: tends to lead to an appreciation of a nation’s currency

Option B: tends to lead to a depreciation of a nation’s currency

Option C: usually has no effect on a currency’s exchange value

Option D: tends to lead to a depreciation of the currencies of other nations

Correct Answer: B. tends to lead to a depreciation of a nation’s currency ✔

Option A: as the money supply is decreased the interest rate will increase and the price of UK exports will rise and the Price of UK imports will fall

Option B: as the money supply is decreased the interest rate will increase, and the price of UK exports will fall and the price of UK imports will rise

Option C: as the money supply is decreased the interest rate will increase and the price of UK exports and UK imports will fall.

Option D: as the money supply is decreased the interest rate will increase and the price of both UK exports and UK imports will rise

Correct Answer: as the money supply is decreased the interest rate will increase and the price of UK exports and UK imports will fall. ✔

Option A: adopted a new system of fixed exchange rates

Option B: gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand

Option C: adopted single internationally accepted currency whose use is limited to international transactions

Option D: returned to the gold standard

Correct Answer: gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand ✔

Option A: hard currency

Option B: foreign exchange

Option C: reserve currencies

Option D: near monies

Correct Answer: foreign exchange ✔

Option A: attempt to profit by trading on expectations about future currency prices

Option B: bear risk as they attempt to ____ beat the market||

Option C: attempt to buy currency at a low price and later resell that currency at a higher price

Option D: Simultaneously buy a currency at a low price and sell that currency at a higher price, making a riskless profit

Correct Answer: Simultaneously buy a currency at a low price and sell that currency at a higher price, making a riskless profit ✔

Option A: reflects only the influences of merchandise or real trade on the dollar’s exchange value

Option B: reflects only transactions in the currency futures market

Option C: is the weighted average of the dollar exchange rate relative to the currencies of important U.S trading partners adjusted for inflation?

Option D: is the weighted average of the dollar exchange rate relative to the currencies of important U.S trading partners unadjusted for inflation?

Correct Answer: is the weighted average of the dollar exchange rate relative to the currencies of important U.S trading partners adjusted for inflation? ✔

Option A: currency arbitrage

Option B: interest arbitrage

Option C: short positions

Option D: long positions

Correct Answer: interest arbitrage ✔

Option A: his desire to open a bank account in Japan

Option B: his desire to purchase an automobile produced domestically

Option C: his desire to travel to Europe

Option D: his desire to purchase Treasury bills issued by the British government

Correct Answer: his desire to purchase an automobile produced domestically ✔

Option A: Norway’s export goods become more expensive to Norway’s residents

Option B: Norway’s exports goods become cheaper to Sweden’s residents

Option C: Sweden’s export goods become cheaper to Norway’s residents

Option D: Sweden’s export goods become cheaper to Sweden’s residents

Correct Answer: C. Sweden’s export goods become cheaper to Norway’s residents ✔

Option A: forward discount

Option B: forward premium

Option C: forward spread

Option D: None of these

Correct Answer: forward discount ✔

Option A: differential actions

Option B: cash transaction

Option C: arbitrage

Option D: forward transactions

Correct Answer: arbitrage ✔

Option A: 2.0

Option B: 1.999

Option C: 2.323

Option D: 2.222

Correct Answer: 2.222 ✔

Option A: Swap

Option B: foreign exchange arbitrage

Option C: foreign exchange option

Option D: futures market contract

Correct Answer: foreign exchange option ✔

Option A: hedging

Option B: speculation

Option C: government regulation

Option D: arbitrage

Correct Answer: arbitrage ✔

Option A: upward

Option B: vertical

Option C: downward

Option D: horizontal

Correct Answer: downward ✔

Option A: China

Option B: Germany

Option C: United Kingdom

Option D: USA

Correct Answer: United Kingdom ✔

Option A: flows of foreign investment into the United States

Option B: rising price inflation in the United States

Option C: a substantial decrease in U.S imports

Option D: a substantial increase in U.S exports

Correct Answer: flows of foreign investment into the United States ✔

Option A: Price inflation in the United States

Option B: an increase in U.S real income

Option C: a decrease in the British money supply

Option D: falling interest rates in Britain

Correct Answer: falling interest rates in Britain ✔

Option A: 2 francs per dollar

Option B: 1 franc per dollar

Option C: $2 per franc

Option D: $3 per franc

Correct Answer: 2 francs per dollar ✔

2. euro
3. Chinese Yuan
4. British pound
5. U.S dollar

Correct Answer: 5. U.S dollar ✔

Option A: relatively higher U.S labor productivity was associated with relatively higher U.K export ratios

Option B: relatively high U.K labor productivity was associated with relatively higher U.K export ratios

Option C: Labor productivity ratios and export ratios were not associated with each other

Option D: None of the above

Correct Answer: relatively high U.K labor productivity was associated with relatively higher U.K export ratios ✔

Option A: The stimulus of additional investment spending as market open

Option B: Economies of large scale production as markets open

Option C: Additional competition made possible by the opening of markets

Option D: All of the above

Correct Answer: All of the above ✔

Option A: Trades at Canada’s marginal rate of transformation

Option B: Trade at Sweden’s marginal rate of transformation

Option C: Specializes completely in the production of its export good

Option D: Specializes partially in the production of its exports goods

Correct Answer: A. Trades at Canada’s marginal rate of transformation ✔

Option A: below the production possibility frontier

Option B: on the production possibility frontier

Option C: above the production possibility frontier

Option D: can’t tell without more information

Correct Answer: on the production possibility frontier ✔

Option A: below the production possibility frontier

Option B: On the production possibility frontier

Option C: above the production possibility frontier

Option D: can’t tell without more information

Correct Answer: On the production possibility frontier ✔

Option A: Mexico and Denmark

Option B: Sweden and Denmark

Option C: Sweden and Spain

Option D: Mexico and Sweden

Correct Answer: Mexico and Sweden ✔

Option A: constant opportunity costs

Option B: decreasing opportunity costs

Option C: first increasing and then decreasing opportunity costs

Option D: increasing opportunity costs

Correct Answer: constant opportunity costs ✔

Option A: Shift out in a parallel fashion

Option B: shift in a parallel fashion

Option C: become steeper

Option D: Become flatter

Correct Answer: Become flatter ✔

Option A: 2

Option B: 1/2

Option C: 500

Option D: 1000

Correct Answer: 2 ✔

Option A: Wine

Option B: Beer

Option C: Both wine and beer

Option D: Neither wine nor beer

Correct Answer: Beer ✔

Option A: 1W = 3B

Option B: 1W = 4 1/2B

Option C: 1W = 5B

Option D: 1W = 6B

Correct Answer: 1W = 4 1/2B ✔

Option A: Beer

Option B: Wine

Option C: Both products

Option D: neither products

Correct Answer: neither products ✔

Option A: A would export X to B

Option B: A would export Y to B

Option C: Neither country would want to trade

Option D: None of the above

Correct Answer: A would export Y to B ✔

Option A: Product X

Option B: Product Y

Option C: Neither X nor Y

Option D: Both X and Y

Correct Answer: Product X ✔

Option A: actual differences in labor productivity between countries

Option B: relative differences in labor productivity between countries

Option C: Both (a) and (b)

Option D: Neither (a) nor (b)

Correct Answer: relative differences in labor productivity between countries ✔

Option A: Absolute advantage

Option B: Comparative advantage

Option C: Physical advantage

Option D: Which way the wind blows

Correct Answer: Comparative advantage ✔

Option A: The labor theory of value

Option B: How much the autarky price differs from international terms of trade change

Option C: The fact that a country must lose from trade

Option D: All of the above

Correct Answer: How much the autarky price differs from international terms of trade change ✔

Option A: Is the philosophy of free international trade?

Option B: Was a system of export promotion and barriers to imports practiced by governments?

Option C: Was praised by Adam Smith in the Wealth of Nations

Option D: Both (a) and (c)

Correct Answer: Was a system of export promotion and barriers to imports practiced by governments? ✔

Option A: There is no basis for gainful trade for either country

Option B: Both countries gain from trade

Option C: Only one country gains from trade

Option D: One country gain and the other country loses from trade

Correct Answer: Both countries gain from trade ✔

Option A: Adam Smith

Option B: David Ricardo

Option C: Eli Heckscher

Option D: Berti IOhlin

Correct Answer: David Ricardo ✔

Option A: South Korea should export steel

Option B: South Korea should export steel and DVDs

Option C: Japan should export steel

Option D: Japan should export steel and DVDs

Correct Answer: South Korea should export steel ✔

Option A: One-half ton of steel

Option B: One ton of steel

Option C: One and one-half tons of steel

Option D: Two tons of steel

Correct Answer: Two tons of steel ✔

Option A: evidence against the classical model

Option B: evidence against the Heckscher-Ohlin model

Option C: Support for the Ricardian modal

Option D: Support for the Heckscher-Ohlin model

Correct Answer: Support for the Ricardian modal ✔

Option A: Ricardian theory of comparative

Option B: Heckscher Ohl in theory of comparative advantage

Option C: Linder theory of overlapping demand all of the above

Option D: None of these

Correct Answer: Ricardian theory of comparative ✔

Option A: Theory of reciprocal demand

Option B: Theory of absolute advantage

Option C: Theory of comarative advantage

Option D: Theory of mercantilism

Correct Answer: Theory of reciprocal demand ✔

Option A: A would likely export S to B

Option B: A would likely import S from B

Option C: neither country would want to trade

Option D: None of the above

Correct Answer: A would likely export S to B ✔

Option A: Production equals consumption

Option B: Exports equal imports

Option C: there is no trade

Option D: All of the above

Correct Answer: All of the above ✔

Option A: Are more productive than their large trading partners

Option B: Are less productive than their large trading partners

Option C: Have demand preferences and income levels lower than their large trading partners

Option D: Realize terms of trade lying near the MRTs of their large trading partners

Correct Answer: Realize terms of trade lying near the MRTs of their large trading partners ✔

Option A: Paid for all goods exported by the home country

Option B: Received for all goods exported by the home country

Option C: Received for exports and paid for imports

Option D: Of primary products as opposed to manufactured products

Correct Answer: Received for exports and paid for imports ✔

Option A: constant opportunity costs

Option B: decreasing opportunity costs

Option C: first increasing and then decreasing opportunity costs

Option D: increasing opportunity costs

Correct Answer: increasing opportunity costs ✔

Option A: shift out in a parallel fashion

Option B: shift in a parallel fashion

Option C: Become steeper

Option D: Become flatter

Correct Answer: Become steeper ✔

Option A: 2

Option B: 1/2

Option C: 00

Option D: 1000

Correct Answer: 2 ✔

Option A: Wine

Option B: Beer

Option C: Both wine and beer

Option D: Neither wine nor beer

Correct Answer: Wine ✔

Option A: 1W = 1B

Option B: 1W = 2B

Option C: 1W = 3B

Option D: 1W = 1/3B

Correct Answer: 1W = 3B ✔

Option A: 1/2 Y

Option B: 3/4 Y

Option C: 1 Y

Option D: 4/3 Y

Correct Answer: 4/3 Y ✔

Option A: A would export X to B

Option B: B would import Y from A

Option C: Neither country would want to trade

Option D: None of the above

Correct Answer: B would import Y from A ✔

Option A: Product X

Option B: Product Y

Option C: Neither X nor Y

Option D: Both X and Y

Correct Answer: Product Y ✔

Option A: actual differences in labor production between countries

Option B: relative differences in labor productivity between countries

Option C: Both (a) and (b)

Option D: Neither (a) nor (b)

Correct Answer: actual differences in labor production between countries ✔

Option A: Only countries with low wages will export

Option B: Only countries with high wages will import

Option C: Countries with high wages will have higher prices

Option D: All of the above are false

Correct Answer: All of the above are false ✔

Option A: Countries will completely specialize in the production of export goods

Option B: Considerable trade will occur between countries with different levels of technology

Option C: Small countries could obtain of the gains from trade when trading with large countries

Option D: All of the above

Correct Answer: All of the above ✔

Option A: Different currencies are an obstacle to international trade

Option B: Goods are more mobile internationally than are resources

Option C: Resources are more mobile internationally that are goods

Option D: A country’s exports should always exceed its imports

Correct Answer: Goods are more mobile internationally than are resources ✔

Option A: Trade would depend on difference in demand conditions

Option B: Trade would depend on economies of large-scale production

Option C: Trade would depend on the use of different currencies

Option D: There would be no basis for gainful trade

Correct Answer: Trade would depend on difference in demand conditions ✔

Option A: One DVD

Option B: Two DVDs

Option C: Three DVDs

Option D: Four DVDs

Correct Answer: One DVD ✔

Option A: One-half ton of steel

Option B: One ton of steel

Option C: Two tons of steel

Option D: Two and one-half tons of steel

Correct Answer: Two tons of steel ✔

Option A: Export steel

Option B: Export DVDs

Option C: Exports steel and DVDs

Option D: There is no basis for gainful specialization and trade

Correct Answer: There is no basis for gainful specialization and trade ✔

Option A: One ton of steel

Option B: Two tons of steel

Option C: Three tons of steel

Option D: Four tons of steel

Correct Answer: One ton of steel ✔

Option A: How do the poorest 2/3 of the world live?

Option B: What are the major theories of economic development

Option C: what factors affect labor skills in the third world?

Option D: All of the above are correct

Correct Answer: All of the above are correct ✔

Option A: Nigeria

Option B: Japan

Option C: India

Option D: Mali

Correct Answer: Japan ✔

Option A: the Middle East

Option B: Sub Saharan Africa

Option C: Asia

Option D: Latin America

Correct Answer: Sub Saharan Africa ✔