McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Arts in Economics (BA Economics) , Master of Business Administration (MBA) .
Chapters
| 51. |
If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold: |
| A. | the value of the euro would often appreciate against the dollar. |
| B. | the value of the euro would often depreciate against the dollar. |
| C. | the value of the euro would remain constant most of the time. |
| D. | the value of the euro would appreciate in some periods and depreciate in other periods, but on average have a zero rate of appreciation. |
| Answer» A. the value of the euro would often appreciate against the dollar. | |
| 52. |
If interest rate parity holds, then the one-year forward rate of a currency will ______ the predicted spot rate of the currency in one year according to the international Fisher effect. |
| A. | greater than |
| B. | less than |
| C. | equal to |
| D. | answer is dependent on whether the forward rate has a discount or premium |
| Answer» C. equal to | |
| 53. |
You have an opportunity to invest in Australia at an interest rate of 8%. Moreover, you expect the Australian dollar (A$) to appreciate by 2%. Your effective return from this investment is: |
| A. | 8.00%. |
| B. | 10.16%. |
| C. | 6.00%. |
| D. | 5.88%. |
| Answer» B. 10.16%. | |
| 54. |
The balance of payments equals: |
| A. | The difference between household spending and income |
| B. | The difference between government spending and income |
| C. | A measure of the value of economic transactions between residents of a country and the rest of the world |
| D. | The difference between inflation and unemployment |
| Answer» C. A measure of the value of economic transactions between residents of a country and the rest of the world | |
| 55. |
If there were a balance of payments deficit then in a floating exchange rate system: |
| A. | The external value of the currency would tend to fall |
| B. | The external value of the currency would tend to rise |
| C. | The injections from trade are greater than the withdrawals |
| D. | Aggregate demand is increasing |
| Answer» A. The external value of the currency would tend to fall | |
| 56. |
If the value of the pound in other currencies is strong, then other things being equal: |
| A. | The price of UK products abroad in foreign currency will fall |
| B. | The price of UK products abroad in foreign currency will rise |
| C. | The price of UK products in the UK will rise |
| D. | The price of UK products in the UK will fall |
| Answer» B. The price of UK products abroad in foreign currency will rise | |
| 57. |
If the value of the pound in terms of other currencies rises: |
| A. | The spending on UK exports in pounds must rise |
| B. | The spending on UK exports in foreign currency will rise if demand is price elastic |
| C. | The demand for UK exports will rise |
| D. | The spending on UK exports in foreign currency will fall if demand for UK exports is price elastic |
| Answer» D. The spending on UK exports in foreign currency will fall if demand for UK exports is price elastic | |
| 58. |
The supply of pounds to the currency market will be upward sloping if: |
| A. | The demand for UK exports is price elastic |
| B. | The demand for UK exports is price inelastic |
| C. | The demand for imports into the UK is price elastic |
| D. | The demand for imports into the UK is price inelastic |
| Answer» C. The demand for imports into the UK is price elastic | |
| 59. |
A fall in the value of the pound is likely to decrease spending on imports if: |
| A. | The price elasticity of demand for imports is price elastic |
| B. | The price elasticity of demand for imports is price inelastic |
| C. | The price elasticity of demand for imports has a unit price elasticity |
| D. | The price elasticity of demand for exports is price elastic |
| Answer» A. The price elasticity of demand for imports is price elastic | |
| 60. |
If the exchange rate is above the equilibrium level then in a floating exchange rate system: |
| A. | There is excess demand and the exchange rate should fall |
| B. | There is excess supply and the exchange rate should fall |
| C. | There is excess demand and the exchange rate should rise |
| D. | There is excess supply and the exchange rate should rise |
| Answer» B. There is excess supply and the exchange rate should fall | |
| 61. |
If the exchange rate is below the equilibrium level then in a floating exchange rate system: |
| A. | There is excess demand and the exchange rate should fall |
| B. | There is excess supply and the exchange rate should fall |
| C. | There is excess demand and the exchange rate should rise |
| D. | There is excess supply and the exchange rate should rise |
| Answer» C. There is excess demand and the exchange rate should rise | |
| 62. |
A depreciation of a currency occurs when: |
| A. | The value of the currency falls |
| B. | The value of the currency increases |
| C. | Inflation falls |
| D. | The balance of payments improves |
| Answer» A. The value of the currency falls | |
| 63. |
An appreciation of the currency is likely to occur if: |
| A. | Domestic interest rates fall |
| B. | There is an increase in demand for imports |
| C. | There is an increase in demand for exports |
| D. | There is an increase in the balance of payments deficit |
| Answer» C. There is an increase in demand for exports | |
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