McqMate
Chapters
| 1. |
If the central bank purchases assets, it will result in: |
| A. | An increase in the money supply. |
| B. | An increase in the central bank's net worth. |
| C. | A decline in the money supply. |
| D. | A decline in the central bank's net worth. |
| Answer» A. An increase in the money supply. | |
| 2. |
If there is a decline in output, to keep the exchange rate fixed, the central bank has to: |
| A. | Purchase foreign assets. |
| B. | Purchase domestic assets. |
| C. | Sell domestic assets. |
| D. | Sell foreign assets. |
| Answer» D. Sell foreign assets. | |
| 3. |
What is the effect of an increase in taxes under fixed exchange rates and perfect asset substitutability in the short run? |
| A. | An increase in output and no change in interest rates. |
| B. | A decline in output and interest rates. |
| C. | A decline in output and no change in interest rates. |
| D. | An increase in output and interest rates. |
| Answer» A. An increase in output and no change in interest rates. | |
| 4. |
What is the effect of a currency devaluation under fixed exchange rates in the short run? |
| A. | A decline in output. |
| B. | An increase in imports. |
| C. | A decline in foreign reserves. |
| D. | An increase in exports. |
| Answer» D. An increase in exports. | |
| 5. |
If a respectable source speculates that there is a possibility of devaluation: |
| A. | Output will increase. |
| B. | There will be a net private capital outflow. |
| C. | The central bank's foreign reserves will increase. |
| D. | Domestic interest rates will decline. |
| Answer» B. There will be a net private capital outflow. | |
| 6. |
Under imperfect asset substitutability: |
| A. | Central banks cannot keep the exchange rate fixed. |
| B. | Domestic interest rates should be equal to foreign interest rates. |
| C. | Central banks cannot affect money supply. |
| D. | Sterilized intervention affects money supply. |
| Answer» D. Sterilized intervention affects money supply. | |
| 7. |
Which of the following is NOT true about the reserve currency standard? |
| A. | The currency to which the rates are fixed should be the same as the currency the central bank holds. |
| B. | Exchange rates are all fixed. |
| C. | The reserve center can use monetary policy to keep exchange rates fix |
| Answer» C. The reserve center can use monetary policy to keep exchange rates fix | |
| 8. |
Which of the following is NOT true about the gold standard? |
| A. | Central banks have to hold gold as reserve assets. |
| B. | It does not lead to monetary policy spillovers. |
| C. | Exchange rates are all fix |
| Answer» B. It does not lead to monetary policy spillovers. | |
| 9. |
Which of the following is NOT a motive for international asset trade? |
| A. | Capital controls |
| B. | Intertemporal trade |
| C. | International portfolio diversification |
| D. | Tax avoidance |
| Answer» A. Capital controls | |
| 10. |
Which of the following is NOT a part of a "policy trilemma"? |
| A. | International trade policy |
| B. | Capital controls |
| C. | Monetary policy |
| D. | Exchange rate regime |
| Answer» A. International trade policy | |
| 11. |
Which of the following is NOT a type of offshore bank? |
| A. | Agency office |
| B. | Subsidiary bank |
| C. | Foreign branch |
| D. | Investment bank |
| Answer» D. Investment bank | |
| 12. |
Which of the following is an example of "Eurocurrency" trade? |
| A. | Trade of euros in Europe |
| B. | Trade of dollars for euros anywhere |
| C. | Trade of dollars in Europe |
| D. | Intervention by the ESCB in the euro market |
| Answer» C. Trade of dollars in Europe | |
| 13. |
What are "Eurobanks"? |
| A. | Banks that accept Eurocurrency deposits |
| B. | Banks located in Europe |
| C. | European-owned banks in the U.S. |
| D. | Banks that accept deposits in euros |
| Answer» A. Banks that accept Eurocurrency deposits | |
| 14. |
Which of the following is NOT true about the IBFs? |
| A. | They make loans to foreigners |
| B. | They are not subject to taxes |
| C. | They are only investment banks |
| D. | They accept deposits from foreigners |
| Answer» C. They are only investment banks | |
| 15. |
What institution reduces the risk of bank runs in the U.S.? |
| A. | FDIC |
| B. | Federal Reserve System |
| C. | Congress |
| D. | S&Ls |
| Answer» A. FDIC | |
| 16. |
The Basel Committee: |
| A. | Coordinates monetary policy among 11 countries. |
| B. | Provides international deposit insurance. |
| C. | Provides supervision of the banks trading internationally. |
| D. | Provides LLR services to international banks. |
| Answer» C. Provides supervision of the banks trading internationally. | |
| 17. |
Which of the following is true regarding the capital market development since the 1970s? |
| A. | The extent of intertemporal trade was larger than theory predicts. |
| B. | Onshore-offshore interest rate differentials were too large. |
| C. | The extent of the international portfolio diversification was smaller than theory predicts. |
| D. | The role of emerging markets declined over time. |
| Answer» C. The extent of the international portfolio diversification was smaller than theory predicts. | |
| 18. |
Which one of the following statements is the most accurate? |
| A. | A devaluation occurs when the central bank lowers the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank raises E. |
| B. | A devaluation occurs when the central bank raises the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank lowers E. |
| C. | Devaluation occurs when the domestic currency price of foreign currency, E, is raised, and a revaluation occurs when E is lower |
| Answer» B. A devaluation occurs when the central bank raises the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank lowers E. | |
| 19. |
Which one of the following statements is the most accurate? |
| A. | Depreciation is a rise in E when the exchange rate is fixed, and devaluation is a rise in E when the exchange rate floats. |
| B. | Depreciation is a decrease in E when the exchange rate floats, and devaluation is a rise in E when the exchange rate is fixed. |
| C. | Depreciation is a rise in E when the exchange rate floats, and devaluation is a rise in E when the exchange rate is fix |
| Answer» C. Depreciation is a rise in E when the exchange rate floats, and devaluation is a rise in E when the exchange rate is fix | |
| 20. |
Which one of the following statements is the most accurate? |
| A. | Appreciation is a rise in e when the exchange rate floats, and revaluation is a fall in e when the exchange rate is fixed. |
| B. | Appreciation is a fall in e when the exchange rate floats, and revaluation is a fall in e when the exchange rate is fixed. |
| C. | Appreciation is a fall in e when the exchange rate is fixed, and revaluation is a fall in e when the exchange rate is flexible. |
| D. | Appreciation is a fall in e when the exchange rate floats, and revaluation is a rise in e when the exchange rate is fixed. |
| Answer» B. Appreciation is a fall in e when the exchange rate floats, and revaluation is a fall in e when the exchange rate is fixed. | |
| 21. |
Which one of the following statements is the most accurate? |
| A. | Devaluation reflects a deliberate government decision. |
| B. | Depreciation reflects a deliberate government decision. |
| C. | Devaluation reflects a deliberate government decision, and depreciation is an outcome of government actions and market forces acting together. |
| D. | Depreciation reflects a deliberate government decision, and devaluation is an outcome of government actions and market forces acting together. |
| Answer» C. Devaluation reflects a deliberate government decision, and depreciation is an outcome of government actions and market forces acting together. | |
| 22. |
Which one of the following statements is the most accurate? |
| A. | Revaluation reflects an outcome of government actions and market forces acting together, and appreciation reflects a deliberate government decision. |
| B. | Revaluation reflects a deliberate government decision, and appreciation is an outcome of government actions and market forces acting together. |
| C. | Revaluation reflects a deliberate government decision, and appreciation is an outcome of government actions. |
| D. | Revaluation and appreciation have the same meaning and the same causes. |
| Answer» B. Revaluation reflects a deliberate government decision, and appreciation is an outcome of government actions and market forces acting together. | |
| 23. |
Under fixed exchange rate, which one of the following statements is the most accurate? |
| A. | Devaluation causes a decrease in output, a decrease in official reserves, and a contraction of the money supply. |
| B. | Devaluation causes a rise in output, a rise in official reserves, and an expansion of the money supply. |
| C. | Devaluation causes a rise in output and a rise in official reserves. |
| D. | Devaluation causes a rise in output and an expansion of the money supply. |
| Answer» B. Devaluation causes a rise in output, a rise in official reserves, and an expansion of the money supply. | |
| 24. |
Under fixed exchange rate, which one of the following statements is the most accurate? |
| A. | Devaluation causes a rise in output. |
| B. | Devaluation causes a decrease in output. |
| C. | Devaluation has no effect on output. |
| D. | Devaluation causes a rise in output and a decrease in official reserves. |
| Answer» A. Devaluation causes a rise in output. | |
| 25. |
Under fixed exchange rate, which one of the following statements is the most accurate? |
| A. | Devaluation causes a reduction of the money supply. |
| B. | Devaluation has no effect on the stock of money. |
| C. | Devaluation causes an expansion of the money supply. |
| D. | Devaluation causes a reduction in output. |
| Answer» C. Devaluation causes an expansion of the money supply. | |
| 26. |
The main reason(s) why governments sometimes chose to devalue their currencies is (are): |
| A. | Devaluation allows the government to fight domestic unemployment despite the lack of effective monetary policy. |
| B. | Devaluation improves in the current account. |
| C. | Devaluation increases foreign reserves held by the central bank. |
| D. | All of the above. |
| Answer» D. All of the above. | |
| 27. |
At negative nominal interest rates, which one of the following statements is the most accurate? |
| A. | People would find money strictly preferable to bonds. |
| B. | People would find money strictly preferable to bonds and bonds therefore would be in excess supply. |
| C. | People would find money strictly preferable to bonds and bonds therefore would be in excess dema |
| Answer» B. People would find money strictly preferable to bonds and bonds therefore would be in excess supply. | |
| 28. |
Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? |
| A. | fixed exchange rate |
| B. | flexible exchange rate |
| C. | crawling peg |
| D. | moving target |
| Answer» C. crawling peg | |
| 29. |
Which among the following could be said to be an 'Open Economy'? |
| A. | A nation that follows the doctrine of Free-market and Laissez-faire economics |
| B. | A nation that trades with other nations in goods and services and financial assets |
| C. | An economy that operates without government intervention |
| D. | None of the above |
| Answer» A. A nation that follows the doctrine of Free-market and Laissez-faire economics | |
| 30. |
The records of exports and imports in goods and services and transfer payments is known as |
| A. | Current account |
| B. | Budget surplus |
| C. | Economic leakage |
| D. | degree of openness |
| Answer» A. Current account | |
| 31. |
The ratio of foreign rates to domestic rates measured in the 'same' currency is known as: |
| A. | Real exchange rate |
| B. | Nominal exchange rate |
| C. | Superfluous exchange rate |
| D. | None of the above |
| Answer» A. Real exchange rate | |
| 32. |
Which among the following is taken as the real measure of a country's international competitiveness? |
| A. | Real exchange rate |
| B. | Nominal exchange rate |
| C. | Superfluous exchange rate |
| D. | None of the above |
| Answer» A. Real exchange rate | |
| 33. |
When the exchange rate is determined by the market forces of demand and supply, it is known as : |
| A. | Real exchange rate |
| B. | Nominal exchange rate |
| C. | Superfluous exchange rate |
| D. | Floating exchange rate |
| Answer» D. Floating exchange rate | |
| 34. |
The Gold Standard was prevalent in the world from: |
| A. | 15th century to 18th century |
| B. | 9th century to 18th century |
| C. | From 1870 till First World War |
| D. | From 1670 till First World War |
| Answer» C. From 1870 till First World War | |
| 35. |
An increase in foreign income generally leads to: |
| A. | increased exports, increased domestic output |
| B. | decreased exports, increased domestic output |
| C. | decreased exports, decreased domestic output |
| D. | increased exports, decreased domestic output |
| Answer» A. increased exports, increased domestic output | |
| 36. |
What records a country's transactions (made by individuals, firms and government bodies.) with the rest of the world? |
| A. | Trade deficit |
| B. | Capital Budget |
| C. | Foreign imports |
| D. | Balance of Payments or BoP |
| Answer» D. Balance of Payments or BoP | |
| 37. |
Under a fixed exchange rate system, a contractionary fiscal policy leads to a worsening in a nation’s balance-of-payments position if the resulting: |
| A. | Trade-account deficit more than offsets the capital-account surplus |
| B. | Trade-account deficit more than offsets the capital-account deficit |
| C. | Capital-account deficit more than offsets the trade-account surplus |
| D. | Capital-account deficit more than offsets the trade-account deficit |
| Answer» C. Capital-account deficit more than offsets the trade-account surplus | |
| 38. |
Given a system of floating Exchange rates, falling income in the United States would trigger: |
| A. | An increase in the demand for imports and an increase in the demand for foreign currency |
| B. | An increase in the demand for imports and a decrease in the demand for foreign currency |
| C. | A decrease in the demand for imports and an increase in the demand for foreign currency |
| D. | A decrease in the demand for imports and a decrease in the demand for foreign currency |
| Answer» D. A decrease in the demand for imports and a decrease in the demand for foreign currency | |
| 39. |
Under a system of floating Exchange rates, relatively low productivity and high inflation rates in the United States result in: |
| A. | An increase in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciación in the dollar |
| B. | An increase in the demand for foreign currency, an increase in the supply of foreign currency, and an appreciation in the dollar |
| C. | A decrease in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciation in thedollar |
| D. | A decrease in the demand for foreign currency, an increase in the supply of foreign currency, and an appreciation in the dollar |
| Answer» A. An increase in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciación in the dollar | |
| 40. |
Which example of market expectations causes the dollar to appreciate against the yen? Expectations that the U.S. economy will have: |
| A. | Faster economic growth tan Japan |
| B. | Higher future interest rates than Japan |
| C. | More rapid money supply growth tan Japan |
| D. | Higher inflation rates than Japan |
| Answer» B. Higher future interest rates than Japan | |
| 41. |
Starting at the point of equilibrium between the money supply and the money demand, an increase in the domestic money supply causes the value of the home currency to: |
| A. | Depreciate relative to other currencies |
| B. | Appreciate relative to other currencies |
| C. | Not change relative to other currencies |
| D. | None of the above |
| Answer» A. Depreciate relative to other currencies | |
| 42. |
An Exchange rate is said to __________ when its short-run response to a change in market Fundamentals is greater than its long-run response. a |
| A. | Overshoot |
| B. | Undershoot |
| C. | Depreciate |
| D. | Appreciate |
| Answer» A. Overshoot | |
| 43. |
Concerning exchange-ratedetermination, “market fundamentals” include all of the Following except: |
| A. | Monetary policy and fiscal policy |
| B. | Profitability and riskiness of investments |
| C. | Speculative opinión about future Exchange rates |
| D. | Productivity changes affecting production costs |
| Answer» C. Speculative opinión about future Exchange rates | |
| 44. |
In the short run, Exchange rates respond tomarketforcessuch as: |
| A. | Inflation rates |
| B. | Expectations of future Exchange rates |
| C. | Investment profitability |
| D. | Government trade policy |
| Answer» B. Expectations of future Exchange rates | |
| 45. |
Long-run Exchange ratemovements are governed by all of the following except: |
| A. | National productivity levels |
| B. | Consumer tastes and preferences |
| C. | Rates of inflation |
| D. | Interest rate levels |
| Answer» D. Interest rate levels | |
| 46. |
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: |
| A. | Monetary approach to exchange-rate determination |
| B. | Law of one price |
| C. | Fundamentalist approach to exchange-ratedetermination |
| D. | Exchange-rate-overshooting principle |
| Answer» B. Law of one price | |
| 47. |
The quantity of dollars supplied to the foreign Exchange market would increase if, other things remaining equal: |
| A. | Incomerises in Canada |
| B. | Manufacturing productivity increases in Canada |
| C. | Prices decrease in Canada |
| D. | Import tariffs rise in Canada |
| Answer» A. Incomerises in Canada | |
| 48. |
The Gold Standard was prevalent in the world from: |
| A. | 15th century to 18th century |
| B. | 9th century to 18th century |
| C. | From 1870 till First World War |
| D. | From 1670 till First WorldWar |
| Answer» C. From 1870 till First World War | |
| 49. |
When was the International Monetary Fund (IMF) set up? |
| A. | 1912 |
| B. | 1214 |
| C. | 1942 |
| D. | 1944 |
| Answer» D. 1944 | |
| 50. |
If there is an increase in the trade deficit, there must be |
| A. | An increase in the current account. |
| B. | An increase in the capital account. |
| C. | a decrease in the capital account. |
| D. | An increase in net transfers in the current account. |
| Answer» B. An increase in the capital account. | |
| 51. |
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? |
| A. | The dollar appreciates in value, stimulating imports but curtailing exports. |
| B. | The dollar appreciates in value, stimulating exports but curtailing imports. |
| C. | The dollar depreciates in value, stimulating imports but curtailing exports. |
| D. | The dollar depreciates in value, stimulating exports but curtailing imports. |
| Answer» D. The dollar depreciates in value, stimulating exports but curtailing imports. | |
| 52. |
The Federal Reserve raises interestrates. What happens in the foreign Exchange market? |
| A. | Capital flows into the United States from other countries. |
| B. | Capital flows out of the United States in to other countries. |
| C. | The U.S. dollar depreciates. |
| D. | Thereis no change in the foreign Exchange market |
| Answer» A. Capital flows into the United States from other countries. | |
| 53. |
If the dollar depreciates, this likely will cause |
| A. | U.S. aggregate supply to rise in the short run and rise in the longrun. |
| B. | U.S. aggregate supply to rise in the short run but fall in the longrun. |
| C. | U.S. aggregate supply to fall in the short run and fall in the longrun. |
| D. | U.S. aggregate supply to fall in the short run but rise in the longrun |
| Answer» B. U.S. aggregate supply to rise in the short run but fall in the longrun. | |
| 54. |
Ifthe U.S. dollar depreciates against the British pound, what is likely to happen? |
| A. | British people will buy more American goods. |
| B. | Americans will buy more British goods. |
| C. | Americans will take more vacations in Britain. |
| D. | British people will stop vacationing in Florida |
| Answer» A. British people will buy more American goods. | |
| 55. |
Exchange rates are flexible and fiscal policy is held constant. An expansionary monetary policywill be |
| A. | Reinforce dbyan open economy. |
| B. | Mitigated byan open economy. |
| C. | Unaffected byan open economy. |
| D. | Multiplied byan outflow of gold. |
| Answer» A. Reinforce dbyan open economy. | |
| 56. |
Exchange rates are flexible and fiscal policy is held constant. A Contractionary monetary policywill be |
| A. | Reinforced byan open economy. |
| B. | Mitigated byan open economy. |
| C. | Unaffected byan open economy. |
| D. | Multiplied bya noutflow of gold. |
| Answer» A. Reinforced byan open economy. | |
| 57. |
In a floating exchange rate system: |
| A. | The government intervenes to influence the exchange rate |
| B. | The exchange rate should adjust to equate the supply and demand of the currency |
| C. | The Balance of Payments should always be in surplus |
| D. | The Balance of payments will always equal the government budget |
| Answer» B. The exchange rate should adjust to equate the supply and demand of the currency | |
| 58. |
To prevent the external value of its currency rising the government could: |
| A. | Sell its own currency |
| B. | Increase interest rates |
| C. | Buy its own currency |
| D. | Sell foreign currency |
| Answer» A. Sell its own currency | |
| 59. |
A fall in the external value of a currency: |
| A. | May cause an outward shift in the demand for the currency |
| B. | May cause an inward shift in the supply for the currency |
| C. | May lead to a movement along the demand curve for a currency |
| D. | May be due to an increase in demand for the country's export |
| Answer» C. May lead to a movement along the demand curve for a currency | |
| 60. |
Which of the following is NOT an argument for a country allowing its currency to float freely? |
| A. | It allows the country to have sovereignty over its currency. |
| B. | It enables a country to allow its currency to depreciate if it faces balance of payments deficits. |
| C. | It gives greater certainty to firms involved in trade in terms of future revenues. |
| D. | It enables a country to have greater control over its fiscal and monetary policies. |
| Answer» C. It gives greater certainty to firms involved in trade in terms of future revenues. | |
| 61. |
Starting from a position of internal and external balance, a reduction in aggregate demand will cause a current account _____________ |
| A. | deficit |
| B. | surplus |
| C. | revaluation |
| D. | devaluation |
| Answer» B. surplus | |
| 62. |
A rise in the real exchange rate will ____________ the competitiveness of the domestic economy |
| A. | increase |
| B. | reduce |
| C. | do nothing to |
| D. | none |
| Answer» B. reduce | |
| 63. |
Within the circular flow of income, an increase in domestic income will tend to increase |
| A. | exports |
| B. | taxes |
| C. | inventories |
| D. | imports |
| Answer» D. imports | |
| 64. |
Perfect international capital mobility suggests that international funds will be responsive to _____________ differentials |
| A. | current account |
| B. | interest rate |
| C. | tax |
| D. | price |
| Answer» B. interest rate | |
| 65. |
When capital mobility is perfect, interest rate differentials will tend to be offset by ________ |
| A. | price differences |
| B. | balance of payments differences |
| C. | current account differences |
| D. | expected exchange rate changes |
| Answer» D. expected exchange rate changes | |
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