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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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