All Free Economics MCQs with Answers

• A. fertility
• B. population quality
• C. mortality
• D. morbidity

Explanation: Education, training and skills improve the abilities and productivity of people, so they are components of population quality or human…

• A. Protestants disapproved of accumulating wealth
• B. Protestants failed to restrict extravagance and conspicuous consumption
• C. Roman Catholicism expressed its asceticism in a secular vocation
• D. capitalism was most advanced in Protestant countries

Explanation: Weber argued that the Protestant ethic, especially its emphasis on disciplined work and saving, helped foster the spirit of capitalism.

• A. Adam Smith
• B. Max Weber
• C. Joseph Schumpeter
• D. William Baumol

Explanation: Max Weber wrote The Protestant Ethic and the Spirit of Capitalism, linking religious values such as disciplined work and saving with the…

• A. depreciation generally improves the trade balance
• B. depreciation generally hurts the trade balance
• C. no strong generalization is possible
• D. depreciation has no effect on the trade balance

Explanation: The effect of depreciation depends on elasticities, import content and the timing of contracts, so it cannot be assigned one universal…

• A. pass through
• B. absorption
• C. adjustment mechanism
• D. currency contract period

Explanation: Pass-through measures how a devaluation or depreciation is reflected in domestic and foreign prices.

• A. sooner
• B. longer
• C. bigger
• D. smaller

Explanation: A shorter pass-through period means prices respond more quickly to the currency change, so the desirable balance-of-trade effects appear…

• A. improves
• B. worsens
• C. is unaffected
• D. falls for a while before increasing

Explanation: When both exports and imports are contracted in pounds, their pound values are fixed during the currency contract period.

• A. should increase the dollar value of exports
• B. should not have any effect on the dollar value of U.S imports
• C. must increase the balance of trade
• D. All of the above

Explanation: With exports priced in foreign currency, dollar depreciation raises their dollar value, while imports contracted in dollars retain the…

• A. import prices to fall by 10 percent
• B. import prices to rise by 10 percent
• C. export prices to rise by 10 percent
• D. export prices to fall by 10 percent

Explanation: Complete pass-through means the exchange-rate change is fully reflected in import prices measured in the domestic currency.

• A. appreciation in the value of both currencies
• B. depreciation in the value of both currencies
• C. appreciation in the value of the yen against the mark
• D. depreciation in the value of the yen against the mark

Explanation: The yen loses 20 percent of its value while the mark loses only 15 percent, so the yen becomes relatively weaker than the mark.

• A. elasticity of demand for exports = 0.9; elasticity of demand for imports = 0.4
• B. elasticity of demand for exports = 0.7; elasticity of demand for imports = 0.3
• C. elasticity of demand for exports = 0.5; elasticity of demand for imports = 0.7
• D. elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6

Explanation: The Marshall-Lerner condition requires the sum of export and import demand elasticities to exceed one for depreciation to improve the…

• A. increases
• B. decreases
• C. does not change
• D. None of the above

Explanation: The balance of trade is linked to income minus domestic absorption. If income falls relative to absorption, spending exceeds output and…

• A. relative price
• B. elasticity
• C. J Curve
• D. Pass through

Explanation: The J-curve effect describes a temporary worsening of the trade balance after depreciation, followed by improvement as quantities of…

• A. the absorption approaches
• B. the Marshall Lerner approach
• C. the monetary approach
• D. the elasticities approach

Explanation: The absorption approach links the trade balance to national spending relative to output.

• A. J Curve effect
• B. Marshall Lerner effect
• C. absorption effect
• D. pass through effect

Explanation: Pass-through measures how much an exchange-rate change is reflected in import and export prices.

• A. home demand for imports is inelastic and foreign export demand is inelastic
• B. home demand for imports is elastic and foreign export demand is inelastic
• C. home demand for imports is inelastic and foreign export demand is elastic
• D. home demand for imports is elastic and foreign export demand is elastic

Explanation: A depreciation improves the trade balance when the combined price elasticities of import demand and foreign demand for exports satisfy the…

• A. partial currency pass through
• B. complete currency pass through
• C. partial J curve effect
• D. complete J curve effect

Explanation: If the dollar depreciates by 70 percent but Japanese prices in dollars do not fall by the full amount, the exchange-rate change has only…

• A. 0.67 pesos = $1
• B. 0.8 pesos = $1
• C. 1.25 pesos = $1
• D. 1.67 pesos = $1

Explanation: Purchasing power parity equates the $3 U.S. price with the 2-peso Mexican price, so the implied rate is 2/3 peso per dollar, or…

• A. appreciation; trade surplus
• B. appreciation; trade deficit
• C. depreciation; trade surplus
• D. depreciation; trade deficit

Explanation: Investing abroad increases the supply of yen in foreign-exchange markets, causing yen depreciation.

• A. flow from the United States to foreign countries
• B. flow from foreign countries to the United States
• C. remain totally in foreign countries
• D. remain totally in the United States

Explanation: Expected dollar depreciation lowers the anticipated foreign-currency return on U.S. assets.