All Free Economics MCQs with Answers
Every Economics question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
4,037 questions · page 54 of 202
- A. decrease in the money supply
- B. increase in the money supply
- C. decrease in the money demand
- D. None of the above
Explanation: In the monetary approach, a reduction in money supply creates excess money demand, prompting capital inflows and an improvement in the…
Correct answer: decrease in the money supply- A. faster economic growth than Japan
- B. higher future interest rates than Japan
- C. more rapid money supply growth than japan
- D. higher inflation rates than japan
Explanation: Higher expected U.S. interest rates attract funds toward dollar assets, increasing demand for dollars and causing appreciation against the…
Correct answer: higher future interest rates than Japan1063. Given a system of floating exchange rates falling income in the United States would trigger a (an) ?
- A. increase in the demand for imports and an increase in the demand for foreign currency
- B. increase in the demand for imports and a decrease in the demand for foreign currency
- C. decrease in the demand for imports and an increase in the demand for foreign currency
- D. decrease in the demand for imports and a decrease in the demand for foreign currency
Explanation: Falling U.S. income reduces households' ability to buy foreign goods, so imports decline.
Correct answer: decrease in the demand for imports and a decrease in the demand for foreign currency- A. The United States to Japan causing the dollar to depreciate
- B. The United States to Japan causing the dollar to appreciate
- C. The Japan to United States, causing the dollar to depreciate
- D. The Japan to United States, causing the dollar to appreciate
Explanation: The real interest rate is about 4% in the United States versus 5% in Japan, so investment funds are attracted to Japan.
Correct answer: The United States to Japan causing the dollar to depreciate- A. Japanese exports become more expensive to foreign buyers
- B. Japanese exports become less expensive for foreign buyers
- C. Japanese imports become less expensive for German buyers
- D. Japanese imports become more prestigious to German buyers
Explanation: A current-account deficit puts downward pressure on Japan's currency under floating exchange rates.
Correct answer: Japanese exports become less expensive for foreign buyers- A. the Canadian current account balance is in surplus
- B. the Swiss current account balance is in deficit
- C. the Canadian current account balance is in equilibrium
- D. the Swiss current account balance is in equilibrium
Explanation: An excess supply of Swiss francs means Switzerland is selling more goods, services, or assets abroad than it is buying, consistent with a…
Correct answer: the Swiss current account balance is in deficit- A. an excess supply of that currency exists in the foreign exchange market
- B. an excess demand for that currency exists in the foreign exchange market
- C. the supply of foreign exchange shifts outward to the right
- D. the supply of foreign exchange shifts backward to the left
Explanation: When the exchange-rate price is above equilibrium, sellers offer more of the currency than buyers want, creating excess supply.
Correct answer: an excess supply of that currency exists in the foreign exchange market1068. The high foreign exchange value of the U.S dollar in the early 1980s can best be explained by ?
- A. additional investment funds made available from overseas
- B. lack of investor confidence in U.S fiscal policy
- C. market expectations of rising inflation in the United States
- D. American tourists overseas finding costs increasing
Explanation: The strong dollar in the early 1980s was supported by large foreign capital inflows into U.S.
Correct answer: additional investment funds made available from overseas- A. $50 per pound
- B. $1.00 per pound
- C. $2.00 per pound
- D. $8.00 per pound
Explanation: Purchasing power parity equates the price of the bushel: $4 equals £2, so one pound equals $2.
Correct answer: $2.00 per pound- A. decrease the foreign demand for dollars causing the dollar to depreciate
- B. decrease the foreign demand for dollars causing the dollar to appreciate
- C. increase the foreign demand for dollars causing the dollar to depreciate
- D. decrease the foreign demand for dollars causing the dollar to appreciate
Explanation: Relatively low U.S. real interest rates make dollar-denominated assets less attractive, reducing foreign demand for dollars.
Correct answer: decrease the foreign demand for dollars causing the dollar to depreciate- A. 20 pounds
- B. 40 pounds
- C. 60 pounds
- D. 80 pounds
Explanation: At 5 Swiss francs per pound, divide 200 francs by 5 francs per pound: 200 ÷ 5 = 40 pounds.
Correct answer: 40 pounds- A. appreciate because of an increase supply of peso denominated assets
- B. depreciate because of an increased supply of peso denominated assets
- C. appreciated because of an increased demand for peso denominated assets
- D. depreciated because of an increased demand for peso denominated assets
Explanation: Greater investor confidence raises demand for assets denominated in pesos, increasing demand for pesos in the foreign-exchange market and…
Correct answer: appreciated because of an increased demand for peso denominated assets- A. inflation effects exchange rates
- B. international capital flows affect exchange rates
- C. governments sometimes impose trade restrictions such as tariffs and quotas
- D. not all products are internationally tradeable
Explanation: Inflation differentials are the central basis of purchasing power parity, so inflation affecting exchange rates is not a limitation of the…
Correct answer: inflation effects exchange rates- A. the use of import tariffs and quotas by governments
- B. the current account balance of each country
- C. the relative growth rate of national output between countries
- D. efforts of investors to balance their portfolios among financial assets denominated in different currencies
Explanation: The asset market approach treats currencies as assets and emphasizes investors' attempts to balance portfolios across assets denominated…
Correct answer: efforts of investors to balance their portfolios among financial assets denominated in different currencies- A. why exchange rates remain quite stable
- B. why governments change their money supplies
- C. long term exchange rate movements
- D. short term exchange rate movements
Explanation: Because financial assets and investor expectations can change rapidly, the asset market approach is particularly useful for explaining…
Correct answer: short term exchange rate movements- A. judgmental analysis
- B. fundamental analysis
- C. technical analysis
- D. nontechnical analysis
Explanation: Fundamental analysis uses economic data and large-scale models, including income, prices, interest rates, and balance-of-payments…
Correct answer: fundamental analysis- A. anticipate the dollar to depreciate against the euro
- B. anticipate the dollar to appreciate against the euro
- C. anticipate the dollar's exchange rate against the euro to remain constant
- D. have no anticipation concerning future movements in the dollar/euro exchange rate
Explanation: The spot rate of $1.38 per euro is above the PPP rate of $1.30, so the euro is relatively overvalued and is expected to depreciate toward…
Correct answer: anticipate the dollar to appreciate against the euro- A. increasing portfolio investment into the United States
- B. decreasing portfolio investment into the United States
- C. increasing direct investment into the United States
- D. decreasing direct investment into the United States
Explanation: Higher U.S. income, sales, and profits make production in the United States more attractive to foreign firms, encouraging direct…
Correct answer: increasing direct investment into the United States- A. increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
- B. increase in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar
- C. decrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
- D. decrease in the demand for foreign currency and increase in the supply of foreign currency and a appreciation in the dollar
Explanation: Low productivity and high inflation reduce export competitiveness and encourage imports.
Correct answer: increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar1080. Given a system of floating exchange rates rising income in the United States would trigger a (an) ?
- A. increasing in the demand for imports and an increasing in the demand for foreign currency
- B. increase in the demand for imports and decrease in the demand for foreign currency
- C. decrease in the demand for imports and an increase in the demand for foreign currency
- D. decrease in the demand for imports and a decrease in the demand for foreign currency
Explanation: Higher U.S. income increases purchases of both domestic and imported goods, so import demand rises.
Correct answer: increasing in the demand for imports and an increasing in the demand for foreign currency