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 63 of 202
- A. European union, single market
- B. Western European, single currency area
- C. European Union, single currency area
- D. Western European, single market
Explanation: The Single European Act set the objective of completing a European single market by 1992, including the removal of barriers to the…
Correct answer: European union, single market- A. The ECU
- B. currency swap agreement between member
- C. the exchange rate mechanism
- D. all of the above
Explanation: The European Monetary System included the ECU, the Exchange Rate Mechanism and financial support arrangements such as currency or credit…
Correct answer: all of the above- A. crowds out imports
- B. crowds out public consumption
- C. crowds out exports
- D. reduces the budget deficit
Explanation: Fiscal expansion under floating exchange rates can raise interest rates, attract capital inflows and appreciate the currency.
Correct answer: crowds out exports- A. stable
- B. predictable
- C. volatile
- D. depreciating
Explanation: Floating exchange rates can respond rapidly to capital flows, speculation, interest-rate changes and expectations, making them volatile in…
Correct answer: volatile- A. interest rates
- B. competitiveness
- C. trade
- D. speculation
Explanation: In the short run, floating exchange rates respond chiefly to speculation about future currency values, interest rates and economic…
Correct answer: speculation- A. higher import prices, higher wages increases
- B. lower export prices, lower imports volumes
- C. higher import prices, lower export prices
- D. higher wage increases lower import volumes
Explanation: Devaluation makes imports more expensive and can raise domestic wages and costs, producing inflation.
Correct answer: higher import prices, higher wages increases- A. money supply targets
- B. income policy
- C. interest rates
- D. inflation targets
Explanation: With free international capital movement, central banks use interest rates to influence capital flows and provide incentives for…
Correct answer: interest rates- A. buy foreign exchange, sell domestic currency
- B. sell foreign exchange buy domestic currency
- C. buy foreign exchange buy domestic currency
- D. sell foreign exchange sell domestic currency
Explanation: A balance-of-payments deficit creates excess demand for foreign currency, so the central bank supports the fixed rate by selling foreign…
Correct answer: sell foreign exchange buy domestic currency- A. Price difference
- B. balance of payments difference
- C. current account differences
- D. expected exchange rate changes
Explanation: With perfect capital mobility, investors move funds to eliminate interest-rate advantages.
Correct answer: expected exchange rate changes- A. deficit
- B. surplus
- C. revaluation
- D. devaluation
Explanation: Lower aggregate demand reduces domestic income and therefore reduces imports.
Correct answer: surplus1251. When the $/£ exchange rate rises the pound _____ and when the $/£ rates falls the pound ________?
- A. depreciates, appreciates
- B. revalues, devalues
- C. appreciates, depreciates
- D. becomes more expensive becomes cheaper
Explanation: A rise in the dollar-per-pound rate means one pound buys more dollars, so the pound appreciates.
Correct answer: appreciates, depreciates- A. fluctuate more than it would do otherwise
- B. appreciate
- C. depreciate
- D. not be affected
Explanation: Importing many cars increases demand for foreign currency and the supply of rupees in the foreign-exchange market.
Correct answer: depreciate- A. fluctuate more than it would do otherwise
- B. appreciate
- C. depreciate
- D. not be affected
Explanation: Faster income growth usually raises demand for imports, increasing the supply of rupees in exchange markets and weakening the currency.
Correct answer: depreciate- A. depreciate
- B. not be affected
- C. fluctuate more than if it were at peace
- D. appreciate
Explanation: Participation in a war can raise uncertainty, defence-related import demand and capital outflows, weakening confidence in the currency.
Correct answer: depreciate- A. a recession
- B. a trade surplus
- C. a trade deficit
- D. an expansion.
Explanation: A country has a trade deficit when the value of its imports exceeds the value of its exports. A trade surplus is the opposite situation.
Correct answer: a trade deficit- A. financial account on the balance of payments.
- B. balance of payments
- C. balance of payments on current account
- D. capital account of the balance of payments
Explanation: Purchases and sales of shares, other financial assets and bank deposits across borders are recorded in the financial account.
Correct answer: financial account on the balance of payments.- A. free-trade
- B. autarkic
- C. open
- D. mixed
Explanation: An open economy conducts trade and financial transactions with other countries.
Correct answer: open- A. rise, fall
- B. rise; rise
- C. fall; fall
- D. fall; rise
Explanation: Higher interest rates increase borrowing and financing costs, while discouraging consumption and investment.
Correct answer: rise, fall- A. fiscal policies
- B. incomes policies
- C. supply-side policies
- D. monetary policies
Explanation: Fiscal policy uses taxation and government expenditure to influence aggregate demand, employment and economic activity.
Correct answer: fiscal policies- A. real balance effect
- B. menu costs of inflation
- C. money illusion.
- D. cost-push inflation.
Explanation: Menu costs are the administrative costs of changing prices, such as replacing price tags and reprinting price lists, when inflation…
Correct answer: menu costs of inflation