All Free Economics MCQs with Answers

• A. Brazil
• B. Argentina
• C. Thailand
• D. Malaysia

Explanation: Brazil, Argentina and Thailand were among the major developing-country debtors in 2001, whereas Malaysia was not generally classified…

• A. long-term debt divided by GDP of a country in a given year
• B. interest and principle payments divided by exports of goods and services
• C. ratio of debt net of portfolio investment financing and foreign direct investment
• D. default and reschedule debt minus annual export revenues that must be devoted to paying interest

Explanation: The debt-service ratio measures the burden of external debt payments by comparing interest and principal repayments with export earnings…

• A. dependable positive real interest rates
• B. higher taxes on capital gains
• C. more efficient state enterprises
• D. market liberalization

Explanation: Higher taxes on capital gains can encourage investors to move funds abroad or keep them outside the formal domestic system, so they may…

• A. External debt accumulates with international balance on goods services and income deficcits
• B. When debts are denominated in U.S dollars their appreciation during the 1990s increased the cost of servicing such debts
• C. In the 19901s LDCs relied increasingly on aid from DCs
• D. International lenders required LDC governments to guarantee private debt

Explanation: During the 1990s, developing countries generally faced declining aid dependence and increasingly relied on private capital and commercial…

• A. Iraq and Iran
• B. Egypt and Poland
• C. Pakistan and Afghanistan
• D. Saudi Arabia and Jordan

Explanation: Following the Persian Gulf War, the United States provided major debt relief or more generous repayment terms to Egypt and Poland.

• A. screening of debtors based on their regional location
• B. World Bank requiring LDCs seconded by a DC to get loan reduction
• C. loan denial to crisis-stricken highly indebted countries
• D. None of the above

Explanation: None of the listed descriptions accurately defines the policy cartel on debt reduction, which refers to coordinated control by major…

• A. excessively committed to writing down LDC debt
• B. a managed duopoly of policy advice
• C. a U.S monoply
• D. the initiator of HIPCs debt forgiveness

Explanation: Mosley, Harrigan and Toye characterized the IMF and World Bank as a managed duopoly of policy advice because the two institutions jointly…

• A. unrealistic for IMF to intervene in the financial markets of poor countries during the crisis
• B. impractical for the IMF to loan short term as reforms can only be effective in the middle to long run
• C. crucial that the IMF intervene in the reform of fiscal policy of the country and not the monetary policy
• D. None of the statements above is correct

Explanation: Stiglitz argued that short-term IMF lending is poorly suited to structural banking reforms, since such reforms require time to design and…

• A. Structural adjustment loans
• B. sectoral adjustment loans
• C. internal adjustment loans
• D. external leverage loans

Explanation: Sectoral adjustment loans were introduced to support reforms in particular sectors such as agriculture, industry, energy, education and…

• A. trade account surplus
• B. massive reverse outflows of capital
• C. technological transfer from DCs
• D. Symmetric informational in financial market

Explanation: A sudden reversal of capital flows can drain foreign exchange reserves, weaken currencies and expose banks and firms with foreign-currency…

• A. investment loans, and grants from overseas minus international resource outflows
• B. net international resource flows minus net international interest payments and profit remittances
• C. international resource outflows minus international balance of payments and profit remittances
• D. foreign direct investment inflow minus investment loans and grants from overseas

Explanation: Net transfers are net international resource inflows after subtracting interest payments and profit remittances sent abroad.

• A. Singapore (1994)
• B. Mexico (1994)
• C. Russia (1998)
• D. Brazil (1998)

Explanation: Mexico, Russia and Brazil experienced serious debt or financial crises during the 1990s, with worsening poverty among affected groups.

• A. Argentina
• B. Venezuela
• C. Mexico
• D. Canada

Explanation: Argentina, Venezuela and Mexico were associated with substantial capital flight during 1976-1984.

• A. primary products
• B. intermediate products
• C. manufactured products
• D. financial services

Explanation: Less-developed countries commonly have abundant land or unskilled labour but limited capital and technology, giving them a comparative…

• A. banks were unable to function
• B. there was little corporate control
• C. vital infrastructure was missing
• D. All of the above

Explanation: Transition economies suffered output declines because financial institutions and banks were disrupted, corporate governance was weak, and…

• A. Reduce interest rates
• B. Sell its own currency
• C. Buy its own currency with foreign reserves
• D. Increase its own spending

Explanation: To support a falling currency, the central bank buys its own currency in the foreign-exchange market and pays with foreign reserves…

• A. Total spending / total consumption
• B. Total consumption / total income
• C. Change in consumption / change in income
• D. Change in consumption / change in savings

Explanation: The marginal propensity to consume measures the additional consumption generated by an additional unit of income, so it is calculated as…

• A. The income of one country compared to another
• B. The GDP of one country compared to another
• C. The quantity of exports of one country compared to another
• D. Export prices compared to import prices

Explanation: Terms of trade compare a country's export prices with its import prices, commonly expressed as the export price index divided by the…

• A. Higher interest rates
• B. Higher income tax
• C. Tariffs
• D. Reduced government spending

Explanation: A demand-switching policy redirects expenditure from foreign goods toward domestic goods; tariffs make imports more expensive and…

• A. trade diversion
• B. trade channeling
• C. trade creation and trade diversion
• D. trade creation

Explanation: Trade creation is the increase in trade among member countries after internal barriers are removed, while trade diversion shifts imports…