All Free Economics MCQs with Answers

• A. occurs when countries are granted most favored nation status
• B. occurs when one country voluntarily agrees to reduce its exports to another country
• C. occurs when two or more nations join to form a free-trade zone
• D. Occurs when countries develop an acquired comparative advantage that makes their industries more competitive in international markets

Explanation: Economic integration means countries reduce trade barriers and coordinate their economies; a free-trade area is one recognized stage of…

• A. 5 percent
• B. 10 percent
• C. 25 percent
• D. 55 percent

Explanation: In the standard textbook period used for this comparison, U.S. exports plus imports were approximately one-quarter of gross national…

• A. The upward trend in commodity prices the stability of primary products real prices
• B. The upward trend in commodity prices, the volatility of primary products real prices
• C. The downward trend in commodity prices the stability of primary products real prices
• D. The downward trend in commodity prices the volatility of primary products real prices

Explanation: Primary-export dependence is risky because commodity prices have shown a long-run downward tendency relative to manufactured goods and are…

• A. resource scarcity
• B. low levels of investment
• C. low population
• D. poor infrastructure
• E. poor human capital

Explanation: Resource scarcity, weak investment, poor infrastructure, and inadequate human capital can all constrain development.

• A. high monetary growth high wages
• B. high budget deficits devaluation
• C. high monetary growth devaluation
• D. Prices surge from an artificially low level to their equilibrium level the inflation tax is required a source of government revenue

Explanation: Transition economies often release prices from artificially low controlled levels, causing a sharp one-time surge, while governments may…

• A. The external value of the currency would tend to fall
• B. The external value of the currency would tend to rise
• C. The injections from trade are greater then the withdrawals
• D. Aggregate demand is increasing

Explanation: In a floating exchange-rate system, a balance-of-payments deficit creates excess supply of the domestic currency in the foreign-exchange…

• 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

Explanation: Under floating exchange rates, market forces determine the rate by bringing demand for and supply of the currency into balance.

• A. U.S firms shipping component production overseas
• B. High profit levels for American corporations
• C. Sluggish rates of productivity growth in the United States
• D. High unemployment rates among America workers

Explanation: Offshoring, weak productivity growth and unemployment can create political pressure for protectionism by raising fears about jobs and…

• A. Canada
• B. Mexico
• C. China
• D. North Korea

Explanation: Canada, Mexico and China are major U.S. trading partners, whereas North Korea has very limited trade with the United States because of…

• A. Intensify inflationary pressure at home
• B. Induce falling output per worker-hour for domestic workers
• C. Place constraints on the wages of domestic workers
• D. Increase profits of domestic import competing industries

Explanation: Foreign competition makes it harder for domestic firms to raise prices and wages, so it tends to restrain the wages of workers in…

• A. Automobiles
• B. Steel
• C. Radios and TVs
• D. Computer software

Explanation: Automobiles, steel, and radios and televisions have faced substantial import competition, while U.S.

• A. Exports should exceed imports
• B. imports should exceed exports
• C. Resources are more mobile internationally than are goods
• D. Resources are less mobile internationally than are goods

Explanation: Goods can cross borders more easily than most productive resources such as labour and capital, which remain relatively immobile…

• A. The introduction of new products
• B. Product design and quality
• C. Product price
• D. All of the above

Explanation: International competition pressures domestic firms to improve product variety, design, quality and price in order to retain consumers.

• A. Some nations prefer to produce one thing while others produce another
• B. Resources are not equally distributed to all trading nations
• C. Trade enhances opportunities to accumulate profits
• D. interest rates are not identical in all trading nations

Explanation: Countries possess different quantities and qualities of land, labour, capital and natural resources, so trade lets them obtain goods that…

• A. health and nutrition
• B. living standard
• C. infant mortality
• D. Purchasing Power Parity

Explanation: In the Human Development Index, longevity is represented mainly by life expectancy at birth, which measures the health dimension.

• A. infant mortality life expectancy and adult literacy rate
• B. crime rate clean environment and quality of housing
• C. air pollution rate, Water pollution rate and sanitation
• D. health education and environment

Explanation: The PQLI combines infant mortality, life expectancy at age one, and adult literacy.

• A. both exchange rates are measured s the domestic currency price of the US-dollar
• B. both exchange rates are not converted into international dollars
• C. both exchange rate are pegged
• D. both exchange rate are converted into Big Mac PPP formula

Explanation: The GDP price level compares the PPP exchange rate with the actual market exchange rate, with both expressed as domestic-currency units…

• A. current-year
• B. base-year
• C. fisher-ideal index
• D. Purchasing Power Parity (PPP)

Explanation: A Paasche index uses quantities from the current year as weights, whereas a Laspeyres index uses base-year quantities.

• A. Organization of Petroleum Exporting Country
• B. Organization of Pre-European Commission
• C. Oil Producing Economies Caucus
• D. Organization of Problematic Economies Committee

Explanation: OPEC stands for the Organization of the Petroleum Exporting Countries, a group coordinating petroleum policies among member countries.

• A. NIC, OPEC and G7
• B. Low income , middle income and high income
• C. Southeast Northeast and Southwest
• D. Asia, America and Europe

Explanation: The World Bank traditionally groups economies by income per person into low-income, middle-income, and high-income categories.