Macroeconomics MCQs

Question 1

Given a two-country world, suppose Japan devalues the yen by 20 percent and west German devalues the mark by 15 percent This result is a (an)?

Accepted Answer

depreciation in the value of the yen against the mark

Answer

appreciation in the value of both currencies

Answer

depreciation in the value of both currencies

Answer

appreciation in the value of the yen against the mark

Question 2

According to the Marshall-Lerner condition if a country's currency depreciates its trade balance will worsen if ?

Accepted Answer

elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6

Answer

elasticity of demand for exports = 0.9; elasticity of demand for imports = 0.4

Answer

elasticity of demand for exports = 0.7; elasticity of demand for imports = 0.3

Answer

elasticity of demand for exports = 0.5; elasticity of demand for imports = 0.7

Question 3

The balance of trade can only worsen if income ____ relative to absorption ?

Accepted Answer

decreases

Answer

increases

Answer

does not change

Answer

None of the above

Question 4

The notion that, following a currency depreciation the balance of trade falls for a while before increasing is called an effect ?

Accepted Answer

J Curve

Answer

relative price

Answer

elasticity

Answer

Pass through

Question 5

Which approach predicts that is an economy operates a full employment and faces trade deficit currency devaluation will improve the trade balance only if domestic spending is cut thus freeing resources to produce exports ?

Accepted Answer

the absorption approaches

Answer

the Marshall Lerner approach

Answer

the monetary approach

Answer

the elasticities approach

Question 6

The extent to which a change in the exchange rate leads to changes in import and export prices is known as the ?

Accepted Answer

pass through effect

Answer

J Curve effect

Answer

Marshall Lerner effect

Answer

absorption effect

Question 7

Economic theory predicts that a currency depreciation will least lead to an improvement in the home country's trade balance when ?

Accepted Answer

home demand for imports is inelastic and foreign export demand is inelastic

Answer

home demand for imports is elastic and foreign export demand is inelastic

Answer

home demand for imports is inelastic and foreign export demand is elastic

Answer

home demand for imports is elastic and foreign export demand is elastic

Question 8

Suppose that U.S dollar depreciates 70 percent against the yen yet Japanese export prices to Americans did not decrease by the full extent of the dollar depreciation. This is best explained by ?

Accepted Answer

partial currency pass through

Answer

complete currency pass through

Answer

partial J curve effect

Answer

complete J curve effect

Question 9

Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

Accepted Answer

0.67 pesos = $1

Answer

0.8 pesos = $1

Answer

1.25 pesos = $1

Answer

1.67 pesos = $1

Question 10

Due to Japan's high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

Accepted Answer

depreciation; trade surplus

Answer

appreciation; trade surplus

Answer

appreciation; trade deficit

Answer

depreciation; trade deficit

Question 11

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

Accepted Answer

flow from the United States to foreign countries

Answer

flow from foreign countries to the United States

Answer

remain totally in foreign countries

Answer

remain totally in the United States

Question 12

Starting from a position where the nation's money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

Accepted Answer

decrease in the money supply

Answer

increase in the money supply

Answer

decrease in the money demand

Answer

None of the above

Question 13

Which example of market expectations causes the dollar to appreciate against the yen- expectations that the U.S economy will have ?

Accepted Answer

higher future interest rates than Japan

Answer

faster economic growth than Japan

Answer

more rapid money supply growth than japan

Answer

higher inflation rates than japan

Question 14

Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

Accepted Answer

decrease in the demand for imports and a decrease in the demand for foreign currency

Answer

increase in the demand for imports and an increase in the demand for foreign currency

Answer

increase in the demand for imports and a decrease in the demand for foreign currency

Answer

decrease in the demand for imports and an increase in the demand for foreign currency

Question 15

For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

Accepted Answer

The United States to Japan causing the dollar to depreciate

Answer

The United States to Japan causing the dollar to appreciate

Answer

The Japan to United States, causing the dollar to depreciate

Answer

The Japan to United States, causing the dollar to appreciate

Question 16

If Japan runs current account deficit and exchange rates are floating?

Accepted Answer

Japanese exports become less expensive for foreign buyers

Answer

Japanese exports become more expensive to foreign buyers

Answer

Japanese imports become less expensive for German buyers

Answer

Japanese imports become more prestigious to German buyers

Question 17

Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

Accepted Answer

the Swiss current account balance is in deficit

Answer

the Canadian current account balance is in surplus

Answer

the Canadian current account balance is in equilibrium

Answer

the Swiss current account balance is in equilibrium

Question 18

When the price of foreign currency (the exchange rate) is above the equilibrium level ?

Accepted Answer

an excess supply of that currency exists in the foreign exchange market

Answer

an excess demand for that currency exists in the foreign exchange market

Answer

the supply of foreign exchange shifts outward to the right

Answer

the supply of foreign exchange shifts backward to the left

Question 19

The high foreign exchange value of the U.S dollar in the early 1980s can best be explained by ?

Accepted Answer

additional investment funds made available from overseas

Answer

lack of investor confidence in U.S fiscal policy

Answer

market expectations of rising inflation in the United States

Answer

American tourists overseas finding costs increasing

Question 20

IF when cost $4 per bushel in the United States and 2 pounds per bushel in Great Britain then in the presence of purchasing power parity the exchange rate should be ?

Accepted Answer

$2.00 per pound

Answer

$50 per pound

Answer

$1.00 per pound

Answer

$8.00 per pound

Free Macroeconomics MCQs with Answers