Free Macroeconomics MCQs with Answers
1,499 Macroeconomics MCQs from Economics, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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1,499 questions · page 33 of 75
- 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 dollar651. 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- A. the United States to Switzerland causing the dollar to depreciate
- B. the United States to Switzerland causing the dollar to appreciate
- C. Switzerland to the United States causing the franc to depreciate
- D. Switzerland to the United States causing the franc to appreciate
Explanation: The relevant real return is approximately the nominal interest rate minus inflation: 4% in the United States versus 3% in Switzerland.
Correct answer: Switzerland to the United States causing the franc to depreciate- A. the rate of inflation in the United States
- B. the number of dollars printed by the U.S government
- C. the international demand and supply for dollars
- D. the monetary value of gold held at Fort Knox, Kentucky
Explanation: Under modern floating exchange rates, the dollar's exchange value is set by international demand for dollars and the supply of dollars in…
Correct answer: the international demand and supply for dollars- A. the value of other currencies will rise relative to the dollar
- B. the dollar will depreciate relative to other currencies
- C. the price of foreign goods will become cheaper to Canadians
- D. the price of foreign goods will rise for Canadians
Explanation: A balance-of-payments surplus increases demand for the Canadian dollar relative to foreign currencies, causing it to appreciate under…
Correct answer: the price of foreign goods will become cheaper to Canadians- A. the United States being considered a safe haven by foreign investors
- B. relatively high real interest rates in the United States
- C. confidence of foreign investors in the U.S economy
- D. relatively high inflation rates in the United States
Explanation: High U.S. inflation reduces the dollar's purchasing power and normally puts downward pressure on its exchange value.
Correct answer: relatively high inflation rates in the United States- A. large trade surpluses for the United States
- B. high inflation rates in the United States
- C. lack of investor confidence in U.S money policy
- D. high interest rates in the United States
Explanation: High U.S. interest rates raise the return on dollar-denominated assets and attract foreign investment.
Correct answer: high interest rates in the United States- A. 200 pounds
- B. 400 pounds
- C. 600 pounds
- D. 800 pounds
Explanation: Purchasing power parity applies the exchange rate to the U.S. price: $400 × 2 pounds per dollar = 800 pounds.
Correct answer: 800 pounds- 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. increase the foreign demand for dollars causing the dollar to appreciate
Explanation: Higher real interest rates make dollar-denominated assets more attractive to foreign investors.
Correct answer: increase the foreign demand for dollars causing the dollar to appreciate- A. the inflation rate in each country will necessarily equal zero
- B. the inflation rate in each country will necessarily equal 1 percent
- C. the exchange rates are said to be fixed pegged to each other
- D. purchasing power parity holds
Explanation: When an identical tradable product has the same value after currency conversion, the exchange rate equalizes purchasing power between the…
Correct answer: purchasing power parity holds- A. purchasing power parity theory
- B. asset markets theory
- C. monetary theory
- D. balance of payments theory
Explanation: Purchasing power parity theory links exchange rates with the relative prices of goods, especially tradable goods.
Correct answer: purchasing power parity theory