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.
Last updated
1,499 questions · page 35 of 75
- A. the time that it takes for policy makers to recognize the existence of boom of bust
- B. the time needed for parliament to agree to a tax cut.
- C. the time that is necessary to put the desired policy into effect
- D. the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented
Explanation: The response lag is the time between implementing a stabilisation policy and the economy’s reaction to it.
Correct answer: the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented- A. delays in the response of the economy is stabilization policy
- B. the foreign response to price changes
- C. the change in exports and imports prices
- D. the change in exchange rates
Explanation: Stabilisation policies often work with a delay because households, firms, interest rates, and output do not adjust immediately.
Correct answer: delays in the response of the economy is stabilization policy- A. exchange rates to be insensitive to the differential rates of inflation between countries
- B. the currencies of relatively high-inflation countries to depreciate
- C. the currencies of relatively high inflation countries to appreciate
- D. the currencies of relatively low inflation countries to depreciate
Explanation: With floating exchange rates, a country experiencing relatively higher inflation tends to lose international competitiveness, reducing…
Correct answer: the currencies of relatively high-inflation countries to depreciate- A. a weakening of a currency
- B. A depreciation of a currency
- C. An appreciation of a currency
- D. a debasement of a currency
Explanation: An appreciation is an increase in the value of a currency relative to another currency under a floating-rate system.
Correct answer: An appreciation of a currency- A. has no predictable effect on the price of the pound sterling?
- B. does not affect the price of the pound sterling
- C. tends to appreciate the pound sterling
- D. tends to depreciate the pound sterling
Explanation: Under a floating exchange-rate model, fiscal expansion can raise interest rates and attract foreign capital, increasing demand for…
Correct answer: tends to appreciate the pound sterling- A. floating exchange rates
- B. pegged exchange rates
- C. managed exchange rates
- D. fixed exchange rates
Explanation: A floating exchange rate is determined primarily by market forces of supply and demand, without a fixed official value.
Correct answer: floating exchange rates687. The agreements that were reached at the Bretton Woods conferences in 1944 established a system ?
- A. of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed upon value of its currency
- B. in which the value of currencies was fixed in terms of a specific number of ounces of gold, which in turn determined their values in international trading
- C. of floating exchange rates determined of the supply and demand of one nation's currency relative to the currency of other nations
- D. That prohibited governments from intervening in the foreign exchange markets
Explanation: Bretton Woods created an essentially fixed but adjustable exchange-rate system in which countries intervened to maintain agreed currency…
Correct answer: of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed upon value of its currency- A. exchange rate
- B. balance of trade
- C. terms of trade
- D. currency valuation
Explanation: The exchange rate is the price of one currency expressed in units of another currency.
Correct answer: exchange rate- A. forward contracts occur in a specific locations-for example, the Chicago Mercantile Exchange
- B. futures contracts have negotiable delivery dates
- C. forward contracts can be tailored in amount and delivery date to the need of importers of exporters
- D. futures contracts involve no brokerage fees or other transactions costs
Explanation: Forward contracts are privately negotiated and can be customised for the amount and delivery date required by an importer or exporter.
Correct answer: forward contracts can be tailored in amount and delivery date to the need of importers of exporters- A. destabilizing
- B. stabilizing
- C. inflationary
- D. deflationary
Explanation: Speculation is stabilizing when traders bet against a currency movement, selling when its price is rising excessively and buying when it…
Correct answer: stabilizing- A. $0.0909
- B. $0.1002
- C. $0.2826
- D. $1.1024
Explanation: If $1 equals 11 pesos, the dollar value of 1 peso is the reciprocal: $1 ÷ 11 = $0.0909.
Correct answer: $0.0909- A. sell; appreciation
- B. sell; depreciation
- C. buy; depreciation
- D. buy; appreciation
Explanation: Because Boeing will receive euros later, it risks receiving fewer dollars if the euro depreciates.
Correct answer: sell; depreciation- A. forward contract
- B. spot contract
- C. money contract
- D. bid contract
Explanation: A forward contract fixes today the exchange rate for delivery of specified currencies at a future date.
Correct answer: forward contract- A. profit
- B. arbitrage
- C. spread
- D. forward transaction
Explanation: The spread is the difference between the dealer’s bid price, at which it buys currency, and its ask price, at which it sells currency.
Correct answer: spread- A. forward transaction
- B. spot transaction
- C. swap transaction
- D. None of the above
Explanation: Spot transactions dominate foreign-exchange trading, while outright forward transactions make up a much smaller share than spot and swap…
Correct answer: forward transaction- A. hedging
- B. speculation
- C. intervention
- D. arbitrage
Explanation: Hedging means taking a position that offsets a possible loss from exchange-rate movements.
Correct answer: hedging- A. increase in the demand for yen
- B. decrease in the demand for yen
- C. increase in the supply of yen
- D. decrease in the Supply of yen
Explanation: Canadian purchases of Japanese computers require Canadians to acquire yen to pay Japanese sellers.
Correct answer: increase in the demand for yen- A. America's demand for Swiss merchandise rises
- B. America's demand for Swiss merchandise falls
- C. Switzerland's demand for American merchandise rises
- D. Switzerland's demand for American merchandise falls
Explanation: When the franc becomes more expensive in dollars, Swiss residents have greater purchasing power for U.S.
Correct answer: Switzerland's demand for American merchandise rises- A. letter a credit
- B. foreign currency option
- C. cable transfer
- D. bill of exchange
Explanation: A foreign-currency option gives its buyer the right, but not the obligation, to buy or sell a specified currency at a predetermined price…
Correct answer: foreign currency option- A. constant
- B. inelastic
- C. elastic
- D. Unitary elastic
Explanation: When import demand is elastic, a depreciation causes a relatively large change in the quantity of imports demanded, making its impact most…
Correct answer: elastic