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 57 of 75
- A. the sum of merchandise trade and services
- B. the current account plus long-term capital
- C. the value of merchandise exports minus imports
- D. short-term capital plus the basic balance
Explanation: Net exports in GDP are calculated as exports of goods and services minus imports of goods and services.
Correct answer: the sum of merchandise trade and services- A. engage in more government spending
- B. reduce government taxes
- C. increases private investment spending
- D. decrease domestic consumption
Explanation: Reducing domestic consumption generally lowers spending on imported goods and services, which improves the current-account balance.
Correct answer: decrease domestic consumption- A. merchandise trade deficits
- B. merchandise trade surpluses
- C. capital/financial account surpluses
- D. capital/financial account deficits
Explanation: A current-account deficit means the country spends more abroad than it earns and must be financed by a net inflow of foreign capital.
Correct answer: capital/financial account surpluses- A. mean a loss of foreign exchange
- B. bring foreign exchange into the country
- C. indicate a surplus exist
- D. exist at the bottom line after all accounts are totaled
Explanation: A debit entry represents a payment to foreigners or another transaction that uses foreign exchange, so it records an outflow or loss of…
Correct answer: mean a loss of foreign exchange- A. the value of trade in merchandise
- B. services
- C. unilateral transfers
- D. All of the above
Explanation: The current account records merchandise trade, trade in services, and unilateral transfers such as gifts and remittances.
Correct answer: All of the above- A. capital outflow would cause the nation's currency to depreciate contributing to a trade deficit
- B. capital inflow would cause the nation's currency to depreciate contributing to a trade deficit
- C. capital inflow would cause the nation's currency to appreciate contributing to a trade deficit
- D. capital outflow would cause the nation's currency to appreciate contributing to a trade deficit
Explanation: A capital-account surplus generally reflects capital inflows, which increase demand for the domestic currency and cause appreciation.
Correct answer: capital inflow would cause the nation's currency to appreciate contributing to a trade deficit- A. investment inflows
- B. merchandise exports
- C. payments for American services to foreigners
- D. private gives to foreign residents
Explanation: Merchandise exports, investment inflows, and payments received for services supplied to foreigners are credit items.
Correct answer: private gives to foreign residents- A. insure that the sum of all debits matches the sum of all credits
- B. insure that trade imports equals the value of trade exports
- C. obtain an accurate account of a balance of payments deficit
- D. obtain an accurate account of a balance of payments surplus
Explanation: Because the balance of payments must balance in accounting terms, the statistical discrepancy records errors and omissions needed to make…
Correct answer: insure that the sum of all debits matches the sum of all credits- A. larger savings pool available to finance domestic spending
- B. higher interest rate which leads to lower domestic investment
- C. loss of funds to trading partners overseas
- D. decrease in its services exports to other countries
Explanation: A net international debtor has previously received more foreign funds than it has invested abroad, so foreign capital initially enlarges…
Correct answer: larger savings pool available to finance domestic spending1130. The Baker plan (1985) stressed _______ and the Brady Plan (1989) emphasized _______ respectively?
- A. IMF decentralization; World Bank dissolution
- B. new loans from multilateral agencies and surplus countries; debt reduction or write-downs
- C. structural adjustment loans for LDCs experiencing unanticipated external shocks; renewed emphases on macroeconomic stabilization programs
- D. debt relief for at leas three-fourths of the eligible HIPCs; shorter requirements for adjustment programs
Explanation: The Baker Plan sought to address the debt crisis through additional lending from multilateral institutions and surplus countries.
Correct answer: new loans from multilateral agencies and surplus countries; debt reduction or write-downs- A. Structural adjustment loans
- B. sectoral adjustment loans
- C. internal adjustment loans
- D. external leverage loans
Explanation: Sectoral adjustment loans were designed to support reforms in particular sectors such as agriculture, industry, energy, education, and…
Correct answer: sectoral adjustment loans- 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…
Correct answer: Malaysia- 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…
Correct answer: interest and principle payments divided by exports of goods and services- 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…
Correct answer: higher taxes on capital gains- 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…
Correct answer: In the 19901s LDCs relied increasingly on aid from DCs- 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.
Correct answer: 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…
Correct answer: None of the above- 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…
Correct answer: a managed duopoly of policy advice- 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…
Correct answer: impractical for the IMF to loan short term as reforms can only be effective in the middle to long run- 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…
Correct answer: sectoral adjustment loans