Free Macroeconomics MCQs with Answers

• A. trade account surplus
• B. massive reverse outflows of capital
• C. technological transfer from DCs
• D. Symmetric informational in financial market

Explanation: A sudden reversal of capital flows can drain foreign exchange reserves, weaken currencies and expose banks and firms with foreign-currency…

• A. investment loans, and grants from overseas minus international resource outflows
• B. net international resource flows minus net international interest payments and profit remittances
• C. international resource outflows minus international balance of payments and profit remittances
• D. foreign direct investment inflow minus investment loans and grants from overseas

Explanation: Net transfers are net international resource inflows after subtracting interest payments and profit remittances sent abroad.

• A. Singapore (1994)
• B. Mexico (1994)
• C. Russia (1998)
• D. Brazil (1998)

Explanation: Mexico, Russia and Brazil experienced serious debt or financial crises during the 1990s, with worsening poverty among affected groups.

• A. Argentina
• B. Venezuela
• C. Mexico
• D. Canada

Explanation: Argentina, Venezuela and Mexico were associated with substantial capital flight during 1976-1984.

• A. primary products
• B. intermediate products
• C. manufactured products
• D. financial services

Explanation: Less-developed countries commonly have abundant land or unskilled labour but limited capital and technology, giving them a comparative…

• A. banks were unable to function
• B. there was little corporate control
• C. vital infrastructure was missing
• D. All of the above

Explanation: Transition economies suffered output declines because financial institutions and banks were disrupted, corporate governance was weak, and…

• A. Reduce interest rates
• B. Sell its own currency
• C. Buy its own currency with foreign reserves
• D. Increase its own spending

Explanation: To support a falling currency, the central bank buys its own currency in the foreign-exchange market and pays with foreign reserves…

• A. Total spending / total consumption
• B. Total consumption / total income
• C. Change in consumption / change in income
• D. Change in consumption / change in savings

Explanation: The marginal propensity to consume measures the additional consumption generated by an additional unit of income, so it is calculated as…

• A. The income of one country compared to another
• B. The GDP of one country compared to another
• C. The quantity of exports of one country compared to another
• D. Export prices compared to import prices

Explanation: Terms of trade compare a country's export prices with its import prices, commonly expressed as the export price index divided by the…

• A. Higher interest rates
• B. Higher income tax
• C. Tariffs
• D. Reduced government spending

Explanation: A demand-switching policy redirects expenditure from foreign goods toward domestic goods; tariffs make imports more expensive and…

• A. trade diversion
• B. trade channeling
• C. trade creation and trade diversion
• D. trade creation

Explanation: Trade creation is the increase in trade among member countries after internal barriers are removed, while trade diversion shifts imports…

• 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…