Question

1. A deficit in the overall balance of payments of a nation generally is an indication that:

a. the country’s monetary authority is selling foreign currency.

b. the country’s monetary authority is buying foreign currency.

c. the country’s monetary authority is buying domestic government bonds.

d. the country’s monetary authority is selling domestic currency.

2. Which of the following is an immediate effect of an increase in money supply by the European Central Bank by 10 percent?

a. There will be an inflow of foreign capital in the countries belonging to the European Union.

b. The expected exchange rate value of the foreign currencies vis-à-vis the Euro will increase.

c. The interest rate in the EU countries will increase.

d. The product prices in the EU countries will decline drastically.

3. If the marginal propensity to save is 0.3 and the marginal propensity to import is 0.2, then value of the simple spending multiplier is:

      a. 2.0.

      b. 0.5.

      c.1.5.

      d.0.1.

4. If the marginal propensity to save is 0.3 and the marginal propensity to import is 0.1, and the government increases expenditures by $10 billion, ignoring foreign-income repercussions, how much will GDP rise?

      a. $20 billion.

      b. $10 billion.

      c. $25 billion.

d. $15 billion.

5. Equilibrium GDP in the short-run is determined at the point where:

       a. gross domestic production equals aggregate demand.

       b.domestic production equals domestic consumption.

       c.imports equal exports.

       d. the rate of unemployment equals zero.

6. Real domestic investment spending is:

a. positively related to the marginal propensity to consume.

b. negatively related to the level of interest rates in the economy.

c. positively related to government spending.

d. negatively related to the exchange rate.

7. The greater the marginal propensity to import:

a. the smaller the spending multiplier.

b. the greater the level of investment.

c. the greater is the net export.

d. the smaller is the level of consumption.

8. Which of the following refers to foreign exchange?

a. The act of trading different nations’ moneys

b. The holdings of foreign assets

c. The act of exchanging goods and services internationally.

d. The adoption of foreign trade policies

9. An increase in the dollar per euro exchange rate will result in:

a. a decline in the quantity demanded for euro.

b. a decline in the quantity demanded for dollar.

c. an inward shift of the supply curve of euro.

d. an outward shift of the demand curve for dollar.

Answer 1