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budget deficits and the trade balance MCQs

Practise focused budget deficits and the trade balance questions with marked answers for exam preparation and subject revision.

budget deficits and the trade balance Mcqs
1. Which of the following groups would be most harmed by a UK government budget deficit ?
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A. Foreigners who wish to buy assets in the UK

B. BAe Systems wishing to sell aircraft to Saudi Arabia

C. Lenders of loanable funds

D. UK residents wishing to buy foreign Produced cars

2. An export subsidy should have the opposite effect of ?
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A. A government budget deficit

B. An increase in Private saving

C. A tariff

D. Capital flight

3. An example of a trade policy is ?
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A. All are examples of trade policy

B. capital flight because it increases a countrys net exports

C. A tariff on sugar

D. an increase in the government budget deficit because it reduces a countrys net exports

4. An increase in the government budget deficit ?
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A. decreases the real interest rate and crowds out investment

B. None of these answers

C. Increases the real interest rate and crowds out investment

D. has no impact on the real interest rate and fails to crowed out investment

5. Which of the following statements about trade policy is true ?
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A. None of these answers

B. A countrys trade policy has no impact on the size of its trade balance

C. A restrictive import quota decreases a countrys net exports

D. A restrictive imports quota increases a countrys net exports

6. An increase in Pakistans private saving ?
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A. Increase Pakistans net exports and decrease Pakistans net capital outflow

B. decrease Pakistans net exports and increase Pakistans net capital outflow

C. increase Pakistans net exports and Pakistans net capital outflow the same amount

D. decreases Pakistans net exports and Pakistans net capital outflow the same amount

7. Which of the following statements regarding the market for foreign currency exchange is true ?
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A. An increase in Pakistans net exports decrease the demand for rupees and the rupees appreciates

B. An increase in Pakistans net exports increase the demand for rupees and the rupees appreciates

C. An increase in Pakistans net exports decreases the supply of rupees and the rupees depreciates

D. An increase in Pakistans net exports increases the Supply of rupees and the rupees depreciates

8. Which of the following statement regarding the loanable funds market is true ?
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A. An increase in the government budget deficit shifts the supply of loanable funds to the right

B. An increase in private saving shifts the supply of loanable funds to the left

C. An increase in the government budget deficit shifts the supply of loanable funds to the left

D. A decrease in the government budget deficit increase the real interest rate

9. An increasing in Europes taste for UK produced Hondas would cause the pound to ?
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A. appreciate and would increase UK net exports

B. depreciate and would increase UK net exports

C. appreciate, but the total value of UK net export stays the same

D. depreciate and would decrease UK net exports

10. Suppose, due to political instability, Russians suddenly choose to purchase UK assets as opposed to Russian assets Which of the following statements is true regarding the value of the pound and UK net exports ?
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A. The pound appreciates, and UK net exports rise

B. The pound appreciates, and UK net exports fall

C. The pound depreciates, and UK net exports rise

D. The pound depreciates, and UK net exports fall

11. Suppose, due to political instability, Russians suddenly choose to invest in UK assets as opposed to Russian assets Which of the following statements is true regarding UK net foreign investment ?
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A. UK net foreign investment rises

B. UK net foreign investment falls

C. UK net foreign investment is unchanged because only UK residents can after UK net foreign investment

D. None of the above

12. The Phrase twin deficits refers to ?
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A. a countrys trade deficit and its net capital outflow deficit

B. A countrys trade deficit and its government budget deficit

C. the equality of a countrys saving deficit and its investment deficit

D. The fact that if a country has a trade deficit, its trading partners must also have trade deficits

13. If the EU imposes a quota on the importing of clothing produced in China, so reducing UK imports of clothing Which of the following is true regarding the market for foreign currency exchange ?
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A. The Supply of pounds increases, and the pound depreciates

B. The demand for Pounds increases and the pound appreciates

C. The demand for pounds decreases and the pound depreciates

D. The Supply of pounds decreases, and the pound appreciates

14. An increase in the Pakistans government budget deficit ?
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A. decreases Pakistans net exports and increase Pakistans net capital outflow

B. Increase Pakistans net exports and Pakistans net capital outflow the same amount

C. Increase Pakistans net exports and decrease Pakistans net capital outflow

D. decreases Pakistans net exports and Pakistans net Capital outflow the Pakistans same amount
15. Which of the following statements regarding the loanable funds market is not true ?
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A. An increase in domestic investment shifts the demand for loanable funds to the right

B. An increase in a countrys net capital outflow raises its real interest rate

C. A decrease in a countrys net capital outflow shifts the demand for loanable funds to the left

D. An increase in a countrys net capital outflow shifts the supply of loanable funds to the left
16. Which of the following groups would not benefit from an EU imports quota on Japanese cars ?
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A. Eu consumers who buy electronics from Japan

B. EU farmers who export grain

C. employees of EU car manufacturers

D. Shareholders of German carmaker BMW

17. Capital flight ?
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A. increases a countrys net exports and increases its long-run growth path

B. increases a countrys net exports and decreases its long-run growth path

C. decreases a countrys net exports and decreases its long-run growth path

D. decreases a countrys net exports and increases its long-run growth path

18. Which of the following statements regarding the market for foreign currency exchange is true ?
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A. An increase in Pakistans net capital outflow increase the supply of rupees and the rupees depreciate

B. An increase in Pakistans net capital outflow increase the supply of rupees and the rupees appreciate

C. An increase in Pakistans net capital outflow increase the demand of rupees and the rupees depreciate

D. An increase in Pakistans net capital outflow increase the demand of rupees and the rupees appreciate

19. If the EU imposes a quota on the importing of clothing produced in China, so reducing UK imports of clothing, which of the following is true regarding UK net exports ?
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A. Net exports will fall

B. Net exports will rise

C. Net exports will remain unchanged

D. None of these answers