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macroeconomic issues and analysis MCQs

Practise focused macroeconomic issues and analysis questions with marked answers for exam preparation and subject revision.

macroeconomic issues and analysis Mcqs

1. The price of one countrys currency in terms of another countrys currency is the ?
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A. balance of trade

B. terms of trade

C. exchange rate

D. currency validation

2. Reducing inflation is a more important objective than economic growth is an example of ?
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A. Normative economics

B. Positive economics

C. Reality economics

D. Objective economics

3. If the economy is in the expansionary phase of the business cycle, aggregate demand ____ unemployment ____ inflation ____ payments is likely to move towards ____?
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A. rise; falls; rises; deficit

B. falls; falls; falls; surplus

C. is static; low; rise; deficit;

D. falls; rise; falls; surplus

4. If one country, with floating exchange rates, has higher inflation than its competitors we would expect its exchange rate to ?
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A. appreciate

B. revalue

C. depreciate

D. be in short supply

5. If VAT rates rise, then costs are likely to ___ and demand is likely to ____?
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A. fall; fall

B. fall; rise

C. rise; rise

D. rise; fall

6. The situation when a country imports more than it exports is ?
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A. a trade surplus

B. a trade deficit

C. an expansion.

D. a recession

7. If the economy is in the recessionary phase of the business cycle, aggregate demand ___ unemployment ____ inflation ___ and the current account of the balance of payments is likely to move towards ____?
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A. falls; rises; falls; surplus

B. is static; low; rises; deficit

C. rises; falls; rises; deficit

D. falls; falls; falls; surplus

8. When capital mobility is perfect interest rate differentials will tend to be offset by ?
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A. current account differences

B. expected exchange rate changes

C. balance of payments difference

D. Price difference

9. If the Pakistan receives larger than expected revenues from exports then the exchange value of its currency will tend to ?
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A. depreciate

B. appreciate

C. fluctuate more than if exports were lower

D. not be affected

10. A current account deficit means that a country may ?
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A. increase its stock of foreign assets

B. increases its foreign currency reserves

C. reduce its stock of foreign assets

D. increases its savings

11. When the $/ exchange rate rises the pound _____ and when the $/ rates falls the pound ________?
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A. depreciates, appreciates

B. appreciates, depreciates

C. becomes more expensive becomes cheaper

D. revalues, devalues

12. If currency dealers expect the value of the pound to fall, the exchange value will tend to ?
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A. fluctuate more than it would do therwise

B. not be affected

C. depreciate

D. appreciate

13. Within the circular flow of income, an increase in domestic income will tend to increase ?
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A. inventories

B. exports

C. taxes

D. imports

14. If Pakistans incomes rise faster than those in most other countries the the exchange value will tend to ?
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A. depreciate

B. appreciate

C. fluctuate more than it would do otherwise

D. not be affected

15. Which of the following can the government not use directly to control the economy ?
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A. investment in education

B. Pay rates within the private sector

C. Benefits available for the unemployed and sick

D. pay rates in the public sector

16. If the economy is in the though phase of the business cycle, aggregate demand ____ unemployment ______ inflation ______ and the current account of the balance of payments is likely to move towards ________?
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A. rises; falls; rises; deficit

B. falls; rises; falls; surplus

C. is static; low; rises; deficit

D. falls; falls; falls; surplus

17. In the ERM, each country fixed participant Collectively the group ________ against the rest of the world?
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A. a real exchange rate, floated

B. a real exchange rate, pegged

C. a purchasing power parity, pegged

D. a nominal exchange rate, floated

18. Under floating exchange rates, expectations of higher interest rates are likely to cause an ____ of the exchange rate?
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A. depreciation

B. fall

C. devaluation

D. appreciation

19. In the absence of international capital controls, central banks set ________ to provide the correct incentive for speculators?
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A. income policy

B. money supply targets

C. inflation targets

D. interest rates

20. The main features of the European Monetary system are ?
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A. currency swap agreement between member

B. The ECU

C. all of the above

D. the exchange rate mechanism

21. The record of a countrys imports and exports of of goods and services plus net investment incomes and current transfers of money to and from abroad, is called its ?
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A. balance of payments

B. balance of payments on current account

C. visible trade balance

D. balance of trade

22. If a nations interest rates are relatively low compared to those of other countries. then the exchange value of its currency will tend to ?
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A. fluctuate more than if interest rates were high

B. depreciate

C. appreciate

D. not be affected

23. If a large car importer in the Pakistan wants to import many cars, then the exchange value of the Pak rupees will tend to ?
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A. fluctuate more than it would do otherwise

B. appreciate

C. depreciate

D. not be affected

24. The record of countrys transfers of land inter-government payments and money sent by migrants to and from abroad is called its ?
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A. balance of payments on current account

B. capital account of the balance of payments

C. balance of payments

D. financial account of the balance of payments

25. The Maastricht criteria for entry to the EMU are that applicants should have ?
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A. stable nominal exchange rates

B. budget deficits and government debt under control

C. low inflation

D. all of the above

E. low interest rates

26. Starting from a position of internal and external balance a reduction in aggregate demand will cause a current account ?
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A. revaluation

B. deficit

C. devaluation

D. surplus

27. A fixed exchange rate, plus perfect capital mobility ________ the scope for monetary policy ?
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A. undermines

B. enhances

C. facilitates

D. encourages

28. If the Pakistan takes part in a war in the Middle East, then the exchange value of its currency will tend to ?
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A. depreciate

B. not be affected

C. appreciate

D. fluctuate more than if it were at peace

29. As prices rise. People will want to keep more money as cash and in bank accounts This is called ?
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A. real balance effect.

B. menu costs of inflation.

C. cash ratio.

D. money illusion.

30. The demand for ice-cream is lower outside of summer causing lower demand for ice-cream salesman if they cannot find other work, this is called _______ unemployment?
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A. Regional

B. seasonal

C. structural

D. demand-deficient

31. Which of the following is a possible government objective as opposed to a policy ?
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A. Lower taxation rates

B. Lower government spending

C. Lower interest rates

D. Lower inflation

32. Which fixed exchange rates and no private capital flows, to correct a balance of payments deficit, the central bank will _______ and ________ ?
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A. sell foreign exchange buy domestic currency

B. sell foreign exchange sell domestic currency

C. buy foreign exchange, sell domestic currency

D. buy foreign exchange buy domestic currency

33. The competitive advantage from a devaluation is likely to be offset by _______ and ________?
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A. higher import prices, lower export prices

B. lower export prices, lower imports volumes

C. higher wage increases lower import volumes

D. higher import prices, higher wages increases

34. The record of a countys transfers of shareholding property and bank deposits to and from abroad is called its ?
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A. balance of payments

B. capital account of the balance of payments

C. balance of payments on current account

D. financial account on the balance of payments.

35. A rise in the real exchange rate will ________ the competitiveness of the domestic economy?
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A. None of the above

B. increase

C. reduce

D. do nothing to

36. What is meant by an objective ?
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A. A target

B. A strategy

C. A way of reaching a target

D. A policy

37. If the exchange rate between the UK and Japan changes from 1 = 100 yen to 1 = 150 yen then ceteris paribus, the price of UK goods in Japan ?
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A. will decrease

B. could either increase of decrease

C. will remain the same

D. will increase

38. In a fixed exchange rate regime, the central the exchange rate ?
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A. selling, increase

B. selling, reduce

C. buying reduce

D. C and D

E. A and B

F. buying increase

39. Fiscal policy is weak under floating exchanges rates as fiscal expansion ?
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A. crowds out exports

B. crowds out imports

C. reduces the budget deficit

D. crowds out public consumption

40. Unemployment resulting from imperfect information in the labour market is called ____ unemployment?
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A. disequilibrium

B. natural

C. Frictional

D. real-wage

41. Aggregate supply is the total amount ?
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A. of goods and services produced in an economy.

B. of products produced by a given industry.

C. of labour supplied by all households

D. produced by the government

42. If British residents want more French francs to purchase more French cloths other things equal, then the equilibrium value of the pound against the French franc will ?
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A. fluctuate

B. fall

C. rise

D. not change

43. Floating exchange rates are ____ in the short run?
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A. volatile

B. depreciating

C. stable

D. predictable

44. If the economy is at the peak of the business cycle, aggregate demand ____ unemployment _______ inflation _______ and the current account of the balance of payments is likely to move towards _______?
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A. falls; rises; falls; surplus

B. is static; low; rises; deficit

C. rise; falls; rise; deficit

D. falls; falls; falls; surplus

45. With fixed exchange rates and no private currency flows, when the central bank buys domestic currency the domestic money supply is ?
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A. unaffected

B. reduced

C. None of these

D. increased

46. A monetary union means ________, ________ and ________?
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A. permanently fixed exchange rates, free capital movements, a single interest rates

B. a common currency floating exchange rates common monetary policy

C. a common currency a single central bank, common monetary policy

D. permanently fixed capital movements floating exchange rates a fixed structure of interest rates

47. An individual who is not working and who has given up looking for work is classfied as ?
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A. unemployed.

B. a discouraged worker:

C. unemployable

D. hard core unemployed.

48. Which does the government not control directly ?
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A. Spending on education

B. Spending on defence

C. Firms investment decisions

D. Spending on health

49. The record of countrys imports and exports of goods is called its ?
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A. balance of trade:

B. balance of payments on current account

C. visible trade balance

D. balance of payments

50. perfect international capital mobility suggests that international funds will be responsive to ________ differentials?
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A. price

B. current account

C. interest rate

D. tax

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