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Subject: Economics / General Economics
1) If the current account of a country is in deficit, then one can conclude
with certainty that this country’s
a) GNDI must be higher than GNE
b) public saving must be higher than private saving
c) national saving cannot be more than investment
d) trade balance is in surplus
2) Which of the following is not part of the current account of a country?
a) imports
b) exports c) unilateral transfers
d)
forgiven debt
3) If we add the current account balances for every nation, the overall
balance has to be equal to
a) the world GDP
b) zero
c) spending minus saving
d) sum of manufacturing production in all nations
4) Between 1990-2006, in the U.S., the current account deficit ______ mainly
because of a(n) ____________ in the trade deficit, and hence, during that
period GDP was lower than GNE.
a) increased; increase
b) decreased; decrease
c) increased; decrease
d) decreased; increase
5) If interest rates in the United States is 5% per year and in Australia it is
8%, and inflation rate in Australia is 6%, then using the Fisher effect, one
can predict that the inflation rate in the United States is:
a) 2%.
b) 3%.
c) 6%.
d) 4%.
6) If there is a permanent decline in foreign real income by 2%, then in the
long run:
a) domestic prices will increase by 2%
b) foreign prices will decrease by 2%
c) the home currency will depreciate by 2%
d) the home currency will appreciate by 2%
7) If there is a permanent decline in domestic money supply by 5%, then in
the long run:
a) domestic prices will increase by 5%
b) domestic prices will decrease by 5%
c) the home currency will depreciate by 2.5%
d) the home currency will appreciate by 2.5%
8) Suppose that Mexico has a fixed exchange rate regime, and value of peso
is fixed against the dollar. If U.S. real income growth rate increases above
that of Mexico, how should the monetary policy react to maintain the fixed
exchange rate regime?
a) Mexico has to increase growth rate of money supply.
b) Mexico has to reduce growth rate of money supply. c) Under fixed exchange rate regime, they cannot change monetary policy.
d) U.S. should adjust monetary policy.
9) If the real exchange rate between Australia and Vietnam is 1.1 and the
inflation differential between them is -1%, given a 15% speed of
convergence, what would be the rate of real exchange rate depreciation?
a) -1.36% b) 1.36% c) 15% d) -15% 10) If Denmark has a real GDP growth rate of 3%, and Canada has a real
GDP growth rate of 4%, while money growth in Denmark is 5%, and money
growth in Canada is 3%, what would the monetary approach predict for
exchange rates in the long run?
a) The Canadian dollar would appreciate by 3% against the Danish krone.
b) The Canadian dollar would depreciate by 3% against the Danish krone.
c) The Canadian dollar would depreciate by 1% against the Danish krone.
d) The Canadian dollar would appreciate by 1% against the Danish krone.
11) If a basket of goods in the United States costs $1000, and the same
basket of goods in Malaysia costs 5000 ringgits, then for PPP to hold, $1
should trade for ____ Malaysian ringgits.
a) 0.2
b) 5
c) 50
d) 50,000
12) If less home goods are required to buy the same amount of foreign
goods, then we say that the foreign country experienced:
a) a nominal appreciation
b) a nominal depreciation
c) a real appreciation
d) a real depreciation
13) According to the long run money market model, countries that
consistently print a lot of money tend to have ____ inflation rates and ____
exchange rates (defined as home currency units per foreign currency)
a) high, falling
b) low, rising
c) high, rising
d) low,
falling
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