Online MCQ Assignment
This flash card is very useful for Online MCQ Assignment and must study for if you are student of distance learning program for amity, upes, imtcdl, smu or any others university/institute
QN1: Governments may contribute to inflationary pressure on account of building up large ___
A) numbers of employees
B) welfare plans
C) budget deficits
D) expenditure
Answer
Answer: C) budget deficits
QN2: The Phillips curve shows the trade-off between ___ and ___
A) the inflation rate, interest rates
B) the inflation rate, the unemployment rate
C) interest rates, output
D) output, employment
Answer
Answer: B) the inflation rate, the unemployment rate
QN3: Equilibrium unemployment is determined by the underlying rate of inflation
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN4: The long-run Phillips curve is ___ at the ___
A) horizontal, natural rate of inflation
B) horizontal, natural rate of unemployment
C) vertical, natural rate of inflation
D) vertical, equilibrium rate of unemployment
Answer
Answer: D) vertical, equilibrium rate of unemployment
QN5: The short run Phillips curve can shift in response to changes in ___
A) Inflationary expectations
B) unemployment
C) the inflation rate
D) wage rates
Answer
Answer: A) Inflationary expectations
QN6: The costs of inflation are
A) shoe leather costs
B) menu costs
C) income redistribution
D) uncertainty
E) all of the above
Answer
Answer: E) all of the above
QN7: Only an incomes policy can deliver low inflation in the long run
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN8: A person who is made redundant because of the contraction of an industry is a victim of ___
A) frictional unemployment
B) demand-deficient unemployment
C) classical unemployment
D) structural unemployment
Answer
Answer: D) structural unemployment
QN9: An advocate of the classical model of the economy would claim that unemployment is created when the ___ is above its equilibrium level in the ___
A) price level, aggregate economy
B) tax rate, government budget
C) wage rate, labour market
D) interest rate, market for loanable funds
Answer
Answer: C) wage rate, labour market
QN10: The natural rate of unemployment, (equilibrium unemployment), will always be zero
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN11: We would normally expect the size of the labour force to be ___ than the number of workers willing to accept job offers at any real wage rate
A) smaller
B) larger
C) the same size
Answer
Answer: B) larger
QN12: The equilibrium rate of unemployment, at any real wage, is the difference between ___ and ___
A) those willing to work at the going wage, labour demand
B) labour demand, those willing to work at the going wage
C) labour demand, labour supply
D) those willing to work at the going wage, labour supply
Answer
Answer: D) those willing to work at the going wage, labour supply
QN13: If somebody is prepared to work at the going wage rate but cannot find work then they are victims of
A) voluntary unemployment
B) classical unemployment
C) voluntary unemployment
D) Frictional unemployment
Answer
Answer: C) voluntary unemployment
QN14: Policies to reduce unemployment by reducing union power, tax cuts, reductions in unemployment benefit and investment subsidies are examples of ___
A) Keynesian policies
B) Supply-side policies
C) Monetarist policies
D) Classical policies
Answer
Answer: B) Supply-side policies
QN15: If the income tax rate changes from 30% to 40% on incomes over £30,000 and a person’s income is £31,000 then her marginal tax rate is ___
A) 30%
B) 10%
C) 70%
D) 40%
Answer
Answer: D) 40%
QN16: The abolition of income tax would probably ___ the number of workers in employment and ___ the equilibrium rate of unemployment
A) increase, reduce
B) increase, increase
C) reduce, increase
D) reduce, reduce
Answer
Answer: A) increase, reduce
QN17: Possible causes of involuntary unemployment are
A) minimum wage agreements
B) trade unions
C) scale economies
D) insider-outsider distinctions
E) efficiency wages
F) all of the above
Answer
Answer: F) all of the above
QN18: If a worker chooses not to work at the equilibrium wage rate they are involuntarily unemployed
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN19: If British residents want more French francs to purchase more French wine, other things equal, then the equilibrium value of the pound against the French franc will ___
A) rise
B) fall
C) not change
D) fluctuate
Answer
Answer: B) fall
QN20: When the $/£ exchange rate rises the pound ___, and when the $/£ rate falls the pound ___
A) depreciates, appreciates
B) revalues, devalues
C) appreciates, depreciates
D) becomes more expensive, becomes cheaper
Answer
Answer: C) appreciates, depreciates
QN21: When a government follows a fixed exchange rate regime it allows the exchange rate to be determined by market forces
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN22: In a fixed exchange rate regime, the central bank will intervene by ___ pounds to ___ the exchange rate
A) selling, increase
B) buying, reduce
C) selling, reduce
D) buying, increase
E) a and b
F) c and d
Answer
Answer: F) c and d
QN23: A current account deficit means that a country may ___
A) reduce its stock of foreign assets
B) increase its stock of foreign assets
C) increase its savings
D) increase its foreign currency reserves
Answer
Answer: A) reduce its stock of foreign assets
QN24: Under floating exchange rates, a current account deficit must be exactly matched by a capital account surplus
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN25: Starting from a position of internal and external balance, a reduction in aggregate demand will cause a current account ___
A) deficit
B) surplus
C) revaluation
D) devaluation
Answer
Answer: B) surplus
QN26: A rise in the real exchange rate will ___ the competitiveness of the domestic economy
A) increase
B) reduce
C) do nothing to
Answer
Answer: B) reduce
QN27: Within the circular flow of income, an increase in domestic income will tend to increase
A) exports
B) taxes
C) inventories
D) imports
Answer
Answer: D) imports
QN28: Perfect international capital mobility suggests that international funds will be responsive to ___ differentials
A) current account
B) interest rate
C) tax
D) price
Answer
Answer: B) interest rate
QN29: When capital mobility is perfect, interest rate differentials will tend to be offset by ___
A) price differences
B) balance of payments differences
C) current account differences
D) expected exchange rate changes
Answer
Answer: D) expected exchange rate changes
QN30: The current account will differ from trade balance because of interest flows from foreign assets and debts
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN31: With fixed exchange rates and no private capital flows, to correct a balance of payments deficit , the central bank will ___ and ___
A) buy foreign exchange, sell domestic currency
B) sell foreign exchange, buy domestic currency
C) buy foreign exchange, buy domestic currency
D) sell foreign exchange, sell domestic currency
Answer
Answer: B) sell foreign exchange, buy domestic currency
QN32: With fixed exchange rates and no private currency flows, when the central bank buys domestic currency the domestic money supply is ___
A) increased
B) unaffected
C) reduced
Answer
Answer: C) reduced
QN33: In the absence of international capital controls, central banks set ___ to provide the correct incentive for speculators
A) money supply targets
B) incomes policy
C) interest rates
D) inflation targets
Answer
Answer: C) interest rates
QN34: A fixed exchange rate, plus perfect capital mobility ___ the scope for monetary policy
A) enhances
B) undermines
C) encourages
D) facilitates
Answer
Answer: B) undermines
QN35: The competitive advantage from a devaluation is likely to be offset by ___ and ___
A) higher import prices, higher wage increases
B) lower export prices, lower import volumes
C) higher import prices, lower export prices
D) higher wage increases, lower import volumes
Answer
Answer: A) higher import prices, higher wage increases
QN36: Under floating exchange rates, monetary policy is a powerful tool
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN37: Under floating exchange rates, expectations of higher interest rates are likely to cause an ___ of the exchange rate
A) depreciation
B) appreciation
C) fall
D) devaluation
Answer
Answer: B) appreciation
QN38: In the short run, the level of floating exchange rates is determined mainly by ___
A) interest rates
B) competitiveness
C) trade
D) speculation
Answer
Answer: D) speculation
QN39: If one country, with floating exchange rates, has higher inflation than its competitors, we would expect its exchange rate to ___
A) appreciate
B) depreciate
C) revalue
D) be in short supply
Answer
Answer: B) depreciate
QN40: Floating exchange rates are ___ in the short run
A) stable
B) predictable
C) volatile
D) depreciating
Answer
Answer: C) volatile
QN41: Fixed exchange rates permit a country to have permanently higher inflation
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN42: Fiscal policy is weak under floating exchange rates as fiscal expansion ___
A) crowds out imports
B) crowds out public consumption
C) crowds out exports
D) reduces the budget deficit
Answer
Answer: C) crowds out exports
QN43: The main factor affecting the long run path of the UK nominal exchange rate is the growth of world trade
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN44: The main features of the European Monetary system are
A) the ECU
B) currency swap agreement between member countries
C) the exchange rate mechanism
D) all of the above
Answer
Answer: D) all of the above
QN45: In the ERM, each country fixed ___ against each other ERM participant. Collectively the group ___ against the rest of the world
A) a nominal exchange rate, floated
B) a real exchange rate, pegged
C) a purchasing power parity, pegged
D) a real exchange rate, floated
Answer
Answer: A) a nominal exchange rate, floated
QN46: International policy co-ordination allows policy-makers to commit to policies they would otherwise avoid
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN47: The Single European Act committed ___ governments to a ___ in 1992
A) European union, single market
B) Western European, single currency area
C) European Union, single currency area
D) Western European, single market
Answer
Answer: A) European union, single market
QN48: All of the following are benefits of the Single Market except
A) it allows countries to exploit their comparative advantage , more fully
B) firms could more readily exploit economies of scale
C) it intensified competition
D) it is easier to book holidays in member countries
Answer
Answer: D) it is easier to book holidays in member countries
QN49: The Maastricht criteria for joining EMU is that a country must have a high growth rate
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN50: A monetary union means ___, ___ and ___
A) permanently fixed capital movements, floating exchange rates, a fixed structure of interest rates
B) permanently fixed exchange rates, free capital movements, a single interest rate
C) a common currency, a single central bank, common monetary policy
D) a common currency, floating exchange rates, common monetary policy
Answer
Answer: B) permanently fixed exchange rates, free capital movements, a single interest rate
QN51: The Maastricht criteria for entry to the EMU are that applicants should have
A) low inflation
B) low interest rates
C) stable nominal exchange rates
D) budget deficits and government debt under control
E) all of the above
Answer
Answer: E) all of the above
QN52: The UK is a member of the EMU
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN53: In the EMU a country’s competitiveness can change because of ___
A) interest rate adjustment
B) central bank intervention in the forex
C) domestic wage and price adjustment
D) devaluation
Answer
Answer: C) domestic wage and price adjustment
QN54: GDP per head may be an imperfect measure of economic welfare because it excludes ___
A) the value of leisure
B) externalities
C) untraded goods
D) changes in the distribution of income
E) all of the above
Answer
Answer: E) all of the above
QN55: Potential output can be increased by ___ or by ___
A) increasing the use of labour, increasing the use of land
B) increasing the use of capital, increasing the use of labour
C) increasing the use of land, increasing the use of capital
D) increasing the use of all inputs, technical advances
Answer
Answer: D) increasing the use of all inputs, technical advances
QN56: If a production input is in fixed supply, growth is impossible in the long run
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN57: The neoclassical theory of growth identifies the steady state rate of growth as the ___ just sufficient to keep ___ constant while labour grows
A) saving, investment
B) capital per person, productivity
C) labour growth, output
D) investment, capital per person
Answer
Answer: D) investment, capital per person
QN58: In the neoclassical theory of growth, a higher saving rate leads to ___
A) a higher growth rate
B) a fluctuating growth rate
C) a lower growth rate
D) no change in the growth rate
Answer
Answer: D) no change in the growth rate
QN59: The convergence hypothesis states that poor countries grow more slowly than average, but rich countries grow more quickly than average
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN60: Economic growth may depend upon ___ and ___
A) Population size, x-efficiency
B) Population age distribution, education
C) Population growth, technical progress
D) Population growth, education
Answer
Answer: C) Population growth, technical progress
QN61: The zero-growth proposal argues that it is best to aim for zero-growth in measured GNP to avoid environmental costs
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN62: The growth rates of economies tend to converge because ___ is easier when capital per worker is low and because of ___
A) capital-widening, technical innovation
B) capital-widening, catch-up in technology
C) capital-deepening, technical innovation
D) capital-deepening, catch-up in technology
Answer
Answer: D) capital-deepening, catch-up in technology
QN63: The business cycle describes fluctuations in output around the ___
A) trend path of output
B) boom
C) recession
D) short-run fluctuations in output
Answer
Answer: A) trend path of output
QN64: All of the following are parts of the business cycle except ___
A) boom
B) slump
C) recovery
D) acceleration
Answer
Answer: D) acceleration
QN65: The political business cycle arises because politicians interfere with the economy for political advantage
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN66: The theory that explains business cycles by the dynamic interaction of consumption and investment demand is the ___
A) sun spot theory
B) multiplier-accelerator model
C) Solow theory
D) New classical theory
Answer
Answer: B) multiplier-accelerator model
QN67: The multiplier-accelerator model assumes ___ depends on ___
A) consumption, expected future profits
B) investment, interest rates
C) investment, expected future profits
D) stockbuilding, interest rates
Answer
Answer: C) investment, expected future profits
QN68: Real business cycle theory suggests that ___ not important in explaining short-term fluctuations around actual output
A) aggregate supply is
B) aggregate demand is
C) potential output is
D) real variables are
Answer
Answer: B) aggregate demand is
QN69: The impossibility of negative gross investment provides a ___ to fluctuations in ___
A) ceiling, stockbuilding
B) ceiling, capital prices
C) floor, output
D) floor, the capital-output ratio
Answer
Answer: C) floor, output
QN70: Output can exceed demand during the recovery phase as firms restore stocks to their target levels
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN71: Real business cycles are cycles in ___
A) potential output
B) actual output
C) real output
D) international trade
Answer
Answer: A) potential output
QN72: Real business cycle theories suggest that ___ to correct departures from the desired growth path
A) there is a role for fiscal policy
B) there is a role for monetary policy
C) there is a role for supply-side policies
D) there is no case for stabilizing output over the business cycle
Answer
Answer: D) there is no case for stabilizing output over the business cycle
QN73: The business cycle is not transmitted from one country to another through ___
A) private sector imports and exports
B) economic policy
C) the duration of compulsory education
D) labour supply changes
Answer
Answer: C) the duration of compulsory education
QN74: Real business cycle theorists argue that ___ can explain short and long term fluctuations in output
A) imperfect labour markets
B) rational expectations
C) intertemporal decisions of households, firms and government
D) sun spot cycles
Answer
Answer: C) intertemporal decisions of households, firms and government
QN75: Keynesian unemployment causes a fall in the real wage
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN76: International specialization takes place because of ___
A) differences in technology
B) differences in factor endowments
C) scale economies
D) all of the above
Answer
Answer: D) all of the above
QN77: International differences in opportunity costs lead to countries acquiring ___
A) comparative advantage
B) high exchange rates
C) trade barriers
D) trade quotas
Answer
Answer: A) comparative advantage
QN78: If a country does not have an absolute cost advantage in the production of a any good, there is no incentive to trade
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN79: The main cause of different relative costs between countries are ___
A) relative factor competition
B) relative factor mobility
C) relative factor substitution
D) relative factor endowments
Answer
Answer: D) relative factor endowments
QN80: The level of the equilibrium exchange rate offsets international differences in ___
A) comparative advantage
B) absolute advantage
C) opportunity cost
D) relative costs
Answer
Answer: B) absolute advantage
QN81: International trade can never hurt any people
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN82: The imposition of a tariff causes consumption to ___ and imports to ___
A) rise, rise
B) fall, rise
C) fall, fall
D) rise, fall
Answer
Answer: C) fall, fall
QN83: A tariff causes domestic firms to ___ and consumers to ___
A) overproduce, underconsume
B) overproduce, overconsume
C) underproduce, underconsume
D) underproduce, overconsume
Answer
Answer: A) overproduce, underconsume
QN84: Tariffs always distort trade and are never justified
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN85: An optimal tariff is one which reduces imports to the level at which ___ equals ___
A) imports, exports
B) the balance of trade, zero
C) the demand for currency, the supply of currency
D) social marginal cost, social marginal benefit
Answer
Answer: D) social marginal cost, social marginal benefit
QN86: If goods are exported for less than society’s marginal production cost and the marginal benefit to domestic consumers, it is likely that they benefit from ___
A) an import subsidy
B) a quota
C) comparative advantage
D) an export subsidy
Answer
Answer: D) an export subsidy
QN87: Export subsidies do not involve waste
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN88: Economic transition involves high inflation because ___ and ___
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 as source of government revenue
Answer
Answer: D) prices surge from an artificially low level to their equilibrium level, the inflation tax is required as source of government revenue
QN89: Output fell sharply in the transition economies because
A) banks were unable to function
B) there was little corporate control
C) vital infrastructure was missing
D) all of the above
Answer
Answer: D) all of the above
QN90: Most transition economies are seeking membership of the EU
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN91: All of the following represent obstacles to LDC development except
A) resource scarcity
B) low levels of investment
C) low population
D) poor infrastructure
E) poor human capital
Answer
Answer: C) low population
QN92: LDCs often have a comparative advantage in the production of ___
A) primary products
B) intermediate products
C) manufactured products
D) financial services
Answer
Answer: A) primary products
QN93: LDCs are reluctant to pursue development through the export of primary products because of ___ and ___
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
Answer
Answer: D) the downward trend in commodity prices, the volatility of primary products real prices
QN94: Buffer stocks increase price volatility in an unstable market
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN95: Import substitution is the replacement of ___ by domestic production under the protection of ___
A) exports, subsidies
B) exports, patents
C) imports, high tariffs or import quotas
D) imports, subsidies
Answer
Answer: C) imports, high tariffs or import quotas
QN96: If a country has a burden of debt it cannot sustain it can ___
A) reschedule debt
B) get a loan from an international organization
C) default on the loan
D) any of the above
Answer
Answer: D) any of the above
QN97: If an LDC chooses structural adjustment as a strategy for development, it will nationalize its principle industries
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN98: Which of the following events will defintely lead to an increase in the equilbrium interest rate
a. a decrease in the level of output (real GDP)
b. the purchase of government securities by the Bank of Canada
c. an increase in the level of out (real GDP) and an increase the money supply
d. the sale of government securities by the Bank of Canada
Answer
Answer: d. the sale of government securities by the Bank of Canada
QN99: When economists refer to “tight” monetary policy, they mean that the Bank of Canada is taking actions that will
a. increase the demand for money
b. decrease the demand for money
c. expand the supply of money
d. contract the supply of money
Answer
Answer: d. contract the supply of money
QN100: A increase in total production (real GDP) causes the demand for money to ___ and the interest rate to___
a. increasse; increase
b. increase; decrease
c. decrease; decrease
d. decrease; increase
Answer
Answer: a. increasse; increase
