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Macroeconomic Issues and Analysis – MCQs

76 questions. Click to practice.

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1.Why is fiscal policy considered ineffective under floating exchange rate systems when there is fiscal expansion?

2.How do floating exchange rates typically behave over a short period?

3.What is the primary factor influencing the value of floating exchange rates in the short term?

4.Which two factors are most likely to negate the competitive advantage gained from a currency devaluation?

5.When there are no international capital restrictions, what do central banks adjust to create appropriate incentives for speculators?

6.Under a fixed exchange rate system with no private capital movements, how does the central bank respond to a balance of payments deficit?

7.Under conditions of perfect capital mobility, what typically counterbalances interest rate differentials?

8.In the circular flow of income model, what is most likely to rise when domestic income grows?

9.If an economy initially maintains both internal and external equilibrium, what effect will a decrease in aggregate demand have on the current account?

10.Under a fixed exchange rate system, what action does the central bank take to raise the exchange rate?

11.What happens to the value of the pound when the $/£ exchange rate increases, and what occurs when the $/£ exchange rate decreases?

12.During the trough stage of the business cycle, what typically happens to aggregate demand, unemployment, inflation, and the current account balance?

13.At the peak phase of the business cycle, how do aggregate demand, unemployment, inflation, and the current account balance typically behave?

14.If a major automobile importer in Pakistan plans to bring in a large number of cars, how is the exchange rate of the Pakistani rupee likely to be impacted?

15.What is the likely effect on Pakistan's exchange rate if its income levels grow more rapidly than those of most other nations?

16.If Pakistan becomes involved in a conflict in the Middle East, how is the value of its currency likely to change?

17.If the exchange rate shifts from £1 = 100 yen to £1 = 150 yen, assuming all other factors remain constant, how will the price of British products in Japan be affected?

18.What is the term for when a nation brings in more goods and services than it sends out?

19.What is the term for a county's record of cross-border transfers involving shareholdings and bank deposits?

20.What is the term for a country's record of its imports and exports of goods and services?