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BSP2001 - Macro and International Economics Sem 1 2013/2014

Topic 8

Practice Multiple Choice Questions

1) If a foreigner buys 10000 shares of Singtel stock on the Singapore Stock Exchange,
the transaction will be recorded as _______.
A) a surplus item in the Singapore capital account.
B) a deficit item in the Singapore capital account.
C) a surplus item in the Singapore current account.
D) a deficit item in the Singapore current account.


2) If the domestic real exchange rate is greater than 1, we can expect that _______.
A) goods in the domestic country, on average, are more expensive than goods abroad.
B) goods abroad, on average, are more expensive than goods in the domestic country.
C) the domestic and foreign currencies are at purchasing power parity.
D) the nominal exchange rate should increase.


3) If the dollar price of foreign goods increases, we can expect that _______.
A) both the imports and exports of the domestic country will increase.
B) both the imports and exports of the domestic country will decrease.
C) the imports of the domestic country will decrease.
D) the exports of the domestic country will decrease.


4) Which of the following policy measures CANNOT be used to reduce a current
account deficit?
A) a tariff on imported goods
B) a devaluation of the currency
C) expansionary monetary policy
D) expansionary fiscal policy


5) Under perfect capital mobility, a _______in the domestic interest rate will lead to a
capital _______; resulting in an appreciation of the domestic currency.
A) rise; inflow
B) rise; outflow
C) fall; inflow
D) fall; outflow




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6) From 1980 to 2000, the yen/dollar exchange rate fell from 240 yen/dollar to 102
yen/dollar, while the dollar/pound exchange rate fell from 2.22 dollars/pound to 1.62
dollars/pound. As a result,
A) the dollar appreciated relative to the yen, but depreciated relative to the pound.
B) the dollar depreciated relative to the yen, but appreciated relative to the pound.
C) the dollar appreciated relative to both the yen and the pound.
D) the dollar depreciated relative to both the yen and the pound.


7) Under a fixed exchange rate regime, _______will cause a larger rise in GDP due to
accommodation by _______.
A) an expansionary monetary policy; sterilization.
B) a contractionary monetary policy; sterilization.
C) an expansionary fiscal policy; monetary policy.
D) a contractionary fiscal policy; monetary policy.


8) If the purchasing power parity exchange rate rises 2%, domestic inflation is 3%, and
foreign inflation is 1%, what is the percent change in the nominal exchange rate?
A) 6%
B) 4%
C) 2%
D) 0%


9) An increase in the marginal propensity to import will cause the IS curve to _______.
A) shift parallel to the right.
B) shift parallel to the left.
C) become steeper.
D) become flatter.


10) A country has an internal and external balance when _______.
A) it has a trade surplus and a budget surplus.
B) the trade balance is zero and the government budget is balanced.
C) the trade balance and the unemployment rate are both zero.
D) the trade balance is zero and output is at the full-employment level.





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Solution:

1) A
2) B
3) C
4) D
5) A
6) B
7) C
8) B
9) C
10) D