Posted: May 13th, 2018

Economics Multiple Choice Questions Quiz

1.The demand for money to cover unexpected expenditures and to meet emergencies is known asthe transactions demand for money.the precautionary demand for money.the asset demand for money.the terminal demand for money.Question2 of 30When people want to hold money to make regular planned expenditures, this isthe transaction demand for money.the asset demand for money.the precautionary demand for money.the spending demand for money.Question3 of 30One of the economic costs of holding currency is thatit fulfills no precautionary role.it fulfills no transactions role.it earns no interest income.its real value always increases.Question4 of 30Which of the following is a true statement about the relationship between the price of bonds and the interest rate?The prices of bonds are directly related to the interest rate.The prices of bonds increase when the interest rates rise.The prices of bonds are unrelated to the interest rate.The prices of bonds are inversely related to the interest rate.Question5 of 30The indirect effect of an increase in the money supply is toraise interest rates so people will save more.lower interest rates, which stimulates both investment and consumption spending.put more cash in people’s pockets, thereby increasing aggregate demand.pay off a portion of the public debt.Question6 of 30In order to close a recessionary gap, the Fed woulddecrease the money supply.increase interest rates.sell bonds.increase the money supply.Question7 of 30Suppose that the economy currently has an inflationary gap. The Fed engages in contractionary monetary policy. The impact of contractionary monetary policy will be toincrease short-run aggregate supply, a decrease in prices, and a decrease in real GDP.increase short-run aggregate supply, decrease prices, and increase real GDP.decrease aggregate demand, decrease prices, and increase real GDP.decrease aggregate demand, decrease prices, and decrease real GDP.Question8 of 30When the U.S. dollar appreciates,foreign residents demand more of U.S. goods, and U.S. residents desire to purchase more foreign goods.foreign residents demand more of U.S. goods, and U.S. residents desire to purchase fewer foreign goods.foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase more foreign goods.foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase fewer foreign goods.Question9 of 30Other things being equal, the quantity theory of money suggests that any increase in the money supplycauses a reduction in the demand for money.results in a decrease in the aggregate price level.causes the aggregate level of nominal gross domestic product (GDP) to fall.results in a proportionate increase in the price level.Question10 of 30The interest rate that the Fed charges banks to borrow funds from the Fed is thediscount rate.federal funds rate.money market rate.nominal interest rate.Question11 of 30The tools of monetary policy areopen market operations, the differential between the discount rate and the federal funds rate, and tax rates.open market operations, government spending, and the required reserve ratio.open market operations, the differential between the discount rate and the federal funds rate, and the required reserve ratio.government spending, tax rates, and the required reserve ratio.Question12 of 30The federal funds rate isthe interest rate that is paid on reserves that are held with the Fed.the interest rate at which banks can borrow excess reserves from other banks.the interest rate on bonds that are issued by the federal government.None of the aboveQuestion13 of 30Specialization in trade will be economically efficient if it is based uponnational security needs.absolute advantage.comparative advantage.government regulations.Question14 of 30In order to obtain an efficient allocation of resources worldwide,countries that have a lot of resources should ship resources to countries that do not have a lot of resources.countries that have a lot of resources should not trade since poorer countries cannot compete.each country should produce the good they have a comparative advantage in and then trade.no trade among countries should occur.Question15 of 30An effect of international trade is:the increase in the average price of goods, as the cost of transportation has to be included.the transmission of ideas around the world.only countries that have absolute advantage in producing a good can participate.the United States has a trade surplus.Question16 of 30One reason that U.S. exports of commercial services have increased steadily over the past 25 years is thatEuropean and Asian nations have shown little interest in developing their own commercial services sectors.the United States has made significant investments in new information technologies.the U.S. government owns and operates most of the economy’s service sector.the U.S. economy operates like one big corporation.Question17 of 30A new industry develops, and the government wants to protect it from foreign competition. Which one of the following arguments would appropriately describe this type of protection?National securityCartelizationInfant industryProtecting American jobsQuestion18 of 30When one country dumps some of its products in another country, itincreases the aggregate level of employment in the importing country, thereby depressing that nation’s market wages.also exports new technology to the importing nation, which indirectly boosts the importing nation’s real GDP.sells its products abroad at a price lower than the price in the home market or lower than the cost of production.also exports pollution-causing technologies, which creates environmental hazards in the receiving country.Question19 of 30Free trade policies may lead toa decrease in world output.price increases in world markets.some labor sectors experiencing some short-term job loss.None of the aboveQuestion20 of 30A quota isa tariff that is imposed on goods that are dumped in the country.a law that prevents ecologically damaging goods from being imported into a country.a market-imposed balancing factor that keeps prices of imports and exports in equilibrium.a government-imposed restriction on the quantity of a specific good that can be imported.Question21 of 30Tariffs to limit imports to protect U.S. jobs will alsostimulate exports.limit exports.decrease import prices.reduce domestic production of import-threatened products.Question22 of 30A significant advantage to being a member of a trade bloc ishigher tariff collections from member countries.reduced or eliminated tariffs among member countries.reduced tariff rates only for the largest member countries.None of the above; there is no economic advantage to a trade bloc.Question23 of 30The balance of payments isthe value of goods and services that are bought and sold in the world market.a summary record of a country’s economic transactions with foreign residents and governments.a summary record of a country’s purchases and sales of goods and services in the world market.the value of merchandise goods that are bought and sold in the world market.Question24 of 30Special drawing rights (SDRs) area reserve asset that is created by the International Monetary Fund that countries can use to settle international payment obligations.a liability payment from a branch bank to a nation’s central bank.a country’s surpluses in their fiscal budgets.exchanges of gold between nations.Question25 of 30When political instability is present in another country, the United States can expectan increase in the capital account balance due to an increase in the current account.an increase in the capital account balance due to the movement of assets to the U.S.a decrease in the balance of payments due to a decrease in special drawing rights.a decrease in the balance of payments due to a decrease in the demand for goods and services.Question26 of 30The foreign exchange rate describes thebalance of trade.balance of payments.law of comparative advantage.price of foreign currency in terms of domestic currency.Question27 of 30Changes in which of the following will cause a change in exchange rates?Real interest ratesConsumer preferencesPerceptions of economic and political stabilityAll of the aboveQuestion28 of 30Suppose that a currency’s value in the foreign exchange market is determined solely by market supply and demand without any intervention by the government authority. In this case, the currency hasa fixed exchange rate.a gold standard.a price control in its exchange rate.a floating exchange rate.Question29 of 30Foreign exchange risk isa financial strategy that reduces the change of suffering losses that arise from foreign exchange risk.an exchange rate arrangement in which a country pegs the value of its currency to the exchange value.the possibility that changes in the value of a nation’s currency will result in variations in the market value of assets.active management of a floating exchange rate on the part of a country’s government.Question30 of 30A hedge isa financial strategy that reduces the change of suffering losses that arises from foreign exchange risk.an exchange rate arrangement in which a country pegs the value of its currency to the exchange value.the possibility that changes in the value of a nation’s currency will result in variations in the market value of assets.active management of a floating exchange rate on the part of a country’s government.

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