Economics Final Quiz, Quizzes of Economics

Download Economics Final Quiz and more Quizzes Economics in PDF only on Docsity! 1. A decade ago Brazil had rapid growth, but now its economy is experiencing a slowdown with investment falling and inventories increasing. Business and consumer confidence has fallen (Source: BBC News, August 2014). Which of the following best describes the effect of the fall in investment and consumer confidence in Brazil a) Increase in aggregate expenditure and hence rise in AD eventually leading to decrease in potential GDP b) There is a recessionary gap which is causing the economy to operate above potential GDP c) There is a recessionary gap which is causing the economy to operate below the potential GDP d) Decline in imports eventually lowering AD and leading to decrease in potential GDP 2. Taxes rise by $70 million and the MPS = 0.37. By how much the aggregate demand needs to change in order to close the output gap a) 119 million b) 134 million c) 143 million d) 117 million 3. Which of the following is an example of an automatic stabilizers a) When output increases tax revenues increase because households’ incomes and firms revenues increase. b) When output decreases and unemployment rises the government expenditure rises through additional fiscal stimulus c) When output increases and unemployment falls the government follows a contractionary policy to combat inflation d) All of the options 4. When there is crowding out, expansionary fiscal policy reduces the impact on the AD of the economy because a) Governments borrowing increases the supply of funds available to the private sector for investments b) Government’s lending increases the supply of funds available to the private sector for investments c) Government’s lending reduces the supply of funds available to the private sector for investments d) Governments borrowing reduces the supply of funds available to the private sector for investments 5. Which of the following is true about quantitative easing from 2007-2017 a) Large scale asset sale programs conducted by the federal reserve b) Contracted the size of the Feds balance sheet by 450% c) A 350% decrease in the monetary base d) A 350% increase in the monetary base 6. An open market purchase of securities from a commercial bank by the Fed of $200 million results in a) Decrease in Fed’s assets by $200 million b) Increase in Fed’s liabilities by $200 million c) Increase in commercial bank’s assets by $400 million d) Increase in commercial bank’s liabilities by $200 million 7. In country X the currency drain ratio is 22% of the deposits. The required reserve is 3% of the deposits and the excess reserves is 1% of the deposits. The quantity of money is 160 billion. Calculate the money multiplier and the monetary base in country X a) 4.69, 34.11 billion b) 3.69, 34.11 billion c) 3.57, 36.21 billion d) 4.21, 35.32 billion 8. An open market sale of securities by the Fed worth $600 million leads to the following a) Decrease in liabilities of a commercial bank by $600 million b) Increase in assets of a commercial bank by $200 million c) Decrease in assets of a commercial bank by $200 million d) Increase in liabilities of the central bank by $600 million 9. The table below shows the short run AD and the AS schedule of Hawaii Island in billions of 2009 dollars. The potential GDP (natural rate of output) of this island is $600 billion. Which of the following is true? a) The economy is experiencing a recessionary gap of -9.09% b) The economy is experiencing a inflationary gap of 7.89% c) The economy is experiencing a recessionary gap of -8.09% d) The economy is experiencing a inflationary gap of 9.09% Price Level ($) Aggregate Demand Aggregate Supply 100 600 510 110 575 545 120 550 550 130 525 560 b) ToT increased from Jan to Feb implying that the country can get fewer imports for the same amount of exports c) ToT decreased from Jan to Feb implying that the country can get more imports for the same amount of exports d) ToT increased from Jan to Feb implying that the country can get more imports for the same amount of exports 6. Suppose the world price of rice is 40 cents a kg and the equilibrium price of rice in China is 60 cents a kg a) China has comparative advantage in rice and under free trade will export rice b) China does not have comparative advantage in rice and under free trade will export rice c) China has comparative advantage in rice and under free trade will import rice d) China does not have comparative advantage in rice and under free trade will import rice 7. If the federal funds rate is as high as the discount rate which of the following holds true a) The commercial banks can demand infinite amount of reserves from the Fed b) The Federal Reserve can supply an infinite amount of reserves at such a high rate c) The demand for reserves will depend on the federal funds rate: negative relationship between the federal funds rate and the demand for reserves d) The demand for reserves and the federal funds rate independent of each other 8. Which of the following are the reasons for exchange rate to be the primary monetary policy instrument for Singapore a) Small economy with no natural resources b) High Degree of Openness to trade c) Small economy with restricted capital flows d) Small Economy with high savings rate 9. From the table below choose the trade direction Output per worker in a day Country Tobacco Coffee Colombia 3 2 Philippines 4 10 a) Philippines exports coffee and Colombia exports tobacco b) Colombia exports coffee and Philippines exports tobacco c) Colombia exports coffee and Philippines imports coffee d) Philippines imports coffee and Colombia imports coffee 10. Which of the following are benefits of international trade a) Reduces market power of some firms b) Trade restricts flow of ideas and technology around the world c) Increases variety – more choice for consumers d) Causes domestic job losses 11. Which of the following is true regarding the derived demand channel of controlling CPI inflation in Singapore a) A strong NEER keeps the import prices low and facing pressure from cheaper imports domestic prices are stable b) A strong NEER keeps the export prices to the rest of the world high which moderates the external demand for domestic goods and services c) A strong NEER keeps the export prices low and facing pressure from cheaper exports domestic prices are stable d) A strong NEER keeps the export prices to the rest of the world high which increases the external demand for domestic goods and services and subsequently increases the pressure on domestic incomes and prices 12. Under the “BBC” system, which of the following corresponds to the “Crawl” a) The exchange rate is managed in such a way so that it mitigates fluctuations of international foreign exchange markets b) The trade-weighted S$ is allowed to float so that it provides flexibility in managing the exchange rate c) The policy band itself is adjustable which prevents misalignment in the currency d) All the options 13. If domestic price is less then the world price for a good, then which of the following is true a) The country exports that good b) With trade the consumer surplus falls and the producer surplus rises c) The country imports the good d) With trade the consumer surplus rises and the producer surplus falls Quiz 4 1. Illegal imposition of tariffs by one country on another can lead to which of the following a) The country facing the tariffs can be the complainant to the WTO and the imposing country could bear financial penalties and will have to realign trade policies following WTO’s set rules and regulations b) The country imposing the tariffs can be the complainant to the WTO and the tariffs facing country could bear financial penalties and will have to realign trade policies following WTO’s set rules and regulations c) The country facing the tariffs can be the complainant to the WTO and the imposing country could bear financial rewards and will have to realign trade policies following WTO’s set rules and regulations d) The country facing the tariffs can be the complainant to the WTO and the imposing country could bear financial penalties and can block the dispute settlement body’s final decision 2. Tariff rates have significantly declined from 1990’s to post 2015. Which of the following is a possible cause and effect a) A significant macro evidence shows that there is a positive correlation between freer trade and economic growth and hence emergence of several free trade areas to facilitate smoother trade between the member countries b) A significant macro evidence shows that there is a negative correlation between freer trade and economic growth and hence emergence of several free trade areas to facilitate smoother trade between the member countries c) A significant macro evidence shows that there is a positive correlation between freer trade and economic growth and hence emergence of restricted trade between countries to save domestic jobs d) A significant macro evidence shows that there have been several trade wars/conflicts between trading partners to save domestic jobs hence emergence of free trade areas to promote smoother trade 3. Which of the following is true for most developing countries a) A Low Savings Rate insufficient to support domestic investments -> not sufficient GDP to finance domestic consumption/investment -> higher demand for imports and lack of sufficient exports -> higher trade surplus -> more capital outflow b) A low savings rate insufficient to support domestic investments -> sufficient GDP to finance domestic consumption/investment -> higher demand for imports and insufficient exports -> lower trade deficit -> more need for foreign capital c) A low savings rate insufficient to support domestic investments -> sufficient GDP to finance domestic consumption/investment -> lower demand for imports and sufficient exports -> higher trade deficit -> lesser need for foreign capital d) A Low Savings Rate insufficient to support domestic investments -> not sufficient GDP to finance domestic consumption/investment -> higher demand for imports and lack of sufficient exports -> higher trade deficit -> more need for foreign capital 4. The role of WTO is a) To boost economic cooperation amongst countries b) Dispute Settlement c) Oversight of monetary policies d) Acts as a lender of credit 5. Which of the following was the cause and consequence of the US-China trade war a) A widespread imposition of tariffs on billions of dollars of Chinese imports leading to higher cost of production for the US based firms restricting wage hikes, production expansion, consequent job losses b) A widespread imposition of tariffs on billions of dollars of Chinese imports leading to a lower cost of production for the US based firms enhancing wage expansion and job creation in the US and China c) A widespread imposition of tariffs on billions of dollars of Chinese imports leading to a retaliation by China through imposition of reverse tariffs on Chinese imports of agricultural products from the US d) A widespread imposition of tariffs on billions of dollars of Chinese imports leading to a retaliation by China by imposition of tariffs on Chinese exports of agricultural products to the US 6. Which of the following is true about the relationship between domestic interest rates and the net capital inflow a) Higher the domestic interest rates, more attractive are the domestic assets and capital inflow > capital outflow b) Higher the domestic interest rates, less attractive are the domestic assets and capital inflow < capital outflow