1. Which of the following is NOT a type of offshore bank?
Correct : D. Investment bank
2. Which of the following is an example of "Eurocurrency" trade?
Correct : C. Trade of dollars in Europe
3. What are "Eurobanks"?
Correct : A. Banks that accept Eurocurrency deposits
4. Which of the following is NOT true about the IBFs?
Correct : C. They are only investment banks
5. What institution reduces the risk of bank runs in the U.S.?
Correct : A. FDIC
6. The Basel Committee:
Correct : C. Provides supervision of the banks trading internationally.
7. Which of the following is true regarding the capital market development since the 1970s?
Correct : C. The extent of the international portfolio diversification was smaller than theory predicts.
8. Which one of the following statements is the most accurate?
Correct : B. A devaluation occurs when the central bank raises the domestic currency price of foreign currency, E, and a revaluation occurs when the central bank lowers E.
9. Which one of the following statements is the most accurate?
Correct : C. Depreciation is a rise in E when the exchange rate floats, and devaluation is a rise in E when the exchange rate is fix
10. Which one of the following statements is the most accurate?
Correct : B. Appreciation is a fall in e when the exchange rate floats, and revaluation is a fall in e when the exchange rate is fixed.
11. Which one of the following statements is the most accurate?
Correct : C. Devaluation reflects a deliberate government decision, and depreciation is an outcome of government actions and market forces acting together.
12. Which one of the following statements is the most accurate?
Correct : B. Revaluation reflects a deliberate government decision, and appreciation is an outcome of government actions and market forces acting together.
13. Under fixed exchange rate, which one of the following statements is the most accurate?
Correct : B. Devaluation causes a rise in output, a rise in official reserves, and an expansion of the money supply.
14. Under fixed exchange rate, which one of the following statements is the most
accurate?
Correct : A. Devaluation causes a rise in output.
15. Under fixed exchange rate, which one of the following statements is the most
accurate?
Correct : C. Devaluation causes an expansion of the money supply.
16. The main reason(s) why governments sometimes chose to devalue their currencies is (are):
Correct : D. All of the above.
17. At negative nominal interest rates, which one of the following statements is the most accurate?
Correct : B. People would find money strictly preferable to bonds and bonds therefore would be in excess supply.
18. Which of the following exchange rate policies uses a target exchange rate, but allows
the target to change?
Correct : C. crawling peg
19. Which among the following could be said to be an 'Open Economy'?
Correct : A. A nation that follows the doctrine of Free-market and Laissez-faire economics
20. The records of exports and imports in goods and services and transfer payments is known as
Correct : A. Current account
21. The ratio of foreign rates to domestic rates measured in the 'same' currency is known as:
Correct : A. Real exchange rate
22. Which among the following is taken as the real measure of a country's international competitiveness?
Correct : A. Real exchange rate
23. When the exchange rate is determined by the market forces of demand and supply, it is known as :
Correct : D. Floating exchange rate
24. The Gold Standard was prevalent in the world from:
Correct : C. From 1870 till First World War
25. An increase in foreign income generally leads to:
Correct : A. increased exports, increased domestic output
26. What records a country's transactions (made by individuals, firms and government bodies.) with the rest of the world?
Correct : D. Balance of Payments or BoP
27. Under a fixed exchange rate system, a contractionary fiscal policy leads to a worsening in a nation’s balance-of-payments position if the resulting:
Correct : C. Capital-account deficit more than offsets the trade-account surplus
28. Given a system of floating Exchange rates, falling income in the United States would
trigger:
Correct : D. A decrease in the demand for imports and a decrease in the demand for foreign currency
29. Under a system of floating Exchange rates, relatively low productivity and high inflation rates in the United States result in:
Correct : A. An increase in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciación in the dollar
30. Which example of market expectations causes the dollar to appreciate against the yen?
Expectations that the U.S. economy will have:
Correct : B. Higher future interest rates than Japan
31. Starting at the point of equilibrium between the money supply and the money demand, an increase in the domestic money supply causes the value of the home currency to:
Correct : A. Depreciate relative to other currencies
32. An Exchange rate is said to __________ when its short-run response to a change in market
Fundamentals is greater than its long-run response. a
Correct : A. Overshoot
33. Concerning exchange-ratedetermination, “market fundamentals” include all of the Following except:
Correct : C. Speculative opinión about future Exchange rates
34. In the short run, Exchange rates respond tomarketforcessuch as:
Correct : B. Expectations of future Exchange rates
35. Long-run Exchange ratemovements are governed by all of the following except:
Correct : D. Interest rate levels
36. That identical godos should cost the same in all nations, assuming tis costless to ship godos between nations and there are no barriers to trade, is a reflection of the:
Correct : B. Law of one price
37. The quantity of dollars supplied to the foreign Exchange market would increase if, other
things remaining equal:
Correct : A. Incomerises in Canada
38. The Gold Standard was prevalent in the world from:
Correct : C. From 1870 till First World War
39. When was the International Monetary Fund (IMF) set up?
Correct : D. 1944
40. If there is an increase in the trade deficit, there must be
Correct : B. An increase in the capital account.
41. To financelarge U.S. federal Budget deficits, the Federal Reserve increases the money supply. This leads to a surplus of dollars world wide. What happens to the U.S. dollar and trade?
Correct : D. The dollar depreciates in value, stimulating exports but curtailing imports.
42. The Federal Reserve raises interestrates. What happens in the foreign Exchange market?
Correct : A. Capital flows into the United States from other countries.
43. If the dollar depreciates, this likely will cause
Correct : B. U.S. aggregate supply to rise in the short run but fall in the longrun.
44. Ifthe U.S. dollar depreciates against the British pound, what is likely to happen?
Correct : A. British people will buy more American goods.
45. Exchange rates are flexible and fiscal policy is held constant.
An expansionary monetary policywill be
Correct : A. Reinforce dbyan open economy.
46. Exchange rates are flexible and fiscal policy is held constant. A Contractionary monetary policywill be
Correct : A. Reinforced byan open economy.
47. In a floating exchange rate system:
Correct : B. The exchange rate should adjust to equate the supply and demand of the currency
48. To prevent the external value of its currency rising the government could:
Correct : A. Sell its own currency
49. A fall in the external value of a currency:
Correct : C. May lead to a movement along the demand curve for a currency
50. Which of the following is NOT an argument for a country allowing its currency to float freely?
Correct : C. It gives greater certainty to firms involved in trade in terms of future revenues.
51. Starting from a position of internal and external balance, a reduction in aggregate demand will cause a current account _____________
Correct : B. surplus
52. A rise in the real exchange rate will ____________ the competitiveness of the domestic economy
Correct : B. reduce
53. Within the circular flow of income, an increase in domestic income will tend to increase
Correct : D. imports
54. Perfect international capital mobility suggests that international funds will be responsive to _____________ differentials
Correct : B. interest rate
55. When capital mobility is perfect, interest rate differentials will tend to be offset by ________
Correct : D. expected exchange rate changes
56. Trade In differentiated products refers to
Correct : A. intra industry trade
57. The terms of trade of developing countries have a secular tendency to
Correct : B. deteriorate
58. The opportunity cost theory assumes that
Correct : D. non of the above
59. If a nation gains from trade its consumption point is
Correct : C. above the ppc
60. Given below is a table whowing the maximum amount of wheat and cloth that the U
K and U S could produce if they fully utilize all the factors of production with the best technology available indicate the comparative advantage of U K and U S. U K U S Bushels of wheat 50 120 Meters of Cloth 150 80
Correct : A. us have comparative advantage in cloth and u k have comparative advantage in wheat
61. If a nations terms of trade is ½ its trade partners terms of trade is
Correct : B. 2
62. The H O theory postulates that as a result of trade the differences in factor prices
between nations
Correct : A. diminishes
63. Leontiff paradox refers to the result that the U S
Correct : D. import substitutes are more capital intensive than u s exports
64. The Exchange rate is kept the same in all parts of the market through
Correct : A. exchange rate arbiterage
65. Hedcging refers to
Correct : B. covering foreign exchange risk
66. If { } > { } when K= capital and L= labour, and A and B are countries then
Correct : B. counry a is capital abundant
67. If { } > { } when K= capital and L= labour, and A and B are countries then
Correct : B. in counry a relative price of capital is low
68. In Autarchy a nations PPC also shows its
Correct : A. consumption function
69. Opportunity cost theory
Correct : C. is a reconstruction of the recardian theory in terms of alternative cost.
70. The paradox that Growth can make a country worse off is termed as
Correct : C. immiserising growth
71. “Free trade between two countries in H O model will equalize relative factor prices
provided there is incomplete specialization.” This is
Correct : A. the factor price equalization theorem
72. The absolute slope of a concave PPC is given by
Correct : B. the marginal rate of transformation
73. If { } > { } when K= capital and L= labour, Pk is price of capital and Pl is price
of labour and A and B are countries then
Correct : B. counry a is capital abundant
74. Devaluation works best when
Correct : B. foreign demad for exports is is elastic
75. BOP includes
Correct : D. all the above
76. international trade refers to trade between
Correct : B. two countries
77. The trade theory that states that nations should accumulate financial wealth, usually
in the form of gold, by encouraging exports and discouraging imports is called
Correct : D. mercantilism.
78. Which among the following are the central themes of Mercantilism?
Correct : D. all the above.
79. “An Enquiry in to the nature and causes of Wealth of Nations” is written by
Correct : D. non of the above
80. Adam Smith identified the basic reason for trade between two nations as
Correct : A. the difference in absolute advantage
81. Theory of Absolute advantage is
Correct : C. critique of merchantalism
82. The Absolute advantage theory indicates that a country should engage in the
production and exchange of those commodities where it has
Correct : B. an absolute advantage
83. The ability to produce more of a good or service than competitors, using the same
amount of resources is
Correct : A. a comparative advantage
84. Which among the following are the major assumptions of Absolute advantage
theory?
Correct : D. all the above.
85. Absolute advantage theory assumes
Correct : D. all the above
86. The principle of comparative advantage was first introduced by
Correct : A. david ricardo
87. The ability of a firm or individual to produce goods and/or services at a lower
opportunity cost than other firms or individuals.
Correct : C. comparative advantage
88. Major assumptions of the theory of Comparitive advantage are
Correct : D. all the above.
89. The ‘Reciprocal Demand Theory’ in International Trade can be attributed to
Correct : C. j s mill
90. The curve that shows howmuch of its import commodity a nation requires in
exchange for various quantities of its export commodity is
Correct : D. offer curev
91. Reciprocal Demand Curve is another name for
Correct : D. offer curev
92. The Reciprocal Demand theory was put into graphic form by
Correct : C. alfred marshall and f.y. edgeworth
93. The amount of commodity a nation is willing to give up to get an additional unit of
another commodity and still remain on the same indifference curve is known as
Correct : A. marginal rate of substitution
94. ------------theory states that countries which are rich in labour will export labour intensive goods and countries which are rich in capital will export capital intensive
goods
Correct : A. the heckscher ohlin theorem
95. Which among the following is NOT an assumption of H-O Theorem
Correct : B. there is no perfect competition in both commodity and factor markets. all production functions are hertogenious. production function is subject to increasing or decreasing returns to scale.
96. Which among the following is an assumption of H-O Theorem
Correct : A. each commodity that a nation produce differs in factor intensity. trade is free i.e. there are no trade restrictions in the form of tariffs or non-tariff barriers.
97. The HO theory deals with which type of trade?
Correct : A. intra industry trade
98. The basis for mutually advantageous trade in H O theory is
Correct : C. economies of scale
99. Trade in differentiated products are also called
Correct : D. inter industry tarde
100. Which among the following are the major limitations of the H O theorem?
Correct : A. it explains only a part of the world trade as it ignores trade in differentiated products.