PPSC Economics Topic 5 International Economics With Answers

PPSC Economics Topic 5 International Economics

Sr. # Questions Answers Choice
1 If export's are a constant proportion of GNP such that E = 18 GNP, find the level of imports that would represent a zero trade balance when GNP = 10,000 180 555 1,800 5,555
2 Prohibiting a trade between two people Will promote economic efficiency Probably Will inhibit productive efficiency Might be necessary if resources are to be put to their most highly valued uses Will have no effect on other persons.
3 Trade based on comparative advantage assures that. Only the strongest suvrive Some people are rich and others are poor Each item is produced using the least amount of time needed to produce it Each item is produced at as low a cost possible in terms of other things given up
4 according to factor price equalization theorem, if country A is labor abundant then once trade opens. Wages and rents should fall in A Wages and rents should rise in A Wages should rise and rents should fall in A Wages should fall and rents should rise in A
5 Small nations with more than one major trading partner lend to peg the value of their currencies to. gold silver a single currency a basket of currencies
6 Small nations whose trade and financial relationships are mainly with a single partner tend to utilize. Pegged exchange rates Freely floating exchanged rates Managed floating exchange rates Crewing exchange rates.
7 Which exchange rate system does not require monetary reserves for official exchange rate intervention. Floating exchange rates Pegged exchange rates Managed floating exchange rates Dual exchange rates
8 Which exchange rate mechanism calls for frequent redefining of the par value by small amounts to remove payments disequilibrium. Dual exchange rates Adjustable pegged exchange rates Managed floating exchange rates Crawling pegged exchange rates.
9 Which exchange rate mechanism is intended to insulates the balance of payments from short term capital movements while providing exchange rate stability for commercial transactions. Dual exchange rates Managed floating exchange rates Adjustable pegged exchange rates Crawling pegged exchange rates.
10 The exchange rate system that best characterizes the present international monetary arrangement used by industrialized countries is. Freely fluctuating exchange rates Adjustable pegged exchange rates Managed floating exchange rate. Pegged or fixed exchange rates
11 The balance of trade can only worsen if income_______ relative to absorption Increases Decreases Does not change None of the above
12 The balance of trade can only worsen if income________ relative to absorption Increases Decreases Adjustment mechanism Currency contract period
13 the_____________ analysis considers the ability of domestic and foreign prices to adjust to devaluation in the short run. Pass through Absorption Adjustment mechanism currency contract period
14 The asset market approach is most helpful in explaining. Why exchange rate remain quite stable Why government change their money supplies Long term exchange rate movements Short term exchange rate movements
15 Exchange rate overshooting often occur because. Domestic prices adjust slowly to shifts in demand Military spending increases during military's confects Elasticities are smaller in the long run than the short run Elasticities are smaller in the short run than the long run.
16 When the price of foreign currency the exchange is above the equilibrium level. an excess supply of that currency exists in the foreign exchange market. an excess demand for that currency exists in the foreign exchange market The supply of foreign exchange shifts outward to the right the supply of foreign exchange shifts backward to the left
17 When the price of foreign currency exchange is above the equilibrium level. An excess demand for that currency exists in the foreign exchange market. An excess supply of the currency exists in the foreign exchange market The demadn for foreign exchange shifts outward to the right The demand for foreign exchange shifts backward to the left.
18 The relationship between the exchange rate ad the prices of tradable goods is known as the. Purchasing power parity theory Asset markets theory Monetary theory Balance of payments theory
19 currency speculation is__________ if speculators bet against market forces that cause exchange fluctuations, thus moderating such fluctuations. Destabilizing Stabilizing Inflationary Deflationary
20 Investors engage in ____ when they move funds into foreign currencies in order to take advantage of interest rates abroad the are higher than domestic interest rates. Currency arbitrage Interest arbitrage Short positions Long positions
Download This Set

Is this page helpful?