Q. To prevent the external value of its currency rising the government could:
✅ Correct Answer: (A)
Sell its own currency
International Economics MCQs and Notes
Q. In a floating exchange rate system:
✅ Correct Answer: (B)
The exchange rate should adjust to equate the supply and demand of the currency
Q. Exchange rates are flexible and fiscal policy is held constant. A Contractionary monetary policywill be
✅ Correct Answer: (A)
Reinforced byan open economy.
Q. Exchange rates are flexible and fiscal policy is held constant. An expansionary monetary policywill be
✅ Correct Answer: (A)
Reinforce dbyan open economy.
Q. Ifthe U.S. dollar depreciates against the British pound, what is likely to happen?
✅ Correct Answer: (A)
British people will buy more American goods.
Q. If the dollar depreciates, this likely will cause
✅ Correct Answer: (B)
U.S. aggregate supply to rise in the short run but fall in the longrun.
Q. The Federal Reserve raises interestrates. What happens in the foreign Exchange market?
✅ Correct Answer: (A)
Capital flows into the United States from other countries.
Q. 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 Answer: (D)
The dollar depreciates in value, stimulating exports but curtailing imports.
Q. If there is an increase in the trade deficit, there must be
✅ Correct Answer: (B)
An increase in the capital account.
Q. When was the International Monetary Fund (IMF) set up?
✅ Correct Answer: (D)
1944