Q. A fall in the value of the pound is likely to decrease spending on imports if:
✅ Correct Answer: (A)
The price elasticity of demand for imports is price elastic
International Economics MCQs and Notes
Q. The supply of pounds to the currency market will be upward sloping if:
✅ Correct Answer: (C)
The demand for imports into the UK is price elastic
Q. If the value of the pound in terms of other currencies rises:
✅ Correct Answer: (D)
The spending on UK exports in foreign currency will fall if demand for UK exports is price elastic
Q. If the value of the pound in other currencies is strong, then other things being equal:
✅ Correct Answer: (B)
The price of UK products abroad in foreign currency will rise
Q. If there were a balance of payments deficit then in a floating exchange rate system:
✅ Correct Answer: (A)
The external value of the currency would tend to fall
Q. The balance of payments equals:
✅ Correct Answer: (C)
A measure of the value of economic transactions between residents of a country and the rest of the world
Q. You have an opportunity to invest in Australia at an interest rate of 8%. Moreover, you expect the Australian dollar (A$) to appreciate by 2%. Your effective return from this investment is:
✅ Correct Answer: (B)
10.16%.
Q. If interest rate parity holds, then the one-year forward rate of a currency will ______ the predicted spot rate of the currency in one year according to the international Fisher effect.
✅ Correct Answer: (C)
equal to
Q. If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold:
✅ Correct Answer: (A)
the value of the euro would often appreciate against the dollar.
Q. According to the IFE, if British interest rates exceed U.S. interest rates:
✅ Correct Answer: (B)
the British pound will depreciate against the dollar.