Open Economy Macroeconomics Test

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Open Economy Macroeconomics Test - 1

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Weekly Quiz Competition

Question 1
1 / -0.25

The foreign exchange rate of a country is the

A
price of a foreign currency in terms of the domestic currency

B
price of a foreign good in terms of the domestic good

C
price of a foreign factor in terms of the domestic factor

D
price of a foreign trade in terms of the domestic trade

Solution

Exchange rates are defined as the price of one country 's currency in relation to another country 's currency .
Question 2
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A source of supply of foreign exchange is

A
Imports

B
Donations given

C
Exports

D
Gifts

Solution

The supply of foreign exchange comes through exports of goods and services.
Question 3
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Foreign exchange means

A
US Dollars

B
Any currency

C
Any currency other than the domestic currency

D
Domestic currency

Solution

Foreign exchange is an institution or system for dealing with the currencies of other countries .
Question 4
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Balance of payment Accounts is a

A
Systematic record of all economic transactions between the residents of a country

B
Systematic record of all receipts between the residents of a country and abroad

C
Systematic record of all expenditures between the residents of a country and abroad

D
Systematic record of economic transactions between the residents of a country &abroad

Solution

The balance of payments (BOP) is the method by which countries measure all of the international monetary transactions within a certain period .
Question 5
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A source of demand for foreign exchange is

A
Smuggle of goods &services

B
Export of goods &services

C
Brokerage of goods &services

D
Import of goods &services

Solution

The source of demand for foreign exchange is Imports of goods and services from the rest of the world.
Question 6
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A deficit in balance of trade indicates

A
That the imports of good are less than the exports

B
That the imports of good are equal to the exports

C
That the imports of good are greater than the exports

D
None of the above

Solution

A trade deficit isan economic measure of international trade in which a country 's imports exceeds its exports. A trade deficit represents an outflow of domestic currency to foreign markets. It is also referred to as a negative balance of trade (BOT).
Trade Deficit = Total Value of Imports –Total Value of Exports
Question 7
1 / -0.25

Fixed exchange rate is

A
is fixed by the businesses in an economy

B
is fixed by the Government in an economy

C
is fixed by the foreign exchange market

D
is fixed by the anybody in an economy

Solution

A fixed or pegged rate is determined by the government through its central bank . The rate is set against another major world currency (such as the U.S. dollar, euro, or yen).
Question 8
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Flexible exchange rate is

A
Fixed

B
Determined

C
Ordered

D
Can ’t say

Solution

The flexible rate of exchange is the rate that is determined by the supply-demand forces in the foreign exchange market .
Question 9
1 / -0.25

Flexible exchange rate is determined by

A
Flexible exchange rate is determined by

B
Market forces of demand and supply

C
Supply of foreign exchange

D
Demand for foreign exchange

Solution

The Flexible exchange rates can be defined as exchange rates determined by global supply and demand of currency. In other words, they are prices of foreign exchange determined by the market, that can rapidly change due to supply and demand, and are not pegged nor controlled by central banks.
Question 10
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Point out a merit of fixed exchange rate

A
Ensures supply of the fixed exchange rate

B
Ensures demand for the fixed exchange rate

C
Ensures stability of the fixed exchange rate

D
None

Solution

Prevents Speculation in foreign exchange market: Another important merit of fixed exchange rate system is that it does away with speculation in foreign exchange markets. The advocates of fixed exchange rate system points out that the flexible and unstable exchange rate encourages speculation in foreign exchange market.

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Open Economy Macroeconomics Test - 1

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Open Economy Macroeconomics Test - 1

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Question 1

price of a foreign currency in terms of the domestic currency

price of a foreign good in terms of the domestic good

price of a foreign factor in terms of the domestic factor

price of a foreign trade in terms of the domestic trade

Solution

Question 2

Imports

Donations given

Exports

Gifts

Solution

Question 3

US Dollars

Any currency

Any currency other than the domestic currency

Domestic currency

Solution

Question 4

Systematic record of all economic transactions between the residents of a country

Systematic record of all receipts between the residents of a country and abroad

Systematic record of all expenditures between the residents of a country and abroad

Systematic record of economic transactions between the residents of a country &abroad

Solution

Question 5

Smuggle of goods &services

Export of goods &services

Brokerage of goods &services

Import of goods &services

Solution

Question 6

That the imports of good are less than the exports

That the imports of good are equal to the exports

That the imports of good are greater than the exports

None of the above

Solution

Question 7

is fixed by the businesses in an economy

is fixed by the Government in an economy

is fixed by the foreign exchange market

is fixed by the anybody in an economy

Solution

Question 8

Fixed

Determined

Ordered

Can ’t say

Solution

Question 9

Flexible exchange rate is determined by

Market forces of demand and supply

Supply of foreign exchange

Demand for foreign exchange

Solution

Question 10

Ensures supply of the fixed exchange rate

Ensures demand for the fixed exchange rate

Ensures stability of the fixed exchange rate

None

Solution

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