Free Practice Quiz Question List

Open-Economy Macroeconomics: Trade, Finance, and Exchange Rates Online Quiz Questions

Use this free practice quiz with 20 questions to review Open-Economy Macroeconomics: Trade, Finance, and Exchange Rates, test your knowledge, and prepare for your next test or exam.

20 questions

True or false

1 point

True or false: A country can gain from international trade even if it has an absolute disadvantage in producing every good.

A
True
B
False

Choose one

1 point

What is the most direct effect of imposing a tariff on an imported good, holding other factors constant?

A
Domestic consumers buy more and imports increase.
B
Domestic consumers buy less and imports decrease.
C
Domestic consumers buy less but imports increase.
D
Domestic producers supply less and imports increase.

Fill in the blank

1 point

Complete the statement: In addition to goods and services, the current account records income and income.

Written response

1 point

What is the standard term for an investment that gives an investor a lasting interest or significant control in a foreign business?

True or false

1 point

True or false: The international investment position measures transactions during a period, while the balance of payments measures the stock of foreign assets and liabilities at a particular date.

A
True
B
False

Choose one

1 point

Foreign demand for a country's exports rises. In the foreign-exchange market for that country's currency, what is the most likely result?

A
It shifts supply of the domestic currency right and causes depreciation.
B
It shifts supply of the domestic currency left and causes appreciation.
C
It shifts demand for the domestic currency right and causes appreciation.
D
It shifts demand for the domestic currency left and causes depreciation.

Fill in the blank

1 point

Complete the statement: If domestic investment exceeds national saving, net exports are , and the country tends to attract .

Written response

1 point

Using the production figures in the example, the United States can produce 10 units of wheat or 5 units of coffee per worker. What is the opportunity cost of 1 unit of wheat, measured in coffee units?

Choose one

1 point

What distinguishes an import quota from a tariff when the quota restricts imports and raises the domestic price?

A
It automatically gives all additional revenue to the government.
B
It creates quota rents for holders of import rights.
C
It lowers the domestic price below the world price.
D
It increases the quantity imported without affecting price.

Choose all

1 point

Select all effects that tend to follow when a country's currency appreciates, holding other factors constant.

A
Domestic exports tend to fall.
B
Domestic imports tend to rise.
C
Domestic net exports tend to rise.
D
Aggregate demand tends to shift left through lower net exports.

Choose all

1 point

Under a flexible exchange-rate system, which effects tend to follow expansionary monetary policy? Select all correct answers.

A
Domestic interest rates tend to fall.
B
Capital may flow abroad.
C
The domestic currency tends to appreciate.
D
Net exports tend to increase.

Choose one

1 point

Under a fixed exchange-rate system, what must a central bank do to maintain the official exchange rate?

A
It must allow the exchange rate to adjust freely after every policy action.
B
It must buy or sell foreign currency to maintain the official rate.
C
It must prohibit all international capital flows.
D
It must balance the government budget before changing interest rates.

True or false

1 point

True or false: A trade deficit does not necessarily mean that an economy is performing poorly.

A
True
B
False

Open ended

1 point

Explain how international trade and finance can promote long-run economic growth in an open economy, and analyze the main risks that openness creates. Include specific mechanisms and at least one way an economy can reduce those risks.

Choose one

1 point

The United States can produce 10 units of wheat or 5 units of coffee per worker. Brazil can produce 6 units of wheat or 6 units of coffee per worker. Which country has the comparative advantage in producing coffee?

A
The United States, because it produces more wheat per worker
B
The United States, because it gives up fewer units of wheat per unit of coffee
C
Brazil, because it gives up fewer units of wheat per unit of coffee
D
Brazil, because it produces fewer total goods

Choose one

1 point

Which combination best describes the effects of a tariff on an imported good?

A
Domestic consumers buy more, and imports increase
B
Domestic producers supply less, and the government collects no revenue
C
Total economic surplus rises because all foreign competition is removed
D
Domestic consumers buy less, domestic producers supply more, imports decrease, and the government collects revenue

Choose one

1 point

If the U.S. dollar appreciates against the euro, what is the most likely immediate effect on U.S. trade, holding other factors constant?

A
U.S. exports tend to fall, U.S. imports tend to rise, and U.S. net exports tend to decrease
B
U.S. exports tend to rise, U.S. imports tend to fall, and U.S. net exports tend to increase
C
Both U.S. exports and imports tend to fall, leaving net exports unchanged
D
Both U.S. exports and imports tend to rise, leaving net exports unchanged

Written response

1 point

What stock measure, reported at a particular date, equals domestic residents' foreign assets minus foreign residents' domestic assets?

Choose one

1 point

If domestic investment exceeds national saving, which outcome is most consistent with the open-economy identity?

A
The country must have positive net exports because investment is high
B
The country neither borrows from nor lends to the rest of the world
C
The country must have zero net exports because saving finances all investment
D
The country tends to have negative net exports and attract foreign saving

Written response

1 point

A government completely prohibits trade with a particular country. What is the single term for this trade restriction?