Exam: 050476RR – Extensions and Issues; International Economics
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Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. The basis for the Bretton Woods international monetary system was
A. the gold standard.
B. an adjustable peg system of exchange rates.
C. a completely fixed system of exchange rates.
D. a freely flexible system of exchange rates.
2. Which one of the following does not correlate positively with economic growth?
A. The percentage of the population engaged in agriculture
B. Output per capita
C. Life expectancy
D. The literacy rate
3. Which one of the following statements about disinflation is correct?
A. Disinflation occurs when investment plans exceed saving.
B. Disinflation occurs when the inflation rate is declining.
C. Disinflation occurs when a speculative investment “bubble” is bursting.
D. Disinflation occurs when the price level is falling.
4. Which one of the following statements about stagflation is correct?
A. Stagflation is an increase in inflation accompanied by decreases in real output and employment.
B. Stagflation is a decline in the price level accompanied by increases in real output and employment.
C. Stagflation is a simultaneous increase in real output and the price level.
D. Stagflation is a simultaneous reduction in real output and the price level.
5. Over recent years, economists holding monetarist views have replaced their call for a monetary rule with
a call for
A. artful Fed management of interest rates.
B. nominal GDP targeting.
C. inflation targeting.
D. inflationary and recessionary gap analysis.
6. Which one of the following statements about the insider-outsider theory is correct?
A. In the insider-outsider theory, insiders are “principals” and outsiders are “agents.”
B. In the insider-outsider theory, insiders are workers who retain employment during recession.
C. In the insider-outsider theory, outsiders are foreigners.
D. In the insider-outsider theory, insiders are managers who have more information about their firms’ performance than outsiders.
7. The very poorest low-income developing countries typically have relatively
A. high rates of economic growth and relatively low rates of population growth.
B. low rates of both population growth and economic growth.
C. high rates of both population growth and economic growth.
D. low rates of economic growth and relatively high rates of population growth.
8. In the U.S. balance of payments, foreign purchases of assets in the United States are a
A. foreign currency outflow.
B. current account item.
C. foreign currency inflow.
D. debit, or outpayment.
9. The exchange rate system currently used by the industrially advanced nations is
A. the managed float.
B. a fixed rate system.
C. the Bretton Woods system.
D. the gold standard.
10. In international financial transactions, what are the only two things that individuals and firms can
A. Currency and currently produced goods and services
B. Services and manufactured goods
C. Currency and real assets
D. Preexisting assets and currently produced goods and services
11. The international agency that lends money to developing countries for economic development projects
A. International Monetary Fund (IMF).
B. World Credit Union.
C. World Bank.
D. World Trade Organization (WTO).
12. Which one of the following is an example of direct foreign investment?
A. General Motors building an auto production facility in China
B. A U.S. bank granting a loan to a Guatemalan firm
C. A U.S. government foreign aid grant to Bangladesh
D. The purchase of debt issued by the Panamanian government
13. If government uses fiscal policy to restrain cost-push inflation, we can expect
A. tax-rate declines and increases in government spending.
B. the unemployment rate to fall.
C. the aggregate demand curve to shift rightward.
D. the unemployment rate to rise.
14. If a nation’s goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with
certainty that this nation has a
A. balance of trade (goods) surplus.
B. positive balance on current account.
C. balance of payments surplus.
D. positive balance on goods and services.
15. The following are hypothetical exchange rates: 2 euros = 1 pound; $1 = 2 pounds. We can conclude
A. 1 euro = $.50.
B. 1 euro = $2.
C. $1 = .5 euros.
D. $1 = 4 euros.
16. Which one of the following statements about efficiency wages is correct?
A. An efficiency wage is an above-market wage that minimizes a firm’s labor cost per unit of output.
B. An efficiency wage is a wage payment necessary to compensate workers for risk of injury on the job.
C. An efficiency wage is a wage that automatically rises with the national index of labor productivity.
D. An efficiency wage is a “wage” that contains a profit-sharing component as well as traditional hourly pay.
17. If a U.S. importer can purchase 10,000 pounds for $20,000, the rate of exchange is
A. $1 = 2 pounds in the United States.
B. $2 = 1 pound in the United States.
C. $0.5 = 1 pound in Great Britain.
D. $1 = 2 pounds in Great Britain.
18. The mainstream view of macro instability is that
A. changes in technology and resource availability are the two main sources of fluctuations of real GDP.
B. bursts of innovation put the economy on an unsustainable growth path, eventually producing recession.
C. changes in the money supply directly cause changes in aggregate demand and thus cause changes in real GDP.
D. changes in investment shift the aggregate demand curve and thus cause changes in real GDP.
19. The basic problem portrayed by the traditional Phillips Curve is
A. that a level of aggregate demand sufficiently high to result in full employment may also cause inflation.
B. that changes in the composition of total labor demand tend to be deflationary.
C. the possibility that automation will increase the level of noncyclical unemployment.
D. that unemployment rises at the same time the general price level is rising.
End of exam
20. A government may be able to reduce the international value of its currency by
A. selling foreign currencies in the foreign exchange market.
B. buying its currency in the foreign exchange market.
C. increasing its domestic interest rates.
D. selling its currency in the foreign exchange market.
Exam: 050476RR – Extensions and Issues; International Economics