Economics Questions and Answers List

Which of the following is a foreign exchange transaction involving the forward market? A. A company writes a cheque in foreign currency. B. A tourist converts US$1,000 into euros at an airport. C. A company agrees to buy US$100,000 for ¥7,500,000 in 60 days.
Economics | (1 Answers)
The most likely objective of an exporter using the forward market in currencies is to: A. reduce risk. B. increase profit. C. increase currency exposure.
Economics | (1 Answers)
A is correct. The bid exchange rate (or bid rate) is the exchange rate at which the currency dealer will buy the foreign currency, and the offer exchange rate (or offer rate) is the exchange rate at which the currency dealer will sell the foreign currency. The currency dealer makes a profit by buying a unit of currency more cheaply than it sells it. Thus, the wider the bid-offer spread, the more money the currency dealer makes.
Economics | (1 Answers)
B is correct. High government debt tends to lead to a depreciation of a country's currency. A and C are incorrect because high interest rates and high economic growth tend to lead to an appreciation of the country's currency.
Economics | (1 Answers)
Which of the following is most likely to cause a country's currency to appreciate? A. High inflation B. Political instability C. A current account surplus
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A is correct. The advantage of a fixed exchange rate system is that it eliminates currency risk (or foreign exchange risk), which is the risk associated with the fluctuation of foreign exchange rates. Under a fixed exchange rate system, the company will know with certainty the amount it will pay for the imported goods. B and C are incorrect because under pure or managed floating exchange rate systems, the company faces currency risk.
Economics | (1 Answers)
C is correct. Under a managed floating exchange rate system, a country's central bank intervenes to stabilise its currency within a certain range. To do so, it buys its domestic currency using its foreign currency reserves to strengthen its domestic currency or buys foreign currency using its domestic currency to weaken its domestic currency.
Economics | (1 Answers)
If a country has a current account surplus, it most likely has a capital and financial account: A. deficit. B. surplus. C. in balance.
Economics | (1 Answers)
Countries with exports greater than imports most likely have a current account: A. deficit. B. surplus. C. in balance
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Payments from a computer company in the United Kingdom to a company in India that operates a call centre to answer questions from the computer company's customers are most likely included in the United Kingdom's: A. current account. B. capital account. C. financial account.
Economics | (1 Answers)
What about the impact of factor prices?
Economics | (1 Answers)
Country A can produce 1 electric turbine using 10 units of labour and 4 refrigerators using 10 units of labour. Country B can produce 1 electric turbine using 7 units of labour and 4 refrigerators using 12 units of labour. According to the theory of comparative advantage, Country A should produce: A. refrigerators and trade with Country B for electric turbines. B. electric turbines and trade with Country B for refrigerators. C. electric turbines and refrigerators and not trade with Country B.
Economics | (1 Answers)
Which of the following would most likely promote international trade? A. Increased tariffs B. Higher transportation costs C. Faster transport of products and services
Economics | (1 Answers)
Which of the following would most likely be reduced if India imposed a tariff on goods from Japan? A. India's exports B. India's imports C. Japan's imports
Economics | (1 Answers)
How can we solve this problem?
Economics | (1 Answers)
International trade most likely: A. helps keep prices down. B. reduces competition. C. reduces demand for domestic products and services.
Economics | (1 Answers)
Disadvantages of new EU members
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Advantages of new EU members
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What else does transfer of resources result in?
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Empirical evidence of Heckscher-Ohlin
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