Online Test — Open Economy Macroeconomics
15 Questions • 15 min • Chapter MCQ
15:00
Question 1 of 15
An economy that trades with other countries is a/an:
Closed economy
Open economy
Barter economy
Planned economy
Explanation: An economy with foreign trade is an open economy.
Question 2 of 15
A record of all economic transactions between a country and the rest of the world is the:
Budget
Balance of payments
GDP
Money supply
Explanation: That record is the balance of payments.
Question 3 of 15
The two main accounts of the BoP are the current account and the:
Capital account
Savings account
Revenue account
Tax account
Explanation: The BoP has a current account and a capital account.
Question 4 of 15
Export and import of goods (visibles) are part of the:
Capital account
Current account
Revenue budget
Money market
Explanation: Merchandise trade (goods) is in the current account.
Question 5 of 15
Foreign investment and loans are recorded in the:
Current account
Capital account
Balance of trade
Revenue account
Explanation: Capital flows are in the capital account.
Question 6 of 15
The balance of just the goods part of the current account is the:
Balance of trade
Capital account
Fiscal deficit
Money supply
Explanation: The goods balance is the balance of trade.
Question 7 of 15
The market where currencies are bought and sold is the:
Stock market
Foreign exchange market
Money market
Bond market
Explanation: Currencies are traded in the foreign exchange market.
Question 8 of 15
The exchange rate is the:
Price of one currency in terms of another
Total exports
A tax on imports
The money supply
Explanation: The exchange rate is the price of one currency in another.
Question 9 of 15
The demand for foreign exchange comes mainly from:
Importers and those sending money abroad
Exporters
Foreign tourists
Remittances
Explanation: Importers and those sending money out demand foreign exchange.
Question 10 of 15
The supply of foreign exchange comes mainly from:
Exporters and foreign money coming in
Importers
Students going abroad
Tourists going out
Explanation: Exporters and inflows supply foreign exchange.
Question 11 of 15
An exchange rate fixed and held by the central bank is a:
Flexible rate
Fixed exchange rate
Floating rate
Market rate
Explanation: A central-bank-fixed rate is a fixed exchange rate.
Question 12 of 15
A market-determined exchange rate that changes freely is:
Fixed
Flexible (floating)
Devalued
Pegged
Explanation: A market-set, freely changing rate is flexible.
Question 13 of 15
The system India follows, combining a float with central-bank intervention, is:
Fixed
Managed floating
Pure flexible
Gold standard
Explanation: India uses a managed floating exchange rate.
Question 14 of 15
A market fall in the value of a currency (flexible system) is:
Appreciation
Depreciation
Revaluation
Devaluation
Explanation: A market fall is depreciation.
Question 15 of 15
When the rupee depreciates, imports become:
Costlier
Cheaper
Free
Unchanged
Explanation: A weaker rupee makes imports costlier (exports cheaper).