Economics MCQs for NTS, PPSC, FPSC TEST and others

Page No. 194

Complete currency pass through arises when a 10 percent depreciation in the value of the dollar causes U.S?

aimport prices to fall by 10 percent

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b import prices to rise by 10 percent

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cexport prices to rise by 10 percent

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d export prices to fall by 10 percent

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View Answer

import prices to rise by 10 percent

Given a two-country world, suppose Japan devalues the yen by 20 percent and west German devalues the mark by 15 percent This result is a (an)?

aappreciation in the value of both currencies

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bdepreciation in the value of both currencies

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cappreciation in the value of the yen against the mark

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ddepreciation in the value of the yen against the mark

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View Answer

depreciation in the value of the yen against the mark

If foreign manufacturing costs and profit margins in response to a depreciation in the U.S dollar the effect of these actions is to ?

a shorten the amount of time in which the depreciation leads to smaller trade deficit

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bshorten the amount of time in which the depreciation leads to smaller trade surplus

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c lengthen the amount of time in which the depreciation leads to smaller trade deficit

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dlengthen the amount of time in which the depreciation leads to smaller trade surplus

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View Answer

lengthen the amount of time in which the depreciation leads to smaller trade deficit

Because of the J curve effect and partial currency pass through, a depreciation of the domestic currency tends to increase the size of a ?

a trade surplus in the short run

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btrade surplus in the long run

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ctrade deficit in the short run

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d trade deficit in the long run

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View Answer

trade deficit in the long run

According to the Marshall-Lerner condition if a country’s currency depreciates its trade balance will worsen if ?

a elasticity of demand for exports = 0.9; elasticity of demand for imports = 0.4

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b elasticity of demand for exports = 0.7; elasticity of demand for imports = 0.3

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celasticity of demand for exports = 0.5; elasticity of demand for imports = 0.7

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d elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6

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View Answer

elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6

The balance of trade can only worsen if income ____ relative to absorption ?

aincreases

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bdecreases

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cdoes not change

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dNone of the above

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View Answer

decreases

The notion that, following a currency depreciation the balance of trade falls for a while before increasing is called an effect ?

arelative price

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belasticity

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cJ Curve

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dPass through

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View Answer

J Curve

Which approach predicts that is an economy operates a full employment and faces trade deficit currency devaluation will improve the trade balance only if domestic spending is cut thus freeing resources to produce exports ?

athe absorption approaches

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bthe Marshall Lerner approach

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cthe monetary approach

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d the elasticities approach

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View Answer

the absorption approaches

The extent to which a change in the exchange rate leads to changes in import and export prices is known as the ?

aJ Curve effect

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bMarshall Lerner effect

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cabsorption effect

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dpass through effect

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View Answer

pass through effect

The shift toward imperfectly competitive markets in domestic and international trade the concept of ?

aofficial exchange rates

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b complete currency pass through

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cexchange arbitrage

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d trade adjustment assistance

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View Answer

complete currency pass through

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