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IB economic International economics Flashcards | StudBud
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IB economic International economics
IB economic International economics
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1
Floating exchange rates are when the value of a currency...
Is controlled by the central bank
Is controlled by the supply of money
Is set by the foreign exchange market
Is set by the interest rate
2
Which of the following policies would reduce the US current account deficit?
Reducing the interest rate
Increasing government spending
Increasing income tax
Increasing the money supply
3
Which is NOT a part of the balance of payments?
Cash account
Capital account
Current account
Financial account
4
The real world limits expenditure switching policies to reduce current account deficits because
The policies mau well create unemployment
The policies involve increasing government borrowing
The policies are limited by the WTO
The policies may well create a recession
5
Which of the following is
NOT
a (theoretical) disadvantage of joining the Euro?
Loss of the monarch's head on all the coins
Loss of monetary policy independence
Loss of fiscal policy independence
Loss of political independece
6
A free trade area or agreement removes all tariffs between members and...
Allows each member to set their own tariffs
Sets a common tariff to other countries
Sets common health and safety standards
Has fixed exchange rates between members
7
Which of the following is
NOT
a form of protectionism?
Export subsidies
Tariff
Health standards
Subsidy on domestic production
8
Which of the following will NOT be an effect on exchange rates if interest rates are increased?
Demand will increase as exports increase
Supply will fall as spending on imports falls
Supply increases as the interest rate rises
Demand will increase as investment increases
9
Why does the EU protect agriculture?
For national security
To protect employment of small farmers
To protect the health and safety standards of food
So as not to rely too much on Russia
10
Which of the following is NOT a theoretical policy solution to a current account deficit?
Increasing income and sales tax
Increasing government spending on infrastructure
Increasing tariffs
Increasing interest rates
11
Which of the following is
NOT
an advantage of free trade?
Greater allocative efficiency in the macro-economies
Over-specialisation on a single primary good
Greater choice of goods
Lower prices on goods
12
What represents the increase in producer surplus that results fromthe tariff?
The trapese A, triangle B and rectangle C
The trapese A
The triangle B and trapese A
There is no increase in producer surplus
13
Depreciating or devaluing the currency may have what negative effect?
Increasing employment
Increasing debt
Increasing growth
Increasing inflation
14
A current account deficit occurs when...
Imported goods are of greater value than exported goods
the exchange rate is too low
the value of imports are greater than exports
the financial account also goes into deficit
15
What goods does the WTO have no tariff rules for?
Electronic goods
Metal goods
Software goods
Agricultural goods
16
On the diagram below, what is the welfare loss suffered by society as a result of the tariff
Triangles A and C with rectangle B
Triangles A and C
Triangle C
Triangle A
17
What has the WTO been criticised for?
Allowing USA to break the rules.
Creating too much beaurocracy and slowing down trade
Not doing anything to protect MNCs from national governments
Not introducing rules against child and slave labour
18
USA has a current account deficit and the value of the US$ is rising, this could be because...
taxation has been reduced
foreign investment is flowing into the country
import demand is rising quickly
American investment is going abroad
19
Asian central banks sometimes intervene in their currency markets, this is technically known as
Pegging
Cheating
Managing
Fixing
20
A customs union (or common market) has a common tariff for all non-members and...
Allows free trade in goods and services within the area
Allows free movement of goods, services and resources.
Has single currency or fixed exchange rates aBetween members
Has common monetary and fiscal policies between members
21
Which of the following policies to reduce a current account deficit is expenditure switching?
Increasing interest rates
Decreasing government spending
Increasing tariffs
Increasing income tax
22
The Greek crisis of the Euro is due to...
Greece borrowing too much
The ECB supplying too many Euros to Greece
The financial crisis in USA
Germany refusing to lend or give Greece more Euros
23
A bilateral preferential trade agreement is...
Any trade agreement between two or more countries
A free trade agreement between two countries
Any trade agreement between two countries
A customs union between two countries
24
What is the main objective of the WTO?
to administer global rules for labour and land
to administer global rules for trade
to protect the global environment through free trade
To create global growth, prosperity and peace
25
The value of £1 has fallen from €1.19 to €1.08 in the past three months. This is a...
Devaluation of the Euro
Depreciation of the Euro
Devaluation of the Pound
Depreciation of the Pound
26
The Bolivian Bolivar is an example of what kind of currency?
Floating currency
Monopoly currency
Fixed currency
Managed currency
27
The lowest value that the Euro has ever had to the US dollar is...
€1=$1.15
€1=$1.05
€1=$0.86
€1=$1.10
28
The balance of payments is the account(s) in and out of a macro-economy of...
goods and services
all transactions
direct, portfolio and speculative investment
all monetary transfers
29
What is the cost of the subsidy for government?
The rectangles A, B and C
The rectangle A
The rectangles A and B
The rectangle B
30
The value of €1 in Danish Kroner varied by less than €0.01 during the last 3 months. This is...
Inflow of investment into Denmark
Currency management by the Danish Central Bank
Currency management by the ECB
Negative interest rates in Denmark
31
Which of the following
is
a member of the WTO?
Cuba
North Korea
Bhutan
Eretrea
32
What does the rectangle represent on thie quota diagram below?
The welfare loss to society
The cost to the governmentof administering the quota
The quota benefits for consumers
The quota rents
33
What represents the loss of consumer surplus that results from introducing a subsidy?
The oblong B
The trapese C
The triangle A
There is no loss in consumer surplus
34
Which of the following is NOT a reason for protectionism?
The correction of a current account deficit
To end a recession
National security
The preservation of employment
35
The US current account deficit is sustainable in the short term because...
It is balanced by a surplus in the financial account
US can always borrow from abroad because US has gold
US has accumilated foreign assets to balance the debt
It is so small
