Masaryk University - Brno
Department of Economics – Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
BPE_MAC1 Macroeconomics 1 – Spring Semester 2011
1
Tutorial session 6 - 01.04.2011, 10:15-11:00 a.m.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. Which of the following would be recorded as an UK merchandise export?
a. A UK tourist spends 10,000 euros on vacation in the south of France.
b. A machine shop in Nottingham purchases a grinder made in Italy.
c. A UK resident receives a £50 dividend on shares she owns in a business in Germany.
d. The French government purchases a fleet of new Peugeot cars built at Peugeot’s factory
in the UK.
____ 2. It must always be true that net capital outflow
a. is greater than net exports.
b. is less than net exports.
c. is equal to net exports.
d. equals 0.
____ 3. If interest rates in Canada rise above those in the rest of the world, then
a. the demand for Canadian dollars decreases.
b. exports from Canada to other countries increases.
c. imports into Canada from other countries decreases.
d. it raises Canada's exchange rate and this may result in a deficit on Canada's current
account.
____ 4. Net capital outflow measures
a. the flow of goods and services between countries.
b. the flow of assets between countries.
c. government budget surpluses and deficits relative to those experienced in other
countries.
d. the amount of physical capital built in foreign countries.
____ 5. The exchange rate is the
a. value of money.
b. quantity of euros, dollars, yen, etc., that are traded on currency markets.
c. amount of foreign currency that is used to buy goods made in your country.
d. number of units of a foreign currency that can be bought with one unit of your own
currency.
____ 6. A tariff is a
a. tax on goods produced domestically.
b. tax on exported goods.
c. tax on imported goods.
d. limit placed on the quantity of goods that a country can import.
____ 7. The supply of funds curve is upward sloping because a rise in the interest rate
a. decreases the opportunity cost of firms' investment spending.
b. increases the opportunity cost of firms' investment spending.
c. decreases the opportunity cost to households of consuming.
d. increases the opportunity cost to households of consuming.
Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
2
____ 8. The supply of foreign exchange is
a. determined by the real exchange rate.
b. independent of the real exchange rate.
c. determined by central bankers.
d. determined by the government of the country concerned.
____ 9. The link between the loanable funds market and the foreign exchange market is
a. the governments of the countries involved.
b. the International Monetary Fund.
c. net capital outflow.
d. purchasing power parity.
____ 10. Equilibrium in an open economy is characterized by
a. net exports = net capital outflow.
b. net exports + net capital outflow = savings.
c. domestic investment + net capital outflow = savings.
d. Both a and c are correct.
____ 11. Increased foreign investment in the UK causes the
a. balance on current account to become positive.
b. sum of the capital and current accounts to be positive.
c. balance of trade to become negative.
d. foreign exchange value of the pound to increase.
____ 12. Government trade policies, such as tariffs and quota restrictions on imports,
a. can eliminate a trade imbalance.
b. often increase a trade deficit.
c. have no real affect on the trade balance.
d. can lower a deficit on current account but not on the capital account.
____ 13. In response to an import quota
a. exports increase by more than imports.
b. imports increase by more than exports.
c. imports and exports are unaffected, but the government collects revenues.
d. imports and exports are both reduced but net exports are unchanged.
____ 14. A large and sudden movement of capital out of a country is called
a. a capital inflow.
b. capital flight.
c. a trade deficit.
d. a trade surplus.
____ 15. Capital flight is often caused by
a. political stability.
b. shifts away from the industrial sector and towards the service sector.
c. political instability.
d. policies of the International Monetary Fund.
ID: A
1
Tutorial session 6 - 01.04.2011, 10:15-11:00 a.m.
Answer Section
MULTIPLE CHOICE
1. ANS: D
The French government purchases a fleet of new Peugeot cars built at Peugeot’s factory in the UK.
PTS: 1
2. ANS: C
is equal to net exports.
PTS: 1
3. ANS: D
it raises Canada's exchange rate and this may result in a deficit on Canada's current account.
PTS: 1
4. ANS: B
the flow of assets between countries.
PTS: 1
5. ANS: D
number of units of a foreign currency that can be bought with one unit of your own currency.
PTS: 1
6. ANS: C
tax on imported goods.
PTS: 1
7. ANS: D
increases the opportunity cost to households of consuming.
PTS: 1
8. ANS: B
independent of the real exchange rate.
PTS: 1
9. ANS: C
net capital outflow.
PTS: 1
10. ANS: D
Both a and c are correct.
PTS: 1
11. ANS: D
foreign exchange value of the pound to increase.
PTS: 1
ID: A
2
12. ANS: C
have no real affect on the trade balance.
PTS: 1
13. ANS: D
imports and exports are both reduced but net exports are unchanged.
PTS: 1
14. ANS: B
capital flight.
PTS: 1
15. ANS: C
political instability.
PTS: 1