Competitive Exams: Economics MCQs (Practice_Test 24 of 122)

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  1. Consider the following statements: If the offer-curve is a straight line
    1. high tariff rates can improve terms of trade.
    2. low tariff rates can improve terms of trade.
    3. absence of tariff can improve terms of trade.

    Of these statements

    1. 1 alone is correct
    2. 2 alone is correct
    3. 3 alone is correct
    4. 2 and 3 are correct
  2. Dumping aims at flooding a foreign country with
    1. high-priced commodities
    2. low-priced commodities
    3. commodities with similar prices
    4. commodities with fluctuating prices.
  3. Which one of the following is the major characteristic foreign direct investment (FDI) ?
    1. it is non-debt creating capital flow
    2. It is portfolio investment in stock market
    3. it is that investment which involves debt-servicing
    4. It is investment made by foreign institutional investors in government securities.
  4. In July 1997, which one of the following groups of countries devalued their currencies with respect to the dollar?
    1. Thailand, Malaysia, Phillippines and Indonesia
    2. Thailand, Pakistan, Taiwan and South Korea
    3. Malaysia, Myanmar, Cambodia and Vietnam
    4. Cambodia, Vietnam, Sri lank


  5. Over-valuation of currency is NOT desirable, when
    1. a country is under the sudden necessity of making large purchases from abroad.
    2. a country is under the sudden necessity of acquiring large amounts of foreign currency to pay its debts.
    3. the prices in the country are higher than the corresponding prices in other countries.
    4. a country wants to boost up its exports and reduce its imports.
  6. Which one of the following represents capital account convertibility of a currency?
    1. Freedom to transact in foreign currency on account of trade in goods and services.
    2. Freedom to transact in foreign currency on account of trade in services.
    3. Freedom to transact in financial assets with foreign countries without restrictions.
    4. No restriction on remittances by national of a country to another country
  7. Hot money refers to the
    1. short-term capital movements from one country to an other seeking either a higher rate of interest or safety of capital irrespective of the rate of interest.
    2. Long-term capital movements from on country to another seeking higher rate of interest.
    3. Medium-term capital movements from on country to another
    4. Currency which is very much in demand in the foreign exchange market.
  8. Portfolio theory of the demand for money assumes that individual.
    1. disregards risk
    2. is risk neutral
    3. I risk lover
    4. is risk averse
  9. If the rate of interest increases, people holding bonds will
    1. Experience a capital gain on the bonds.
    2. experience a capital loss on the bonds
    3. Not be able to find a buyer should they decide to sell
    4. experience neither capital gains nor a capital loss
  10. Consider the following passage: ‘Price is not the same thing as value. Suppose that on a day the price of everything viz. Coal, bread, postage stamps, a day՚s labour, the rent of houses etc. Were to double. Price then would certainly rise, but values of all things except on would not.’ The writer wants to say that if prices of all things were doubled
    1. the values of all things would remain constant
    2. the values of the things sold would be doubled
    3. the values of things bough would be halved
    4. the value of money only would be halved
  11. When the demand for money is infinitely interest-elastic the effectiveness of an expansionary monetary policy is
    1. the highest
    2. moderate
    3. very low
    4. nil
  12. For controlling inflation, the central bank should
    1. sell government securities in the open market
    2. lower the bank rate
    3. purchase government securities in the open market
    4. lower the reserve ratio of the banks.
  13. Which one of the following is a correct and likely sequence (Mis money supply, is a nominal rate of interest and l in investment) ?
    1. m down, i down, i down, GNP down
    2. M down, i down, I up, GNP up
    3. M down, i up, I down, GNP down
    4. M up, i up, I up, GNP up
  14. If the annual income velocity of money is 3, then the total money stock in the economy is
    1. 3 times the nominal GNP
    2. of real GNP
    3. of nominal GNP.
    4. of the ratio of P to real GNP.
  15. Consider the following statements.
    1. supplies credit to the central government
    2. provides credit to the commercial banks
    3. provides credit to the state governments.

    Of these statements

    1. 2 alone is correct
    2. 1 and 3 are correct
    3. 1 and 2 are correct
    4. 1,2 are correct