Economics/Economics Money Banking and International Trade Sample Test,Sample questions

Question:
  A deficit disequilibrium in the balance of payments can be corrected through:

1.Devaluation

2. Monetary squeeze

3.Exchange controls and import quotas

4.All of the above


Question:
  At a very low rate of interest  the interest-elasticity of the speculative demand for money becomes:

1.Low

2.High

3.Very high

4.Infinite


Question:
  Dynamic factors in the realm of international trade theory relate to changes in:

1.Income

2. Factor endowments

3.Technical knowledge and methods of production

4.All of the above


Question:
  Identify Pigou s cash balances equation:

1. M = Ky + K A

2.M = KPO

3.M = KR/P

4.M = PKT


Question:
  If the elasticity of foreign demand for the country s exports is unity  the supply curve of foreign exchange will be:

1.Backward bending

2.Vertical

3.Positively sloping from left to rigt

4.Horizontal


Question:
  If the increase in exports exceeds the increase in imports  and other things remain the same  then the level of income will:

1.Rise

2.Remain the same

3.Fall

4.Move in an uncertain manner


Question:
  In a bimetallic standard:

1.Two metals (usually gold and silver) are simultaneously monetized and their monetary values are fixed as legal tender

2.Both gold and silver coins circulate as unlimited legal tender

3.Coinage as well as exports and imports of both the metals are free

4.All of the above


Question:
  Of the following concepts of term of trade  which one was introduced by F.W. Taussig?

1. Income terms of trade

2.Commodity terms of trade

3.Real cost terms of trade

4.Double fact oral terms of trade


Question:
  On which of the following is the law of comparative costs based?

1. Labour theory of value

2.Opportunity cost theory

3.Law of diminishing returns

4. Both (a) and (b)


Question:
  One of the following is an instrument of qualitative credit control. Identify it:

1.Credit rationing

2.Bank rate

3.Open-market operations

4.Minimum statutory cash reserves ratio


Question:
  Stagflation refers to a situation which is characterised by:

1.Deflation and rising unemployment

2. Inflation and deflation

3.Sustained price-rise and rising unemployment

4.Stagnant employment and deflation


Question:
  The degree of elasticity in respect of speculative demand for money  under the liquidity trap conditions  is:

1.Zero

2.One

3.Greater than one

4.Infinite


Question:
  The devaluation of currency by a country is designed to lead to:

1.Expansion of the export trade

2.Contraction of import trade

3.Promotion of import substitution

4.All of these


Question:
  The multiple exchange rates were first employed by:

1.Brazil

2.Ecuador

3.Germany

4.Peru


Question:
  Under the flexible exchange rate system  the exchange rate is determined by:

1.The central bank of the country

2.The forces of demand and supply in the foreign exchange market

3.The price of gold

4.The purchasing power of currencies


Question:
  Which of the following according to Milton Friedman is not a key determinant of the demand for money?

1.Aggregate wealth

2.Precautionary motive

3.Relative rates of return obtainable on different forms of assets

4.Physical non-human capital goods and human capital or wealth


Question:
  Which of the following is not a liability of commercial banks?

1.Demand deposits

2.Time deposits

3.Advances from the central bank

4.Security holdings


Question:
  Which of the following is not an instrument of monetary policy?

1.Taxation

2.Bank rate

3.Open-market operations

4.Credit rationing


Question:
  Which of the following statements is not correct?

1.Devaluation can have only temporary effects and it may provoke other countries to retaliate

2.Many countries of Europe resorted to exchange clearing agreements during the 1930s

3.The balance of payments of a country is a balance sheet showing the country s foreign assets and liabilities at any given period of time

4.The concept of single factoral terms of trade was developed by Jacob Viner.


Question:
  Who is generally regarded as the founder of the Modern Quantity Theory of Money?

1.J.M.Keynes

2.Milton Friedman

3. M.L.Bursten

4.Don Patinkin


Question:
 A retail price index is a good measure of changes in:

1.Consumers cost of living

2.General purchasing power of money

3.Average standard of living

4.Patterns of consumer expenditure


Question:
 According to the classical approach  the demand for money primarily depends upon:

1.Rate of interest

2.Economic transactions

3.Speculative activity

4.Precautionary motive


Question:
 Arrange the following assets of a bank in the ascending order of income (i.e. in the descending order of liquidity): I-Bills  II-Loans  III-In-vestments in Government and other approved securities

1. I II III

2.I III II

3.II I III

4.III II I


Question:
 As compared to the classical theory  which function of money was stressed more in the Keynesian theory?

1.Unit of account

2.Medium of exchange

3.Standard of deferred payments

4.Store of value


Question:
 Bad money drives good money out of circulation. With whole name is this law associated?

1. J.M.Keynes

2.Thomas Gresham

3.L.E.Mises

4.R.G.Hawtrey


Question:
 Commercial banks have always to face a conflict between:

1.Sharcholders and depositors

2.Central bank and themselves

3.Liquidity and profitability

4.Demand deposits and time deposits


Question:
 During the period of hyper-inflation  there takes place astronomical rise in prices and  as a result  money becomes almost worthless. Such a situation was witnessed in Germany in 1923 and in China in:

1.1947

2.1949

3.1951

4.1953


Question:
 Identify the country  which first employed credit rationing as an instrument of credit control:

1.Germany

2.UK

3.USA

4.France


Question:
 In which capacity does a person stand to gain from deflation?

1.As a pensioner

2.As a debtor

3.As an entrepreneur

4.As an equity-holder


Question:
 In which country was the instrument of minimum legal cash reserves ratio for banks first introduced?

1.USA

2.UK

3.Germany

4.Japan


Question:
 Open market operations refer to the buying and selling of:

1.Commercial bills

2.Foreign exchange

3.Gold

4.Government securities


Question:
 The branch banking system is currently in vogue in most countries of the world. Identify the country where it first developed:

1.South Africa

2.UK

3.Canada

4.Australia


Question:
 The first explanation of stagflation was offered originally in 1931 by:

1.Friedrich A.von Hayek

2.J-M. Keynes

3.Bent Hansen

4.Milton Friedman


Question:
 The market for very short term loans is known as:

1.Capital market

2.Money market

3.Stock market

4.Discount market


Question:
 The spot and forward markets in foreign exchange are linked to each other through:

1.Interest arbitrage

2.Hedging

3.Speculation

4.All of the above


Question:
 Which among the following  is not an assumption of the classical - territory of comparative cost advantage?

1.Labour is the only factor of production

2.Production takes place under diminishing returns

3.There are no tariffs

4.Prices are determined by their real labour costs of production


Question:
 Which one of the following approaches to the definition of money gives the widest possible view of money?

1.Central bank approach

2.Conventional approach

3.Chicago approach

4.Gurley Shaw approach


Question:
 Which one of the following will reduce the capacity of commercial banks to lend?

1.Sales of securities in the open market by the central bank

2.Reduction in the discount rate

3.Reduction of the required cash reserves ratio

4.Purchase of securities by the Central bank in the open market


Question:
According to the Heckscher-Ohlin theory of international trade the most important cause of differences in relative commodity pries and trade between nations is the differences in:

1.Consumer tastes and preferences

2.Factor endowments

3.Knowledge and technology

4.Demand conditions


Question:
Adam Smith s views on world trade can be best understood if one considers them as a reaction to:

1.The mercantilist approach to trade

2.Ricardo s views on trade

3.The labour theory of value

4.None of the above


Question:
Bank rate refer to the interest rate at which:

1.Commercial banks receive deposits from the public

2. Central bank gives loans to commercial banks

3.Government loans are floated

4.Commercial banks grant loans to their customers


Question:
By which year had the gold standard virtually disappeared from the world as an international monetary system?

1.1933

2.1936

3.1939

4.1945


Question:
Cost-push inflation is caused by:

1.Increase in the quantity of money

2.In-crease in investment

3.Creation of credit money

4.Increase in the prices of inputs


Question:
Developing countries usually complain of:

1.Detoriation in their terms of trade

2.Serious hurdles in the way of export promotion

3.Uncertainty and inadequacy of reign aid

4.All of the above


Question:
During which decade of the nineteenth century did most European countries adopt the gold standard?

1.Sixties

2.Seventies

3.Eighties

4.Nineties


Question:
Fiat money refers to:

1.Credit money

2.Legal money

3.Full bodied money

4.International money


Question:
Identify the country which was the first to adopt the gold standard:

1.UK

2.France

3.Germany

4.USA


Question:
If there is a significant decrease in the demand for loans  banks will be forced to:

1.Sell securities to the public

2.Adjust their protfolios

3.Resort to creating credit

4.Increase liquidity


Question:
In the Fisher s equation of exchange MV = PT  what does T denote?

1.Period of time

2.Volume of trade

3. Total money wealth

4.Trend value of general price level


Question:
In which capacity does a person stand to gain from deflation?

1. As a pensioner

2.As a debtor

3.As an entrepreneur

4. As an equity-holder


Question:
Money has been defined as  that by delivery of which debt contracts and price contracts are discharged  and in the the shape of which general purchasing power is held . Whole definition is this?

1.G. Crowther

2.D.H.Robertson

3.J.M.Keynes

4.George N.Halm


Question:
Selective credit control devices are used by the central bank of a country to:

1.Regulate the volume of aggregate bank credit in the economy

2.Regulate credit-creation on the part of some selected banks

3.Control the flow of aggregate bank credit to different productive activities in the economy

4.Selectively allocate credit among banks


Question:
Since when has the Reserve Bank of India been successfully operating the instrument of selective credit control in this country?

1.1939

2.1951

3.1956

4.1961


Question:
The  terms of trade  refer to:

1.Comparative advantage of one country over another in the production of a particular commodity

2.Bilateral trade agreements

3.Rates of exchange between two currencies

4.Ratio of the index of export prices to the index of import prices.


Question:
The best example of representative full-bodied money is found in the  gold certificates  which circulated in the U.S.A. before being withdrawn from circulation in:

1.1925

2.1927

3.1929

4.1933


Question:
The cash transactions approach to the quantity theory of money is usually associated with the name of:

1.Alfred Marshall

2.Irving Fisher

3.J.M.Keynes

4.D.H.Robertson


Question:
The china banking system a variant of the group banking system  developed around the mid-nineteenth century and reaching the apex of popularity in the present century. In which country did it develop?

1.USA

2.UK

3.Germany

4.Italy


Question:
The elasticity of demand for foreign exchange for financing capital outflow is:

1.Zero

2.Greater than zero

3.One

4.Less than infinity


Question:
The foreign exchange market performs the function of:

1.Transfer of purchasing power

2.Provisions of credit for financing foreign trade

3.Furnishing facilities for hedging foreign exchange risks

4.All of the above


Question:
The immediate effect of credit-creation by banks is:

1.Rise in prices

2. Increase in money supply

3. Increase in real national income

4.Reduction of poverty


Question:
The limited legal-tender money stands for the component of money which:

1. Is issued in a limited amount

2.Is legal tender for payment upto a certain maximum amount

3. Is legal tender in specified areas

4.Is to be used in specific transactions


Question:
The liquidity trap condition occurs at a:

1.Low rate of interest

2.Very low rate of interest

3.High rate of interest

4.Very high rate of interest


Question:
The main function of legal cash reserve requirements is to:

1.Ensure safely of deposits

2.Influence the demand deposit-creating power of commercial banks

3.Regulate the inter-sect oral flow of money supply

4.Keep a portion of deposits liquid


Question:
The Quantity Theory of Money establishes the relationship between quantity of money in an economy and the level of:

1.Employment

2.National income

3.Prices

4.Savings


Question:
The reduction or elimination of inflation is known as:

1.Disinflation

2.Deflation

3.Creeping inflation

4.Stagflation


Question:
The relationship between the market rate of interest and the market price of a bond is:

1.Inverse

2.Direct

3.Positive and proportionate

4.Uncertain


Question:
Under the unit banking system  each individual bank is a separate entity having its own independent management and board of directors. Which country is generally regarded as the home of the unit banking system?

1.USA

2.Germany

3.France

4.Japan


Question:
What does the modern theory of international trade predict regarding difference in factor prices between nations on account of trade? The difference:

1.Increases

2.Diminishes

3.Remains the same

4.Either diminishes or increases


Question:
What proportion of international trade is based on absolute differences in costs of production?
. 

1.All

2.Substantial

3.Very little

4.Nil


Question:
What would be the impact on the country s balance of payments position  when in the context of inflationary pressures recourse is taken to expenditure reducing policies?

1.Highly unfavourable

2.Unfavourable

3.Favourable

4.Neutral


Question:
When did the UK finally abandon the gold standard?

1.1925

2.1929

3.1931

4.1936


Question:
When the commodity value of money and its value as money are equal  it is called:

1.Token money

2.Full-bodied money

3.Quasi-money

4.Fiat money


Question:
Which is not a function of the central bank of a country?

1.Lender of the last resort

2.Controller of credit

3.Custodian of nation s foreign exchange reserves

4.Supervisor of nation s fiscal policy


Question:
Which of the following is an instrument of quantitative credit control?

1.Credit rationing

2.Prescribing margin requirements

3.Variable reserve ratio

4.Consumer credit regulation


Question:
Which of the following is not a function of a commercial bank?

1.Accepting public deposits

2.Granting loans and advances

3.Undertaking agency functions

4.Banker to the Government


Question:
Which of the following is not a part of the un-organised Indian money market?

1.Indigenous bankers

2.Co-operative credit societies

3.Chit funds

4.Money lenders


Question:
Which of the following is not an item on the assets side of the balance sheet of a commercial bank?

1.Investments

2.Money at call and short notice

3.Reserves

4.Advances


Question:
Which of the following items in the balance of payments is invisible?
 

1.Government expenditure abroad

2.Foreign investment

3.Foreign travel

4.Goods exported


Question:
Which of the following measures is helpful in controlling inflation?

1.Raising the bank rate

2.Price control and rationing of essential goods

3.Reduction of government expenditure

4.All of the above


Question:
Which of the following was not favoured by the mercantilists?

1.Accomulation of gold by the country

2.Free trade

3.Export promotion

4.Import restriction


Question:
Which one of the following is an example of quasi-money or near-money?

1.Bills of exchange

2.Cheque

3.Bank notes

4.Coins


Question:
Who introduced the concept of the real balance effect?

1.A.C.Pigou

2.Alfred Marshall

3.J.M.Keynes

4.Milton Friedman


More MCQS

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  3. Economics Development
  4. Social Economics -Development
  5. Sectors of Indian Economy
  6. Indian Economy for Competitive Examinations
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  8. Economics National Income MCQS Set-1
  9. Economics National Income MCQS Set-2
  10. Economic Growth and Development
  11. Economics Money Banking and International Trade
  12. Economics Nature and Scope of Economics
  13. Economics Production and Production Function
  14. Economic Development and Planning
  15. Economics Balance of Payments
  16. Economics Central Bank
  17. Economics Equilibrium Of National Income
  18. Economics International Economic Organisations
  19. Economics Business and Finance
  20. Economics Economics and Commercial Geography
  21. Economics International Economic Organisations set-2
  22. Economics Money and Value of Money
  23. Economics Demand and Supply Set-1
  24. Economics Economy of Pakistan
  25. Economics Public Finance
  26. Economics Scale Of Production and Laws of Returns
  27. Economics Transport Communication and Human Resources
  28. Economics Wages Rent Interest and Profit
  29. Economics Demand and Supply Set-2
  30. Economics Great Economists and Their Work Set-1
  31. Economics Great Economists and Their Work Set-2
  32. Economics Market and Revenue Curves
  33. Economics Market Equilibrium
  34. Economics National Income Accounting Set-1
  35. Economics World Economy
  36. Economics National Income Accounting Set-2
  37. MCQ Indian Economy Set 5
  38. MCQ Indian Economy Set 1
  39. MCQ Indian Economy Set 2
  40. MCQ Indian Economy Set 3
  41. MCQ Indian Economy Set 4
  42. Indian Economy MCQs Part 1
  43. Indian Economy MCQs Part 2
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