Download: MCQ Solution 1 – 10

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1. One potential drawback of the gold standard is that:
(Points : 10)
A. the world economy can be subject to deflationary pressure due to the limited supply of monetary gold.
B. the world economy can be subject to inflationary pressure without changes in the supply of monetary gold.
C. gold is scarce.
D. gold is difficult to transport.
2. Comparative advantage (Points : 10)
A. is also known as relative efficiency.
B. can lead to trade even in the face of absolute efficiency.
C. exists when one party can produce a good or service at a lower opportunity cost than another party.
D. all of the above

3. Gresham’s Law states that (Points : 10)
A. bad money drives good money out of circulation.
B. good money drives bad money out of circulation.
C. if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate.
D. none of the above.
4. The theory of comparative advantage (Points : 10)
A. claims that economic well-being is enhanced if each country’s citizens produce only a single product.
B. claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged all countries.
C. claims that economic well-being is enhanced if each country’s citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries, and then trade production.
D. claims that no country has an absolute advantage over another country in the production of any good or service.
5. Supporters of the gold standard for national currencies believe this precious metal provides:
(Points : 10)
A. an effective hedge against price inflation.
B. fixed exchange rates between all currencies.
C. monetary policy autonomy.
D. none of the above

6. The bid price is the price at which a dealer is willing to buy an investment security, currency, etc. (Points : 10)
True
False
7. Which of the following options combinations are internally consistent (i.e., both positions would be profitable or unprofitable at the same time) ? (Points : 10)
A. Sell puts and buy calls
B. Buy puts and sell calls
C. Buy puts and buy calls
D. Both a) and b)

8. How are international finance and domestic finance different?
(Points : 10)
A. Foreign exchange and political risks
B. Market imperfections
C. Expanded opportunity set
D. All of the above

9. The euro zone is similar to the United States in terms of population, even though the gross domestic product (GDP) is less. (Points : 10)
True
False
10. The G-7 is composed of (Points : 10)
A. Canada, France, Japan, Germany, Italy, the U.K., and the United States.
B. Switzerland, France, Japan, Germany, Italy, the U.K., and the United States.
C. Switzerland, France, North Korea, Germany, Italy, the U.K., and the United States.
D. Switzerland, France, Japan, Germany, Canada, the U.K., and the United States.

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