Economic theory predicts that a currency depreciation will least lead to an improvement in the home country’s trade balance when ?

Related Mcqs:

1. Which approach predicts that is an economy operates a full employment and faces trade deficit currency devaluation will improve the trade balance only if domestic spending is cut thus freeing resources to produce exports ?

   A. the absorption approaches
   B. the Marshall Lerner approach
   C. the monetary approach
   D. the elasticities approach

2. If export contracts are written in terms of foreign currency and import contracts are denominated in domestic currency a depreciation of the dollar during the currency contract period ?

   A. should increase the dollar value of exports
   B. should not have any effect on the dollar value of U.S imports
   C. must increase the balance of trade
   D. All of the above

3. The notion that, following a currency depreciation the balance of trade falls for a while before increasing is called an effect ?

   A. relative price
   B. elasticity
   C. J Curve
   D. Pass through

4. Empirical evidence regarding in the effects of currency depreciation on the balance of trade indicates that?

   A. depreciation generally improves the trade balance
   B. depreciation generally hurts the trade balance
   C. no strong generalization is possible
   D. depreciation has no effect on the trade balance

5. Statement A: The might of a country consists of gaining surpluses of gold and silver Statement B: A nation’s strength is found in economic independence and the maintenance of a favorable balance of trade Statement C: We need to gain colonies both as sources for raw materials and as markets for our manufactured of goods Which economic system is being described by these statements ?

   A. traditional
   B. feudal
   C. command
   D. mercantile

6. Because of the J curve effect and partial currency pass through, a depreciation of the domestic currency tends to increase the size of a ?

   A. trade surplus in the short run
   B. trade surplus in the long run
   C. trade deficit in the short run
   D. trade deficit in the long run

7. The theory of overlapping demand predicts that trade in manufactured goods is unimportant for countries with very different ?

   A. Tastes and preferences
   B. Expectations of future interest rate levels
   C. Per-capita income levels
   D. Labor productivities

8. According to the Marshall-Lerner condition if a country’s currency depreciates its trade balance will worsen if ?

   A. elasticity of demand for exports = 0.9; elasticity of demand for imports = 0.4
   B. elasticity of demand for exports = 0.7; elasticity of demand for imports = 0.3
   C. elasticity of demand for exports = 0.5; elasticity of demand for imports = 0.7
   D. elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6

9. Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium economic theory suggests that the nation’s balance of payments would move into a surplus position if there occurred in the nation a (an) ?

   A. increase in the money demand
   B. decrease in the money demand
   C. increase in the money demand
   D. None of the above

10. Suppose that the United Kingdom devalues the pound if both exports and imports are written in terms of pounds then the United Kingdom balance of trade during a currency contract period ?

    A. improves
    B. worsens
    C. is unaffected
    D. falls for a while before increasing