ECO 320 Week3 Quiz

1. Which of the following is a precondition for economic growth? (Points : 1)

2. The possession of primary products in a developing country could: (Points : 1)

3. The following countries has a large amount of economic freedom? (Points : 1)

4. The production function: (Points : 1)

is linear.
is undefined for low-income countries.
slopes downward and to the right.
slopes upward to the right.

Question 5. 5. The rule of law is important to economic growth as it is necessary for the
enforcement of _____ . (Points : 1)

free trade
emigration
contracts
industrial policy

6. Which of the following statements is false? (Points : 1)

High levels of consumption tend to be associated with current account deficits.
High levels of savings tend to be associated with current account surpluses.
Low levels of savings tend to be associated with current account deficits.
Low levels of savings tend to be associated with capital account deficits.

Question 7. 7. A record of all economic transactions between residents of one country with the 
rest of the world is called: (Points : 1)

the trade balance.
the balance of payments.
the current account balance.
the foreign exchange market.

Question 8. 8. Which of the following is not one of the components of GDP? (Points : 1)

Gross private domestic investment
Consumption by the public
Government spending on goods and services 
Foreign direct investment by U.S. corporations

9. The value of final output measured in current prices is: (Points : 1)

nominal GDP.
market value GDP.
real GDP.
real nominal GDP.

Question 10. 10. When GDP is larger than the sum of C, I, and G, then: (Points : 1)

a country prefers current consumption to future consumption.
a country prefers future consumption to current consumption.
a country will have a trade deficit.
a country will borrow to increase spending.

Question 11. 11. The foreign exchange market is composed of: (Points : 1)

the retail market.
the inter-bank market.
the futures and options markets.
all of the above

12. One of the most important interest rates in the world economy is: (Points : 1)

the Lombard rate
the prime rate.
RR rate.
LIBOR.

Question 13. 13. A _____ is when two parties agree to exchange different currencies over a 
specified period of time. (Points : 1)

futures contract
option
currency swap
XR contract

Question 14. 14. If an importer wants to protect a transaction against exchange rate fluctuations 
he/she can use the: (Points : 1)

spot rate.
forward rate.
strike price.
future spot rate.

15. The principle of _____ states that if the returns on various assets do not move 
together identically, then holding a portfolio of assets will be less risky than holding a
single asset. (Points : 1)

risk diversification
asset allocation
stock/bond split
time horizon symmetry

Question 16. 16. An example of depreciation of the dollar would be if the number of Mexican pesos a dollar would purchase went from _____ to _____. (Points : 1)

100, 125
125, 150
150, 180
200, 180

Question 17. 17. As the Mexican peso appreciates, exports from Mexico become_____ and imports 
into Poland become _____. (Points : 1)

cheaper, cheaper
cheaper, more expensive
more expensive, more expensive
more expensive, cheaper

18. As the dollar depreciates: (Points : 1)

the quantity supplied of foreign exchange increases.
the quantity supplied of foreign exchange decreases.
the supply of foreign exchange decreases.
the supply of foreign exchange increases.

Question 19. 19. If the initial exchange rate is 120 yen per dollar and then falls to 110 yen per 
dollar, we would say that the yen has: (Points : 1)

appreciated against the dollar.
depreciated against the dollar.
appreciated against the yen.
depreciated against the yen.

Question 20. 20. Import competing industries in the U.S. are likely to resist: (Points : 1)

an appreciation of the dollar because U.S. imports would become more expensive.
a depreciation of the dollar because U.S. imports would become more expensive.
an appreciation of the dollar because U.S. imports would become less expensive.
a depreciation of the dollar because U.S. imports would become less expensive