International Economics
Test Questions
Course Introduction
International Economics explores the principles and dynamics governing economic interactions between countries, including trade theories, trade policies, and the effects of globalization. The course examines key concepts such as comparative advantage, balance of payments, exchange rates, and the impact of trade agreements and international organizations. Students analyze how nations benefit from trade, the consequences of protectionism, and the roles of multinational corporations and financial institutions in shaping the global economy. Emphasis is placed on real-world applications and current issues, preparing students to understand and critically evaluate the economic challenges and opportunities presented by an increasingly interconnected world.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn
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Hubbard
Page 2
Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) Trina quits her $90 000-a-year job to become a full-time volunteer at a museum.
What is the opportunity cost of her decision?
A)Zero since he will no longer be earning a salary.
B)Depends on the 'going rate' of museum employees.
C)At least $90 000.
D)The value he attributes to the joy of working at a museum.
Answer: C
Q2) The sales revenue a seller receives from the sale of an additional unit of goods is called the 'marginal benefit'.
A)True
B)False
Answer: True
Q3) Making optimal decisions 'at the margin' requires:
A)making decisions according to one's whims and fancies.
B)making consistently irrational decisions.
C)weighing the costs and benefits of a decision before deciding if it should be pursued.
D)making borderline decisions.
Answer: C
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Chapter 2: Choices and Trade Offs in the Market
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Sample Questions
Q1) ________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.
A)Increasing
B)Decreasing
C)Constant
D)Negative
Answer: A
Q2) The 'production possibility frontier model' assumes which of the following?
A)Labour, capital, land and natural resources are unlimited in quantity.
B)The economy produces only two products.
C)Any level of the two products that the economy produces is currently possible.
D)The level of technology is variable.
Answer: B
Q3) A decrease in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a point outside the frontier.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) The equilibrium price will increase if the demand curve for a product shifts to the right and the supply curve for the product shifts to the left.
A)True
B)False
Answer: True
Q2) If the number of firms producing mouthwash increases and consumer preference for mouthwash increases, the equilibrium price of mouthwash will definitely increase.
A)True
B)False
Answer: False
Q3) As the number of firms in a market increases, the supply curve will shift to the right and the equilibrium quantity will rise.
A)True
B)False
Answer: True
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Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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Sample Questions
Q1) The three main methods of measuring GDP are the:
A)multiplier method, the production method, and the expenditure method.
B)goods and services method, the production method, and the expenditure method.
C)income method, the production method, and the expenditure method.
D)consumption method, the savings method, and the investment method.
Q2) Refer to Table 4.2. Calculate the GDP deflator in 2018.
A)124
B)114
C)95
D)87
Q3) Fees that Australian universities receive from overseas students studying in Australia are not included as part of GDP but are included as part of Gross National Income (GNI), as GNI includes flows of funds from overseas.
A)True
B)False
Q4) 'Transfer payments' are not included in GDP because:
A)they are not purchases of goods or services.
B)their value is included in government expenditure.
C)they do not generate income.
D)their market value is difficult to measure.
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Chapter 5: Economic Growth, the Financial System and Business Cycles
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Sample Questions
Q1) Long-run economic growth:
A)is due to increases in capital productivity rather than labour productivity.
B)does not usually occur due to the economic recessions that occur as part of the business cycle.
C)depends more on increases in capital per hour worked than on technological change.
D)depends more on technological change than on increases in capital per hour worked.
Q2) When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?
A)Real GDP is falling.
B)Incomes are growing at a slower rate than the population.
C)Real GDP per capita is rising.
D)Living standards are falling.
Q3) Total motor vehicle sales in Australia:
A)have slowly decreased over time.
B)decline by a greater percentage than does GDP during an economic contraction.
C)decline by a smaller percentage than does GDP during an economic contraction.
D)remain constant during business cycles.
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Page 7
Chapter 6: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Your friend is opposed to globalisation for environmental reasons. Outline for your friend, the positive economic aspects of globalisation.
Q2) What is the result of a lack of investment in strong education and health care systems?
A)It causes a deterioration in human capital and an increase in physical capital.
B)It causes a decline in physical capital and a decline in labour productivity.
C)It increases human capital and causes a decline in labour productivity.
D)It causes a deterioration in human capital and a decline in labour productivity.
Q3) Technological change causes a movement along a per-worker production function.
A)True B)False
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Chapter 7: Unemployment
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Sample Questions
Q1) In Australia between 1978 and 2016, the net number of:
A)part-time jobs and full-time jobs fell.
B)part-time jobs grew, while full-time jobs fell.
C)full-time jobs grew, while part-time jobs fell.
D)part-time jobs and full-time jobs grew.
Q2) Why are jobs continually being created and destroyed in the economy?
Q3) Explain why 'discouraged workers' are not measured as being 'unemployed'.
Q4) Who might be disadvantaged by deregulation of the labour market?
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Chapter 8: Inflation
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Sample Questions
Q1) Which of the following is not an economic cost of higher than anticipated inflation?
A)Purchasing power of people on fixed incomes will fall.
B)A person who has borrowed money at a fixed interest rate will be disadvantaged.
C)Businesses incur costs through having to change prices.
D)Banks who have loaned out money at a fixed interest rate will be disadvantaged.
Q2) The most widely used measure of inflation is based on which of the following price indices?
A)producer price index
B)consumer price index
C)GDP deflator
D)wholesale price index
Q3) Which of the following can cause cost-push inflation if the economy is currently in equilibrium at full-employment GDP?
A)A flood which destroyed much of the country's crops.
B)An increase in the size of the labour force.
C)A decrease in personal income tax rates, which increases after-tax income.
D)An increase in the capital stock in the country.
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Chapter 9: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) If economists forecast an increase in aggregate expenditure, real GDP will rise. A)True
B)False
Q2) Goods that have been produced but not yet sold are referred to as:
A)understocks.
B)inventories.
C)pre-sold goods.
D)capital goods.
Q3) An increase in the price level in Australia, ceteris paribus, will reduce imports and increase exports.
A)True
B)False
Q4) Which of the following is true?
A)National income = Consumption + Savings - Taxes
B)National income = Consumption - Savings - Taxes
C)National income = Consumption + Savings + Taxes
D)National income = Consumption - Savings + Taxes
Q5) When aggregate expenditure is more than real GDP, inventories will increase. A)True
B)False
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Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.
A)raises; recession; lowers; expansion
B)raises; expansion; raises; recession
C)lowers; expansion; lowers; recession
D)lowers; recession; raises; expansion
Q2) Why is the long-run aggregate supply curve vertical?
Q3) Workers expect the rate of inflation to fall from 5% to 2% next year. As a result, this should:
A)shift the short-run aggregate supply curve to the right.
B)shift the short-run aggregate supply curve to the left.
C)move the economy up along a stationary short-run aggregate supply curve.
D)move the economy down along a stationary short-run aggregate supply curve.
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Page 12
Chapter 11: Money, Banks and the Reserve Bank of Australia
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Sample Questions
Q1) Which of the following is used by the Reserve Bank of Australia as the main measure of monetary movements in Australia?
A)M1
B)M3
C)broad money
D)credit
Q2) If households in the economy decide to take money out of demand deposit accounts and put this money into long-term savings accounts, this will:
A)decrease M1 and increase M3.
B)decrease M1 and increase broad money.
C)decrease M1 and not change M3.
D)increase M1 and decrease M3.
Q3) Which of the following is not one of the criteria for a commodity to be a suitable medium of exchange?
A)it should be durable
B)it should have a standardised quantity
C)it should be divisible
D)it should not have other uses
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13
Chapter 12: Monetary Policy
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Sample Questions
Q1) Explain the consequences of expansionary monetary policy if the economy was close to, or at, potential GDP level.
Q2) Which of the following is an argument that supports the non-independence of a country's central bank from its government?
A)Independent monetary policy decision makers are not answerable to the voting public.
B)Non-independence removes monetary policy from the political electoral cycle.
C)Independent monetary policy is more likely to be inflationary.
D)Non-independence allows the government to sell bonds to finance spending more efficiently.
Q3) If real GDP decreases:
A)the money demand curve will shift to the right.
B)the money demand curve will shift to the left.
C)there will be an upward movement along the money demand curve.
D)there will be a downward movement along the money demand curve.
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Page 14
Chapter 13: Fiscal Policy
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Sample Questions
Q1) Which of the following is considered 'expansionary fiscal policy'?
A)The government decreases the income tax rate.
B)The government increases defence spending due to a change in priorities.
C)Legislation that increases education expense deductions from federal income taxes.
D)A state (not federal)government cuts highway spending to balance its budget.
Q2) What is 'expansionary fiscal policy' and under what circumstances would it be used?
Q3) During economic contractions, government expenditure automatically:
A)falls because of programs such as unemployment benefits.
B)rises because of programs such as unemployment benefits.
C)falls because of the progressive income tax system.
D)rises because of the progressive income tax system.
Q4) Induced taxes and transfer payments reduce the multiplier effects.
A)True
B)False
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Page 15
Chapter 14: Macroeconomics in an Open Economy
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Sample Questions
Q1) Which of the following is a source of supply for the Australian dollar?
A)A German firm that wants to purchase agricultural products from Australia.
B)An Indian financier who wants to buy an Australian bond.
C)A currency trader who thinks the value of the dollar will be greater in the future relative to the value today.
D)An Australian bank that wants to buy a Japanese bond.
Q2) The real exchange rate is the amount of an overseas currency that can be purchased with the local (domestic)currency.
A)True
B)False
Q3) Australia ________ concerned with being a net borrower if Australia is using all of the borrowed funds to ________.
A)should be; finance investment
B)should not be; finance consumption
C)should not be; finance imports
D)should be; pay interest to service debt
Q4) In recent decades, Australia has incurred overall balance of payments deficits.
A)True
B)False
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Chapter 15: The International Financial System
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Sample Questions
Q1) Describe how the 'Bretton Woods System' operated.
Q2) The Australian dollar is partially backed by the gold held at the Reserve Bank of Australia.
A)True
B)False
Q3) The trade weighted index (TWI)is a measure of the:
A)difference between exports and imports, to establish the balance of trade on goods and services.
B)value of the Australian dollar against a basket of currencies of its major trading partners.
C)volume of international trade throughout the world.
D)price changes in goods and services traded between Australia and the rest of the world.
Q4) Both countries involved in an exchange rate peg must agree to the peg. A)True
B)False
Page 17
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