Question

1. Economic growth can best be shown by:

a. An outward shift of the production possibility frontier

b. An inward shift in the production possibility frontier

c. A fall in GNP

d. A lower GDP per person

2. A current account trade deficit means that...

a. spending on imported goods and services equals the export earnings over a given period

b. spending on imported goods and services is greater than the export earnings over a given period

c. spending on imported goods and services is less than the export earnings over a given period

d. government spending on imported goods and services equals the export earnings over a given period

3. What does it mean if demand for exports is -0.2?

a. Demand for exports is price elastic

b. An increase in price in foreign currency will not reduce the quantity demanded

c. A rise in value of the pound will increase the spending in foreign currency on UK goods and services

d. Demand for imports will be more than -0.8

4. What does the J curve show?

a. How the government's budget position changes over time

b. How the exchange rate changes over time

c. How the current account position changes following a depreciation of the currency

d. How the current account position changes following an appreciation of the currency

Answer 1

Answer-1. Correct option is 'a'

Economic growth can best be shown by an outward shift of the production possibility frontier. Economic growth is an increase in what an economy can produce if it is using all its scare resources. An increase in an economy's productive potential can be shown by an outward shift in the economy's production possibility frontier.

Answer-2. Correct option is 'b'

A current account trade deficit means that spending on imported goods and services is greater than the export earnings over a given period. The current account deficit is a measurement of a country's trade where the value of the goods and services it imports exceeds the value of the products it exports.

Answer-3. Correct option is 'b'

If demand for exports is -0.2, means the demand for export is inelatic, an increase in price in foreign currency will not reduce the quantity demanded.

Answer-4. Correct option is 'c'

J curve show how the current account position changes following a depreciation of the currency. The J Curve is an economic theory which states that, under certain assumptions, a country's trade deficit will initially worsen after the depreciation of its currency—mainly because higher prices on imports will be greater than the reduced volume of imports.