Question

Question 48

The exchange rate of US Dollar to Euro yesterday, May 8 was $1/€0.89222. The exchange rate two months ago on March 8 was $1/€0.89301. Which one is true about the change over the two moths?

a) Dollar is appreciated

b) Both currencies are appreciated

c) Euro is appreciated

d) Dollar is depreciated

e) c and d

Question 46

Why does a ‘black market’ of foreign exchange occur in many countries, especially in the low-income developing countries?

a) Due to restrictive government policies that limit foreign exchange transactions

b) Black market is not a phenomena in low income countries it occurs in developed countries.

c) The reason for this is not known

d) Due to the shortage of the supply of foreign exchange

e) a and d

Question 45

MacDonald’s is a multi-national American company. Suppose that MacDonald’s invests in a new agroindustry business company that processes food in the UAE. This form of foreign capital flow to the UAE is:

a) Official development assistance

b) Commercial loan

c) Foreign Portfolio investment

d) Foreign direct investment

Question 43

Economic growth is different from economic development of a country in that

a) the former is qualitative while the latter is quantitative

b) economic development is measured by more factors than the national income compared to growth

c) the former is quantitative while the latter is qualitative

d) b and c

Question 44

For a given country Y, if its export commodity prices have been declining in the past 4 years while its import commodity prices has been increasing, what happens to the terms of trade of country Y during the past 4 years?

a) not possible to know this

b) has been increasing

c) remains constant

d) has been declining or deteriorating

Answer 1

48 - option e. Because now it cost less to purchase 1 dollar using the Euro. Hence the Euro has appreciated in terms of dollar and Dollar has depreciated in terms of euro.

46 - option e. restrictive government policies that limit foreign exchange transactions and shortage of supply of foreign currency at the official rate tend to increase activity in the black forex market

45 - option d. Foreign direct investment.

43 - option d. (b & c are correct and self-explanatory)

44 - option d. Terms of Trade = Price of the export/price of the import. If the numerator is declining and the denominator is increasing the overall value will be going down.