Question

1.Any transaction that give rise to an inflow in the balance of payment creates

A. Supply of foreign currency

B. demand for foreign currency

c. Demand for local currency

D. None of the above

2. Through the impact of the interest rate, an increase in the money supply will result in

A. an appreciation of the country's currency

B. A depreciation in the country's currency

C. Either a decrease or an increase in the value of the country's currency depending on the magnitude of the change in interest rate

D. Neither an appreciation nor a depreciation of that country's currency

3. If the US interest rate rises but interest in other countries remain the same, which of the following is likely to happen

A. The US will experience an overflow of hot money

B. The value of the US stock will increase

C. The us dollar will appreciate

D. The US dollar will depreciate

4. In general supporters of globalization argue that free trade benefits

A. Only developed countries

B. All countries

C. only developing countries

D. USA only

Answer 1

1) inflows in the balance of payment account are credit items or exports. This increases the demand for foreign currency. Select option B.

2) when there is an increase in the money supply there is a decline in the rate of interest and this causes the currency to depreciate in value. Select option B

3) there is a inflow of foreign capital when the rate of interest is increased in the domestic economy. This also causes currency to appreciate. Option A an option C are correct

4) correct choice is option B . Free trade benefit all the nation that have comparative advantage in exchange of goods and services.