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AP Intermediate 2nd Year Open Economy Macroeconomics — practice questions — page 2

Explore 50 free Open Economy Macroeconomics questions in AP Intermediate 2nd Year Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Open Economy Macroeconomics questions and exercises with answers

Showing questions 31–50 of 50.

If you pay Rs 50 to get $1, the exchange rate is quoted as what?Read the answer and worked solution →Which reason creates a demand for foreign exchange?Read the answer and worked solution →Which transaction raises the supply of foreign exchange to a country?Read the answer and worked solution →Why does demand for foreign exchange fall when its price rises?Read the answer and worked solution →Which is a way of determining a currency's exchange rate?Read the answer and worked solution →A flexible exchange rate is determined by what?Read the answer and worked solution →A flexible exchange rate is also known by which other name?Read the answer and worked solution →In a completely flexible system, what do central banks do in the forex market?Read the answer and worked solution →The rate moves from Rs 50 to Rs 70 per dollar. The rupee has what?Read the answer and worked solution →Fewer rupees are needed to buy one dollar in a flexible regime. The rupee has what?Read the answer and worked solution →A country whose aggregate demand grows faster than the world's usually sees what?Read the answer and worked solution →Higher domestic interest rates, other things equal, often lead to what for the home currency?Read the answer and worked solution →Equally safe bonds pay 8 per cent in country A and 10 per cent in B. The interest rate differential is what?Read the answer and worked solution →Which theory predicts long-run exchange rates in a flexible exchange rate system?Read the answer and worked solution →A shirt costs $8 in the US and Rs 400 in India. PPP implies a rate of what?Read the answer and worked solution →A Rs 400 Indian shirt rises 20 percent, a $8 US shirt rises 50 percent. PPP rate becomes what?Read the answer and worked solution →A rate of Rs 30 per dollar in 2010; prices double in India, fixed in USA. PPP rate in 2030?Read the answer and worked solution →A higher real exchange rate R makes foreign goods relatively what?Read the answer and worked solution →Under a fixed exchange rate system, who sets the exchange rate?Read the answer and worked solution →The government fixes Rs 70 per dollar against a market Rs 50. What must the RBI do?Read the answer and worked solution →

Worked practice questions

If you pay Rs 50 to get $1, the exchange rate is quoted as what?

  1. Rs 5 per dollar
  2. $50 per rupee
  3. Rs 50 per dollar
  4. $5 per rupee
Show answer and solution

Correct answer: C. Rs 50 per dollar

The rate is the rupee price of one dollar, so paying Rs 50 for $1 is Rs 50 per dollar.

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Which reason creates a demand for foreign exchange?

  1. Foreigners buying exports
  2. Foreigners sending gifts
  3. Foreigners buying assets
  4. Buying imports from abroad
Show answer and solution

Correct answer: D. Buying imports from abroad

Residents need foreign currency to pay for imports, gifts abroad and foreign assets; the other options supply it.

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Which transaction raises the supply of foreign exchange to a country?

  1. Exports of goods
  2. Imports of goods
  3. Gifts sent abroad
  4. Buying foreign assets
Show answer and solution

Correct answer: A. Exports of goods

Foreign buyers pay for our exports in foreign currency, adding to supply.

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