MCQ Question

1. If the economy booms in Canada while going into recession in other countries, the Canadian trade deficit will tend to ______.

• A.Increase
• B.Decrease
• C.Increase in the short run and decrease in the long run
• D.Stay the same

2, Suppose the exchange rate between the Canadian dollar and the Japanese yen was $1 = 220 yen in 2012. In 2014, the exchange rate was $1 = 100 yen.

Refer to the above information. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate in 2014?

• A.Japan's growth of national income was more rapid than that of the Canadian economy during the period.
• B.Japan increased its purchases from Canada during the period.
• C.Japan's government devalued the yen during the period.
• D.During the period, Japan exported more to Canada than it imported from Canada.

3, A deficit on the current account:

• A.means that a nation is not making any international transfers.
• B.normally causes a deficit on the capital account.
• C.has no relationship to the capital account.
• D.normally causes a surplus on the capital account.

4, A basic criticism of supply-side economics is that:

• A.higher taxes will reduce incentives to work, invest, and innovate.
• B.lower taxes will increase aggregate supply much more than they will increase aggregate demand.
• C.lower taxes will increase aggregate demand much more than they will increase aggregate supply thus creating inflation.
• D.empirical research clearly shows that incentives to work and invest vary directly with marginal tax rates.

5,

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