INTERNATIONAL ECONOMICS AND FINANCE

SAMPLE QUESTIONS
Where is the world's largest foreign exchange market?

A) Tokyo
B) London
C) New York
D) Beijing
E) Singapore
Where is the world's largest foreign exchange market?

A) Tokyo
B) London
C) New York
D) Beijing
E) Singapore
Which of the following can be used as a forward currency transaction?

A) Options
B) Swaps
C) Future transactions
D) Forward transactions
E) All
Which of the following can be used as a forward currency transaction?

A) Options
B) Swaps
C) Future transactions
D) Forward transactions
E) All
Which of the following explains the central bank's influence in the foreign
exchange market in Turkey, despite its low transaction volume?

A) Having large foreign exchange reserves

B) Having the authority to print foreign currency
C) Being a policy maker
D) Being the lender of last resort to banks
E) Indirect effect of required reserves
Which of the following explains the central bank's influence in the foreign
exchange market in Turkey, despite its low transaction volume?

A) Having large foreign exchange reserves

B) Having the authority to print foreign currency
C) Being a policy maker
D) Being the lender of last resort to banks
E) Indirect effect of required reserves
Which of the following would not be a result of a permanent decrease in the
money supply?
A) An increase in interest rates in the short run.
B) The real money supply does not change in the long run.
C) The appreciation of the national currency
D) A decrease in the general level of prices in the long run.
E) A decrease in the expected value of the national currency against the
foreign currency.
Which of the following would not be a result of a permanent decrease in the
money supply?
A) An increase in interest rates in the short run.
B) The real money supply does not change in the long run.
C) The appreciation of the national currency
D) A decrease in the general level of prices in the long run.
E) A decrease in the expected value of the national currency against the
foreign currency.
What is the name of buying and selling money, precious metals, bonds and
stocks by taking advantage of price differences in different markets?

A) Interest parity condition

B) Exchange rate
C) Swap
D) Arbitrage
E) None
What is the name of buying and selling money, precious metals, bonds and
stocks by taking advantage of price differences in different markets?

A) Interest parity condition

B) Exchange rate
C) Swap
D) Arbitrage
E) None
Which of the following is false regarding the balance of payments?

A) It can give information about the country's indebtedness in foreign

currency.
B) It has flow variables.
C) It shows all the expenditures that contribute to the production of the
country.
D) It consists of current account, capital account and financial account.
E) Net error omission account is used for balancing purposes.
Which of the following is false regarding the balance of payments?

A) It can give information about the country's indebtedness in foreign

currency.
B) It has flow variables.
C) It shows all the expenditures that contribute to the production of the
country.
D) It consists of current account, capital account and financial account.
E) Net error omission account is used for balancing purposes.
Which is false for real GDP?

A) It is always smaller than nominal GDP.

B) Shows real growth performance
C) It is used to compare the growth rates of countries
D) Adjusted for the effect of inflation
E) Prices of goods and services in a selected year are taken as a basis.
Which is false for real GDP?

A) It is always smaller than nominal GDP.

B) Shows real growth performance
C) It is used to compare the growth rates of countries
D) Adjusted for the effect of inflation
E) Prices of goods and services in a selected year are taken as a basis.
Which of the following represents the total value of final goods and services
produced in a country in a given period considering the market price?

A) GDP
B) GNP
C) Net Income
D) Investment
E) Net exports
Which of the following represents the total value of final goods and services
produced in a country in a given period considering the market price?

A) GDP
B) GNP
C) Net Income
D) Investment
E) Net exports
Which of the following shows the relationship between gross national product
(GNP) and gross domestic product (GDP)?

A) GNP = GDP + Net foreign loans

B) GNP = GDP + Net tourism income
C) GNP = GDP + Net foreign direct investment
D) GNP = GDP + Net foreign capital inflow
E) GNP = GDP + Net external factor income
Which of the following shows the relationship between gross national product
(GNP) and gross domestic product (GDP)?

A) GNP = GDP + Net foreign loans

B) GNP = GDP + Net tourism income
C) GNP = GDP + Net foreign direct investment
D) GNP = GDP + Net foreign capital inflow
E) GNP = GDP + Net external factor income
Which of the following is included in the definition of Gross National Product
(GNP) but not in the definition of Gross Domestic Product (GDP)?

A) Investment expenditures for housing

B) Revenues sent from abroad by contractors who are citizens of the country
C) Investment expenditures made by foreigners in the country
D) Public expenditures for military purposes
E) Health expenditures made by the public sector
Which of the following is included in the definition of Gross National Product
(GNP) but not in the definition of Gross Domestic Product (GDP)?

A) Investment expenditures for housing

B) Revenues sent from abroad by contractors who are citizens of the country
C) Investment expenditures made by foreigners in the country
D) Public expenditures for military purposes
E) Health expenditures made by the public sector
Which of the following includes three approaches to calculating GDP?

A) Production, income and expenditures approach

B) Production, consumption and expenditure approaches
C) Production, value added and expenditure approaches
D) Value added, investment and income approaches
E) Production, income and savings approaches
Which of the following includes three approaches to calculating GDP?

A) Production, income and expenditures approach

B) Production, consumption and expenditure approaches
C) Production, value added and expenditure approaches
D) Value added, investment and income approaches
E) Production, income and savings approaches
Which of the following is the reason why imports are taken into account as
negative in national accounts?

A) Import reflects the opportunity cost of giving up domestic production.

B) Import volume is mostly higher than export volume.
C) Consideration of imported goods and services under other components
such as consumption and investment.
D) Import causes foreign exchange outflow from the country.
E) Quick response of import to exchange rate changes.
Which of the following is the reason why imports are taken into account as
negative in national accounts?

A) Import reflects the opportunity cost of giving up domestic production.

B) Import volume is mostly higher than export volume.
C) Consideration of imported goods and services under other components
such as consumption and investment.
D) Import causes foreign exchange outflow from the country.
E) Quick response of import to exchange rate changes.
Which of the following is false regarding government spending in national
accounts?

A) It is taken into account with a positive sign in national accounts.

B) It includes the consumption expenditures of the state.
C) It includes the investment expenditures of the state.
D) It does not include the contributions made by the state to the
unemployment fund.
E) Includes transfer expenditures made by the government.
Which of the following is false regarding government spending in national
accounts?

A) It is taken into account with a positive sign in national accounts.

B) It includes the consumption expenditures of the state.
C) It includes the investment expenditures of the state.
D) It does not include the contributions made by the state to the
unemployment fund.
E) Includes transfer expenditures made by the government.
Which of the following is false regarding national accounts?

A) The largest share belongs to private consumption.

B) The most unstable component is investments.
C) In a closed economy, exports and imports are not taken into account.
D) In open economies, the largest share belongs to exports.
E) Indirect taxes affect the consumption component negatively.
Which of the following is false regarding national accounts?

A) The largest share belongs to private consumption.

B) The most unstable component is investments.
C) In a closed economy, exports and imports are not taken into account.
D) In open economies, the largest share belongs to exports.
E) Indirect taxes affect the consumption component negatively.
Which of the following is true regarding the current account balance?

A) If the import is greater than the export, there is a current account surplus.
B) If exports are greater than imports, there is a current account deficit.
C) It can be said that the current account balance is equal to the change in net
foreign assets.
D) Using the current account balance, no inference can be made about the
international indebtedness situation.
E) In open economies, the sum of exports must be equal to the sum of
imports.
Which of the following is true regarding the current account balance?

A) If the import is greater than the export, there is a current account surplus.
B) If exports are greater than imports, there is a current account deficit.
C) It can be said that the current account balance is equal to the change in net
foreign assets.
D) Using the current account balance, no inference can be made about the
international indebtedness situation.
E) In open economies, the sum of exports must be equal to the sum of
imports.
Which of the following is false regarding national savings?

A) It has two components, private savings and government savings.

B) In a closed economy it always equals total investment.
C) It is equal to the sum of investments and current account balance in an
open economy.
D) Government saving is often more than private saving.
E) Government savings are equal to the difference between taxes collected
and government expenditures.
Which of the following is false regarding national savings?

A) It has two components, private savings and government savings.

B) In a closed economy it always equals total investment.
C) It is equal to the sum of investments and current account balance in an
open economy.
D) Government saving is often more than private saving.
E) Government savings are equal to the difference between taxes collected
and government expenditures.
Which of the following is false regarding the current account balance in an
open economy?

A) In order to improve the current account balance, it is necessary to increase

private savings.
B) The increase in government expenditures affects the current account
balance negatively.
C) The increase in tax revenues positively affects the current account balance.
D) The increase in government savings affects the current account balance
negatively.
E) The decrease in domestic investments positively affects the current account
balance.
Which of the following is false regarding the current account balance in an
open economy?

A) In order to improve the current account balance, it is necessary to increase

private savings.
B) The increase in government expenditures affects the current account
balance negatively.
C) The increase in tax revenues positively affects the current account balance.
D) The increase in government savings affects the current account balance
negatively.
E) The decrease in domestic investments positively affects the current account
balance.
In an economy where private savings are 60 units, budget deficit is 20 units,
and domestic investments are 10 units, if imports are 20 units, how many units
are exports?

A)20
B)30
C)40
D)50
E)60
In an economy where private savings are 60 units, budget deficit is 20 units,
and domestic investments are 10 units, if imports are 20 units, how many units
are exports?

A)20
B)30
C)40
D)50
E)60
What is the amount of imports in an open economy with national income (Y) =
3000, consumption (C) = 1600, investment (I) = 600, government expenditures
(G) = 800, exports (X) = 600?

A)700
B)600
C)500
D)400
E)300
What is the amount of imports in an open economy with national income (Y) =
3000, consumption (C) = 1600, investment (I) = 600, government expenditures
(G) = 800, exports (X) = 600?

A)700
B)600
C)500
D)400
E)300
Which of the following is included in the M1 money supply?

A) money in circulation
B) time deposit
C) bonds
D) long-term loans
E) savings deposit
Which of the following is included in the M1 money supply?

A) money in circulation
B) time deposit
C) bonds
D) long-term loans
E) savings deposit
In country B, the balance of payments is in balance in 2020. If the financial
account is 600 million dollars, the net-errors-omissions item is 100 million
dollars, and the capital account has a balance of -50 million dollars, which of
the following statements about the current account of this country is correct?
A) It gives a current account deficit of 650 million dollars.
B) It gives a current account deficit of 600 million dollars.
C) It gives a current account surplus of 700 million dollars.
D) It gives a current account deficit of 700 million dollars.
E) It gives a current account deficit of 500 million dollars.
In country B, the balance of payments is in balance in 2020. If the financial
account is 600 million dollars, the net-errors-omissions item is 100 million
dollars, and the capital account has a balance of -50 million dollars, which of
the following statements about the current account of this country is correct?
A) It gives a current account deficit of 650 million dollars.
B) It gives a current account deficit of 600 million dollars.
C) It gives a current account surplus of 700 million dollars.
D) It gives a current account deficit of 700 million dollars.
E) It gives a current account deficit of 500 million dollars.
Balance of Payments 2008 (Billion USD)
Current Account - 27.8
Capital Account 1.0
Financial Account 28.4
Net Errors and Omissions - 1.6

According to the information in this table, which of the following statements regarding
the balance of payments in 2008 is incorrect?

A) The current account deficit was financed by the surplus in the capital and financial
accounts.
B) There is an unexplained 1.6-billion-dollar foreign exchange outflow.
C) The country was a net lender to the rest of the world in 2008.
D) Current account has a deficit of 27.8 billion dollars.
E) The financial account shows that there is a capital inflow of 28.4 billion dollars from
Balance of Payments 2008 (Billion USD)
Current Account - 27.8
Capital Account 1.0
Financial Account 28.4
Net Errors and Omissions - 1.6

According to the information in this table, which of the following statements regarding
the balance of payments in 2008 is incorrect?

A) The current account deficit was financed by the surplus in the capital and financial
accounts.
B) There is an unexplained 1.6-billion-dollar foreign exchange outflow.
C) The country was a net lender to the rest of the world in 2008.
D) Current account has a deficit of 27.8 billion dollars.
E) The financial account shows that there is a capital inflow of 28.4 billion dollars from
Balance of Payments 2020 (Billion USD)
Current Account 30.0
Capital Account -3.0
Financial Account -30.0
Net Errors and Omissions 3.0

Which of the following statements is incorrect regarding the information in this table
regarding the balance of payments for 2020?

A) Capital and financial accounts deficits were financed by current account surplus.
B) There is an unexplained 3-billion-dollar foreign currency inflow.
C) The country is a net lender to the rest of the world in 2020.
D) The balance of payments is in balance.
E) The financial account shows that there is a capital inflow of 30 billion dollars from
Balance of Payments 2020 (Billion USD)
Current Account 30.0
Capital Account -3.0
Financial Account -30.0
Net Errors and Omissions 3.0

Which of the following statements is incorrect regarding the information in this table
regarding the balance of payments for 2020?

A) Capital and financial accounts deficits were financed by current account surplus.
B) There is an unexplained 3-billion-dollar foreign currency inflow.
C) The country is a net lender to the rest of the world in 2020.
D) The balance of payments is in balance.
E) The financial account shows that there is a capital inflow of 30 billion dollars from
Which of the following is false regarding the net international investment
position?

A) It is a stock data.
B) The net position can be a positive or negative value.
C) It is equal to the difference of the financial receivables and liabilities
between residents and non-residents.
D) If the receivables from abroad are greater than the debts abroad, the
country is in the position of a net lender.
E) If the debts abroad are greater than the receivables from abroad, the
country's net position will be positive.
Which of the following is false regarding the net international investment
position?

A) It is a stock data.
B) The net position can be a positive or negative value.
C) It is equal to the difference of the financial receivables and liabilities
between residents and non-residents.
D) If the receivables from abroad are greater than the debts abroad, the
country is in the position of a net lender.
E) If the debts abroad are greater than the receivables from abroad, the
country's net position will be positive.
The annual deposit interest in TL in Turkey is 20%. If the spot rate between the
dollar and TL is E=15 (TL/$) and the expected exchange rate for 1 year is 16.5,
what percentage must the annual deposit interest rate in dollars be to have
balance in the foreign exchange market?

A)15
B)10
C)9
D)7
E)5
The annual deposit interest in TL in Turkey is 20%. If the spot rate between the
dollar and TL is E=15 (TL/$) and the expected exchange rate for 1 year is 16.5,
what percentage must the annual deposit interest rate in dollars be to have
balance in the foreign exchange market?

A)15
B)10
C)9
D)7
E)5
The annual deposit interest in TL in Turkey is 30%, and the annual deposit
interest in dollars in the USA is 5%. If the spot rate between USD and TL is E=15
(TL/$), what must be the expected exchange rate for 1 year to have balance in
the foreign exchange market?

A)17
B)18
C)18,5
D)18,75
E)19
The annual deposit interest in TL in Turkey is 30%, and the annual deposit
interest in dollars in the USA is 5%. If the spot rate between USD and TL is E=15
(TL/$), what must be the expected exchange rate for 1 year to have balance in
the foreign exchange market?

A)17
B)18
C)18,5
D)18,75
E)19
Which of the following is not an item in a net international investment
position?

A) Loans
B) Direct investment
C) Portfolio investment
D) Other investments
E) Export of goods
Which of the following is not an item in a net international investment
position?

A) Loans
B) Direct investment
C) Portfolio investment
D) Other investments
E) Export of goods
Regarding the official reserves in the balance of payments, which of the
following is false?

A) It can be viewed under the finance account or as a separate title.

B) If not included in the financial account, the sum of the current account,
capital account and financial account gives the change in official reserves.
C) It is held at the central bank to finance exports.
D) Gold reserves and special drawing rights at the IMF are also included in
official reserves.
E) If the official reserves are not included in the financial account, a negative
balance in the balance of payments implies that the central bank reserves are
decreasing, or the central bank is borrowing from abroad.
Regarding the official reserves in the balance of payments, which of the
following is false?

A) It can be viewed under the finance account or as a separate title.

B) If not included in the financial account, the sum of the current account,
capital account and financial account gives the change in official reserves.
C) It is held at the central bank to finance exports.
D) Gold reserves and special drawing rights at the IMF are also included in
official reserves.
E) If the official reserves are not included in the financial account, a negative
balance in the balance of payments implies that the central bank reserves are
decreasing, or the central bank is borrowing from abroad.
Which of the following indicates behavior of the dollar interest rate after a
permanent increase in the U.S. money supply?

A) B) C)

t0 Time t0 Time t0 Time

D)
E) None

t0 Time
Which of the following indicates behavior of the dollar interest rate after a
permanent increase in the U.S. money supply?

A) B) C)

t0 Time t0 Time t0 Time

D)
E) None

t0 Time
Considering the graph below money market is initially in balance at
point 1. Which of the following is false?

A) Point 2 indicates impact of the increase in

real output
B) Point 3 indicates impact of the decrease in
real money supply.
C) Point 3 implies depreciation of domestis
currency
D) Point 1’ indicates excess money demand
E) At the points 1, 2 and 3 there is no excess
money demand or supply.
Considering the graph below money market is initially in balance at
point 1. Which of the following is false?

A) Point 2 indicates impact of the increase in

real output
B) Point 3 indicates impact of the decrease in
real money supply.
C) Point 3 implies depreciation of domestis
currency
D) Point 1’ indicates excess money demand
E) At the points 1, 2 and 3 there is no excess
money demand or supply.