Quiz #632

• 1. The MMT classification of exports as a cost means:
• (a) Currency-issuing governments are not financially constrained.
• (b) Foreign spending into the local economy can be inflationary.
• (c) The resources that are embodied in exports are lost to the nation and are, instead, used by foreigners to enhance their material prosperity.
• (d) Government debt interest payments have to be serviced.
• 2. A rising child dependency ratio:
• (a) Will ultimately lead to a falling standard dependency ratio once birth rates decline.
• (b) Means that people of retirement age are increasing at a faster rate than children.
• (c) Means that child care centres are becoming more dependent on government support.
• (d) Means the aged dependency ratio is falling.
• 3. When a nations exchange rate depreciates:
• (a) The nations inflation rate accelerates.
• (b) Imported motor vehicles become cheaper for residents to buy.
• (c) Foreigners stop coming to the nation for holidays.
• (d) Imported goods become more expensive in the local currency.
• 4. When a nations exchange rate appreciates, the debt servicing payments for debt denominated in a foreign currency:
• (a) Fall in local currency terms.
• (b) Rise in local currency terms.
• (c) Are unchanged in local currency terms because the payments are fixed by contract.
• (d) Rise because foreign governments require higher payments.
• 5. A nation will become more competitive in international trade if:
  1. (a) Its nominal exchange rate is unchanged, but its inflation rate falls relative to other nations.
  2. (b) Its nominal exchange rate is unchanged, but its inflation rate rises relative to other nations.
  3. (c) Its nominal exchange rate appreciates, but its inflation rate is unchanged relative to other nations.
  4. (d) Its nominal exchange rate depreciates, but its inflation rate is unchanged relative to other nations.
• (a)
• (b)
• (c)
• (d)
• (a) and (b)
• (b) and (c)
• (a) and (c)
• (a) and (d)

Quiz #632 answers

• 1. The MMT classification of exports as a cost means:

Answer: (c) The resources that are embodied in exports are lost to the nation and are, instead, used by foreigners to enhance their material prosperity.

• 2. A rising child dependency ratio:

Answer: (a) Will ultimately lead to a falling standard dependency ratio once birth rates decline.

• 3. When a nations exchange rate depreciates:

Answer: (d) Imported goods become more expensive in the local currency.

• 4. When a nations exchange rate appreciates, the debt servicing payments for debt denominated in a foreign currency:

Answer: (a) Fall in local currency terms.

• 5. A nation will become more competitive in international trade if:
  1. (a) Its nominal exchange rate is unchanged, but its inflation rate falls relative to other nations.
  2. (b) Its nominal exchange rate is unchanged, but its inflation rate rises relative to other nations.
  3. (c) Its nominal exchange rate appreciates, but its inflation rate is unchanged relative to other nations.
  4. (d) Its nominal exchange rate depreciates, but its inflation rate is unchanged relative to other nations.

Answer: (a) and (d)