Disequilibrium

What is the primary cause of a trade deficit?

• • A) Increased exports

• • B) Decreased imports

• • C) Increased imports

• • D) Stable exchange rates

How can a government reduce a current account deficit?

• • A) Increase public spending

• • B) Decrease tariffs on imports

• • C) Implement tariffs on imported goods

• • D) Lower interest rates

Which of the following indicators would suggest a country is experiencing disequilibrium?

• • A) A balanced budget

• • B) A current account surplus

• • C) A high level of foreign reserves

• • D) A persistent current account deficit

Which of the following is a common policy response to correct disequilibrium?

• • A) Increasing the money supply

• • B) Reducing taxes on income

• • C) Implementing exchange rate controls

• • D) Encouraging foreign investment without restrictions

How does political instability in a country affect its balance of payments?

• • A) It generally improves foreign investment.

• • B) It can lead to capital flight and reduced exports.

• • C) It has no effect on trade or investment.

• • D) It guarantees a trade surplus.

What impact can a recession in major trading partners have on a country's balance of payments?

• • A) It can lead to increased exports.

• • B) It can cause a decrease in demand for imports from that country.

• • C) It has no effect on the balance of payments.

• • D) It improves the trade balance.

What is a common consequence of a significant increase in consumer spending on imports?

• • A) Trade surplus

• • B) Economic growth

• • C) Trade deficit

• • D) Increased foreign reserves

How can exchange rate fluctuations contribute to disequilibrium?

• • A) They stabilize trade flows.

• • B) They alter the prices of imports and exports.

• • C) They eliminate trade deficits.

• • D) They have no impact on trade balances.

What is the role of the International Monetary Fund (IMF) in addressing disequilibrium?

• A) To promote free trade agreements

• B) To provide financial assistance and advice to countries in crisis

• C) To set global interest rates

• D) To control inflation rates worldwide
  

• • A) To promote free trade agreements

• • B) To provide financial assistance and advice to countries in crisis

• • C) To set global interest rates

• • D) To control inflation rates worldwide

What effect does currency depreciation typically have on a country's exports?

• • A) Decreases exports

• • B) Has no effect on exports

• • C) Increases exports

• • D) Makes exports more expensive