Macro Economic 002

During the COVID-19 pandemic, many countries expanded government spending. What potential long-term risk does this pose?

• Increased innovation

• Strengthened trade balance

• Rising public debt and interest burden

• Falling inflation

• Budget surplus

The European Central Bank (ECB) cannot set different interest rates for each country. What is a major implication of this?

• Greater flexibility

• Better targeting of inflation

• Limited national monetary autonomy

• Stronger GDP

• Improved coordination with fiscal policy

In 2022, Sri Lanka faced high inflation and currency crisis. What policy failure contributed most?

• Carbon tax

• Over-reliance on imports without reserves

• Tight monetary policy

• Low taxation

• Crypto regulation

A country has massive inequality and low social mobility. Which policy is most appropriate to reduce long-term inequality?

• Lower minimum wage

• Flat tax rate

• Progressive taxation with education subsidies

• Deregulation of labor

• Budget cuts in healthcare

The introduction of the euro eliminated currency conversion risks. What problem remains?

• Trade barriers

• Tax harmonization

• Fiscal discipline disparity among members

• Language barriers

• Tourism decline

El Salvador made Bitcoin legal tender in 2021. Which of the following is a likely concern from this decision?

• Increased GDP

• Currency appreciation

• Exposure to volatility and inflation

• Lower unemployment

• Controlled capital flows

After the 2008 global financial crisis, central banks implemented quantitative easing. What was one of the unintended consequences?

• Higher inflation immediately

• Increased lending to small businesses

• Rising asset prices and inequality

• Devaluation of local currency

• Collapse of housing markets

China’s investment in AI and green energy is part of its long-run growth strategy. What is a possible benefit of this approach?

• Increase in short-term inflation

• Trade deficit increase

• Technological self-sufficiency

• Lower productivity

• De-industrialization

If oil prices rise globally, how would it affect a net importer country like India?

• Strengthened currency

• Decrease in inflation

• Higher import bill and inflation pressure

• Increased exports

• Budget surplus

Which of the following makes digital currency (CBDC) attractive for central banks?

• Anonymous transactions

• Inability to monitor spending

• Greater monetary control and inclusion

• Instability of value

• Inaccessibility