Financial Programming Basics
What is financial programming?
A) a model that allows forecasting main economic indicators six months into the future.
B) a framework to design macroeconomic policies aimed at maintaining or achieving macroeconomic stability.
C) a fully fledged model of the economy, with nearly a dozen equations and 25 structural parameters.
D) Financial programming is a tool to design a financial plan for any type of project.
B) a framework to design macroeconomic policies aimed at maintaining or achieving macroeconomic stability.
At the demand side, output is the sum of all of the below, EXCEPT:
A) Consumption
B) Investment
C) Remittances
D) Net exports
C) Remittances
Which country was the largest oil producer in 2019?
A) USA
B) Russia
C) Saudi Arabia
D) Iran
A) USA
Income tax elasticity is 1.3; and growth of income tax base (GDP growth) is 10%. What is the growth of revenue from income tax?
A) 10%
B) 13%
C) 7.7%
D) 11.3%
B) 13%
Who was the first woman to win a Noble Prize?
A) Mother Teresa
B) Marie Curie
C) Malala Yousafai
D) Francoise Barre-Sinoussi
B) Marie Curie - 1903 Physics
External balance means that the current account:
A) Can be sustained by capital flows
B) Has to be zero over business cycle
C) Has to be positive most of the time
D) Can only be financed by reserves
A) Can be sustained by capital flows
The concept of potential output is defined as:
A) The amount of goods and services a country can produce when there is no unemployment
B) The amount of goods and services a country can produce when factors of production are utilized at their normal or trend rates
C) The amount of goods and services a country can produce when all of its natural resources are fully utilized
D) The amount of goods and services a country can produce when all of its capital is utilized
B) The amount of goods and services a country can produce when factors of production are utilized at their normal or trend rates
If the government deficit is 3% of GDP and the private savings-investment gap is 2% of GDP, what is the current account balance?
A) -5% of GDP
B) +5% of GDP
C) -1% of GDP
D) +1% of GDP
C) -1% of GDP
Which of the following is unlikely to slow an overheated economy:
A) A tax cut
B) A wage cut
C) Higher interest rates
D) A broadening of the tax base
A) A tax cut
What is one drawback of using the Hodrick-Prescott (HP) filter to estimate potential output in an economy?
A) The HP filter does not capture short-term fluctuations and therefore not useful for monthly data.
B) The HP filter requires reliable data on labor and capital inputs and a good estimate for total factor productivity.
C) The HP filter assumes a constant labor and capital shares of income.
D) The potential output estimates from the HP filter are sensitive to the latest developments in actual output.
D) The potential output estimates from the HP filter are sensitive to the latest developments in actual output.
Which of the following constitutes a structural reform policy?
A) Reducing the wage bill through a temporary hiring freeze
B) Reducing the policy interest rate to promote private investment
C) Increasing income tax thresholds in line with inflation.
D) Reducing barriers to entry to promote more competition in domestic markets
D) Reducing barriers to entry to promote more competition in domestic markets
WILDCARD!! The first dog in space was also the first living creature to orbit the Earth, what was her name?
A) Lassie
B) Katya
C) Laika
D) Oksana
E) Sacha
F) Svetlana
C) Laika
In the balance of payments, the current account includes:
A) Total foreign debt outstanding
B) Amortization of existing foreign debt
C) Interest payments on existing foreign debt
D) Debt service payments on existing foreign debt
C) Interest payments on existing foreign debt
Which of the following ways of financing the budget deficit is most likely to lead to crowding out of the private sector’s access to credit:
A) Borrowing from the central bank
B) Borrowing from the IMF
C) Borrowing from foreign banks
D) Borrowing from domestic banks
D) Borrowing from domestic banks
The public debt is sustainable when:
A) government stops to borrow once debt to GDP reaches 50% level
B) government meets its payment obligations without exceptional measures
C) central bank purchases government debt securities to help it to pay the debt
D) it increases only by 0.25% of GDP per year
B) government meets its payment obligations without exceptional measures
WILDCARD!! How many countries are there in Africa?
A) 53
B) 54
C) 55
D) 56
B) 54
GDP is widely used output measure, but gross national disposable income (GNDI) is a better measure of national income. GNDI is equal to?
A) GDP plus net primary income plus net secondary income
B) GDP plus net primary income from abroad
C) GDP plus net current transfers from abroad
D) GDP plus the current account balance
A) GDP plus net primary income plus net secondary income
What happens when net capital inflows exceed the current account deficit?
A) Foreign reserves increase
B) The local currency depreciates
C) The government needs to borrow abroad
D) Domestic prices increase
A) Foreign reserves increase
Automatic stabilizers usually:
A) Increase tax receipts during recession
B) Increase expenditures during booms
C) Balance the budget
D) None of the above
D) None of the above
For an economy with only domestic debt and a debt-to-GDP ratio of 100%. For the next 5 years, real interest rates are 4%, real GDP growth rate is 3%, and the primary balance as ratio to GDP is -1% (i.e. deficit), what is the trajectory of the debt-to-GDP ratio:
A) Increase
B) Remain unchanged
C) Decrease
D) Not enough information to determine trajectory
A) Increase
Which of the following statements about policies to address persistent macroeconomic imbalances is correct?
A) A fiscal contraction and an exchange rate depreciation can both help reduce inflationary pressures
B) A fiscal contraction and an exchange rate depreciation can both help reduce an external deficit
C) A fiscal expansion and an exchange rate depreciation can both help reduce an external deficit
D) A fiscal expansion and an exchange rate depreciation can both help reduce inflationary pressures
B) A fiscal contraction and an exchange rate depreciation can both help reduce an external deficit
A country experienced an increase in the CPI, but the GDP deflator remains unchanged. What are the most likely developments behind these diverging dynamics in two price indices?
A) Import prices decline following exchange rate appreciation, prices of locally produced goods stay unchanged
B) Import prices increase following exchange rate depreciation, prices of locally produced goods stay unchanged
C) Import prices stay unchanged, prices of locally produced goods increase
D) Import prices stay unchanged, prices of locally produced goods decrease
B) Import prices increase following exchange rate depreciation, prices of locally produced goods stay unchanged
What is the approximate movement in the REER if foreign inflation is higher than domestic inflation by 3% and the nominal exchange rate depreciates by 4%?
A) appreciate by 1%
B) depreciate by 1%
C) appreciate by 7%
D) depreciate by 7%
D) depreciate by 7%
WILDCARD!!! What was the first human-made object to break the speed of sound?
A) NASA Rocket
B) Russian Military fighter Jet
C) Whip
D) Bullet
C) Whip
Which of the following will bring about a decrease in credit to the private sector, holding all else equal?
A) A decrease in credit to the public sector
B) A decrease in net foreign assets held by the banking system
C) An increase in net foreign assets held by the banking system
D) A decrease in fiscal deficit
C) An increase in net foreign assets held by the banking system