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Unit 3.1 3.7 Multiple Choice

This document contains a 20 question multiple choice quiz about macroeconomic concepts. The questions cover topics like defining long-run economic growth, causes of changes in real GDP, characterizing the economic cycle, factors that influence inflation rates, defining types of unemployment, and the effects of monetary and fiscal policy choices.

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NieL Tian
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73 views4 pages

Unit 3.1 3.7 Multiple Choice

This document contains a 20 question multiple choice quiz about macroeconomic concepts. The questions cover topics like defining long-run economic growth, causes of changes in real GDP, characterizing the economic cycle, factors that influence inflation rates, defining types of unemployment, and the effects of monetary and fiscal policy choices.

Uploaded by

NieL Tian
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Unit 3.1-3.

7: Multiple choice quiz

1. Long-run economic growth can be defined as


A. a change in the output of goods and services, measured in nominal terms
B. the potential output of an economy, defined by any point on a production possibility
frontier
C. an increase in output up to a production possibility frontier
D. an increase in real national income

2. Real GDP may decrease in the short-run when


A. tax revenue is less than government spending
B. there is an increase in wage rates
C. an economy decreases its demand for imports
D. there is a recession in overseas markets

3. The economic cycle is characterised by


A. changing rates of real GDP growth
B. slowdown in the economy as many de-industrialise, changing focus from manufacturing to
the production of services
C. increasing rates of unemployment over two consecutive quarters
D. changing rates of inflation arising from central bank intervention

4. The rate of inflation is more likely to rise if the economy


A. None of the responses given
B. is in a boom
C. is below its long-term trend rate of growth
D. is in recession

5. A positive output gap is defined as the extent to which


A. the productive potential of an economy output is greater than actual output
B. actual output is greater than the productive potential of an economy
C. GNP is greater than GDP
D. GDP is greater than GNP

6. One of the problems of using the Claimant Count as a way of measuring unemployment is
that
A. it includes some people who want to work
B. it excludes women who are returning to work after childbirth
C. it includes people who are not seeking work
D. it excludes people who are not capable of work

© Mark Johnson,
InThinking www.thinkib.net/Economics 1
7. The diagram to the right illustrates an example of
which type of unemployment:
A. Demand-deficient unemployment
B. Real-wage unemployment unemployment
C. Cyclical unemployment
D. Structural unemployment

8. The diagram below shows an economy in initial


equilibrium at Y1 with the aggregate demand curve
AD1 and the long-run aggregate supply curve
LRAS1. The left shift in AD to AD2 could have been
caused by which of the following:
A. A fall in tax rates
B. A fall in the value of the national currency
C. A fall in interest rates
D. A fall in government spending levels

9. Deflation has the effect of


A. reducing the value of money
B. reducing consumption levels
C. penalising those on fixed incomes
D. reducing saving levels

© Mark Johnson,
InThinking www.thinkib.net/Economics 2
10. The diagram below shows the conditions of
aggregate demand and aggregate supply in the
short and long-run. When this economy is
operating at Y2, it must be experiencing

A. excess demand
B. excess supply
C. labour unemployment
D. recession

11. A growing negative output gap is likely to


result in
A. the creation of negative externalities
B. economic growth
C. rising unemployment
D. rising prices

12. In the short-run the policy objective of full employment conflicts with that of
A. balance of payments equilibrium
B. increased living standards in the long run
C. income redistribution
D. price stability

13. Monetary policy includes those measures which


A. help manage the government's budget
B. control the level of taxation
C. control the level of prices and incomes
D. control the money supply

14. Which one of the following circumstances might prompt a central bank to reduce interest
rates?
A. Growth is below trend and retail sales are no longer increasing
B. The rate of inflation has stabilised at 3% and export revenue is increasing
C. Unemployment is falling and the economy is booming
D. There is strong growth in GDP and the trade deficit has fallen

15. The impact on inflation of any change in interest rates by a central bank is uncertain
because
A. inflation can be measured in more than one way
B. changes in interest rates do not affect exchange rates, nor inflation
C. it takes several months for any change to affect aggregate demand and inflation
D. the data on which interest rate judgements are made is not reliable

© Mark Johnson,
InThinking www.thinkib.net/Economics 3
16. A regressive tax is one in which
A. the percentage paid by individuals first falls and then rises as incomes rise
B. the percentage paid by individuals falls as incomes fall
C. the percentage paid by individuals falls as incomes rise
D. lower income households pay a larger amount of tax than wealthier ones

17. Which one of the following explains the relationship between the budget balance and the
national debt? HL only
A. An increase in the current budget deficit will lead to an increase in the national debt
B. A reduction in the current budget deficit will lead to a fall in the national debt
C. An increase in the current budget surplus will lead to an increase in the national debt
D. A decrease in the current budget surplus will lead to an increase in the national debt

18. Supply-side policies are typically concerned with influencing


A. the level of consumption in the short-run
B. changes to the exchange rate
C. the long-run trend rate of economic growth
D. changes to the rate of inflation

19. Governments can use fiscal policy decisions to help meet supply-side objectives, for
example
A. reducing the rate of corporation tax and increasing spending on higher education
B. increasing state pensions and reducing the top rate of income tax
C. reducing income taxes and government spending on health
D. extending VAT to food and increasing defence spending

20. Supply-side policies differ from fiscal and monetary policies in that only supply-side
policies aim to improve macroeconomic performance by
A. increasing employment levels, through aggregate demand
B. limiting government influence in economic decision-making
C. reducing inflationary expectations
D. improving the performance of particular markets

© Mark Johnson,
InThinking www.thinkib.net/Economics 4

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