Question 1

Which of the following would suggest that economic growth may be resuming in an economy that is recovering from a recession?

Accepted Answer

A)  The country's exports fell by 8% since the last quarter. 
B)  Domestic demand has reduced by 5.5.% over the last year. 
C)  The business climate index rose from 102 to 105. 
D)  Unemployment rose from 9% to 12%. 
A)  The country's exports fell by 8% since the last quarter. 
B)  Domestic demand has reduced by 5.5.% over the last year. 
C)  The business climate index rose from 102 to 105. 
D)  Unemployment rose from 9% to 12%.

Question 2

In the simple circular ﬂow of income where there are no leakages and injections, _____.

Accepted Answer

A)  households spend all their income on consumption 
B)  government policies play a vital role in determining the level of economic activity of a 
C)  the foreign trade sector is of prime importance 
D)  households undertake both consumption and investment activities 
A)  households spend all their income on consumption 
B)  government policies play a vital role in determining the level of economic activity of a 
C)  the foreign trade sector is of prime importance 
D)  households undertake both consumption and investment activities

Question 3

The total expenditure in an economy is the aggregate of spending on _____.

Accepted Answer

A)  consumption, investment, government purchases and net exports 
B)  consumption, savings, taxes and net exports 
C)  savings, investments, government purchases and imports 
D)  consumption, savings, government purchases and imports 
A)  consumption, investment, government purchases and net exports 
B)  consumption, savings, taxes and net exports 
C)  savings, investments, government purchases and imports 
D)  consumption, savings, government purchases and imports

Question 4

A decrease in investment by ﬁrms will lead to a downward movement along the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 5

The following ﬁgure shows the business cycle for an economy over time. Refer to the ﬁgure to answer the question.   It is proﬁtable for a ﬁrm to make investments in new products, production facilities, distribution or retail outlets when the economy is at ____.
A. Then investments can be put in place to exploit the economic boom in a more timely fashion.

Accepted Answer

A)  point A 
B)  point B 
C)  point C 
D)  point D 
A)  point A 
B)  point B 
C)  point C 
D)  point D

Question 6

Firms that _____ are likely to be pro?table even during a recession.

Accepted Answer

A)  provide goods at a premium price 
B)  have income inferior product lines 
C)  ?nance their activities through borrowings rather than through retained earnings 
D)  stick to one product line 
A)  provide goods at a premium price 
B)  have income inferior product lines 
C)  ?nance their activities through borrowings rather than through retained earnings 
D)  stick to one product line

Question 7

An increase in aggregate demand will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 8

When the price level increases but national output falls, an economy is said to be in an inﬂationary boom.

Accepted Answer

A) True 
 B)False

Question 9

The Organisation for Economic Co-operation and Development (OECD) summary forecast for Greece reads 'The economy is suffering a serious recession in the context of the sizeable, but vital, ﬁscal retrenchment.' This means that:

Accepted Answer

A)  the Greek government needs to reduce its spending or increase its taxes for the economy to recover. 
B)  the Greek economy is recovering through increases in the demand for exports. 
C)  the level of household consumption as a percentage of total expenditure in Greece is likely to be high. 
D)  new job formation and employment in Greece is likely to be high. 
A)  the Greek government needs to reduce its spending or increase its taxes for the economy to recover. 
B)  the Greek economy is recovering through increases in the demand for exports. 
C)  the level of household consumption as a percentage of total expenditure in Greece is likely to be high. 
D)  new job formation and employment in Greece is likely to be high.

Question 10

How is macroeconomic equilibrium determined? Explain how shifts in the aggregate demand and aggregate supply curves affect national output and in?ation.

Accepted Answer

In equilibrium, savings will equal inves

Question 11

If wages fully adjust to inﬂation, aggregate supply will remain constant.

Accepted Answer

A) True 
 B)False

Question 12

Both in the early 2000s and in the early 2010s, the current account in the UK was in surplus.

Accepted Answer

A) True 
 B)False

Question 13

In the early 2000s in the UK, since taxation was increased and government spending reduced, the budget deﬁcit grew.

Accepted Answer

A) True 
 B)False

Question 14

Firms' manufacturing costs increase substantially due to higher electricity tariffs. How will this affect the economy?

Accepted Answer

A)  Aggregate supply will rise causing a boom in the economy. 
B)  Aggregate supply will fall and the economy will move into recession. 
C)  Aggregate demand will fall and the economy will move into recession. 
D)  Aggregate demand will rise causing a boom in the economy. 
A)  Aggregate supply will rise causing a boom in the economy. 
B)  Aggregate supply will fall and the economy will move into recession. 
C)  Aggregate demand will fall and the economy will move into recession. 
D)  Aggregate demand will rise causing a boom in the economy.

Question 15

Explain leakages from and injections into the circular ?ow of income.

Accepted Answer

A leakage from the circular ?ow is incom

Question 16

The key policy inputs controlled directly by the central bank are _____.

Accepted Answer

A)  the government deﬁcit 
B)  interest rates 
C)  the level of government borrowings 
D)  income tax rates 
A)  the government deﬁcit 
B)  interest rates 
C)  the level of government borrowings 
D)  income tax rates

Question 17

Other things remaining constant, an increase in the average price level _____.

Accepted Answer

A)  causes a decrease in aggregate supply 
B)  affects only aggregate demand and not aggregate supply 
C)  causes an increase in aggregate demand 
D)  causes a decrease in aggregate demand 
A)  causes a decrease in aggregate supply 
B)  affects only aggregate demand and not aggregate supply 
C)  causes an increase in aggregate demand 
D)  causes a decrease in aggregate demand

Question 18

An inﬂationary recession is caused by a rightward shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 19

The Organisation for Economic Co-operation and Development (OECD) summary forecast for the UK states that above-target inﬂation will hold back private consumption and public spending. Given this information, which of the following is likely to be true for the UK economy?

Accepted Answer

A)  The government is likely to buy more hospitals and schools and employ nurses and teachers in the near future. 
B)  Interest rates in the UK need to be reduced in order to increase private consumption. 
C)  The aggregate supply curve in the economy is likely to be vertical. 
D)  The UK economy is likely to move to an inﬂationary recession. 
A)  The government is likely to buy more hospitals and schools and employ nurses and teachers in the near future. 
B)  Interest rates in the UK need to be reduced in order to increase private consumption. 
C)  The aggregate supply curve in the economy is likely to be vertical. 
D)  The UK economy is likely to move to an inﬂationary recession.

Question 20

When wages increase at a slower rate than prices, the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Which of the following would suggest that economic growth may be resuming in an economy that is recovering from a recession?

In the simple circular ﬂow of income where there are no leakages and injections, _____.

The total expenditure in an economy is the aggregate of spending on _____.

A decrease in investment by ﬁrms will lead to a downward movement along the aggregate demand curve.

Firms that _____ are likely to be pro?table even during a recession.

An increase in aggregate demand will shift the aggregate demand curve to the left.

When the price level increases but national output falls, an economy is said to be in an inﬂationary boom.

The Organisation for Economic Co-operation and Development (OECD) summary forecast for Greece reads 'The economy is suffering a serious recession in the context of the sizeable, but vital, ﬁscal retrenchment.' This means that:

How is macroeconomic equilibrium determined? Explain how shifts in the aggregate demand and aggregate supply curves affect national output and in?ation.

If wages fully adjust to inﬂation, aggregate supply will remain constant.

Both in the early 2000s and in the early 2010s, the current account in the UK was in surplus.

In the early 2000s in the UK, since taxation was increased and government spending reduced, the budget deﬁcit grew.

Firms' manufacturing costs increase substantially due to higher electricity tariffs. How will this affect the economy?

Explain leakages from and injections into the circular ?ow of income.

The key policy inputs controlled directly by the central bank are _____.

Other things remaining constant, an increase in the average price level _____.

An inﬂationary recession is caused by a rightward shift of the aggregate supply curve.

The Organisation for Economic Co-operation and Development (OECD) summary forecast for the UK states that above-target inﬂation will hold back private consumption and public spending. Given this information, which of the following is likely to be true for the UK economy?

When wages increase at a slower rate than prices, the aggregate supply curve is vertical.

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Measuring Macroeconomic Variables and Policy Issues

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Money, Banking and Interest

Inflation, Output and Economic Policy

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Exam 9: Introduction to the Macroeconomy

Which of the following would suggest that economic growth may be resuming in an economy that is recovering from a recession?

In the simple circular ﬂow of income where there are no leakages and injections, _____.

The total expenditure in an economy is the aggregate of spending on _____.

A decrease in investment by ﬁrms will lead to a downward movement along the aggregate demand curve.

Firms that _____ are likely to be pro?table even during a recession.

An increase in aggregate demand will shift the aggregate demand curve to the left.

When the price level increases but national output falls, an economy is said to be in an inﬂationary boom.

The Organisation for Economic Co-operation and Development (OECD) summary forecast for Greece reads 'The economy is suffering a serious recession in the context of the sizeable, but vital, ﬁscal retrenchment.' This means that:

How is macroeconomic equilibrium determined? Explain how shifts in the aggregate demand and aggregate supply curves affect national output and in?ation.

If wages fully adjust to inﬂation, aggregate supply will remain constant.

Both in the early 2000s and in the early 2010s, the current account in the UK was in surplus.

In the early 2000s in the UK, since taxation was increased and government spending reduced, the budget deﬁcit grew.

Firms' manufacturing costs increase substantially due to higher electricity tariffs. How will this affect the economy?

Explain leakages from and injections into the circular ?ow of income.

The key policy inputs controlled directly by the central bank are _____.

Other things remaining constant, an increase in the average price level _____.

An inﬂationary recession is caused by a rightward shift of the aggregate supply curve.

The Organisation for Economic Co-operation and Development (OECD) summary forecast for the UK states that above-target inﬂation will hold back private consumption and public spending. Given this information, which of the following is likely to be true for the UK economy?

When wages increase at a slower rate than prices, the aggregate supply curve is vertical.

Economics for Business

Consumers in the Marketplace

Firms in the Marketplace

Markets in Action

Market Structure and Firm Performance

Strategic Rivalry

Growth Strategies

Governing Business

Measuring Macroeconomic Variables and Policy Issues

Expenditure and Fiscal Policy

Money, Banking and Interest

Inflation, Output and Economic Policy

Supply-Side Policies and Economic Growth

Exchange Rates and the Balance of Payments

Globalization

Filters