Deck 1: A Tour of the World

Question 1

In 2011, output per capita in Australia was approximately equal to:

A) $53,500.
B) $43,500.
C) $73,500.
D) $33,500.
E) $63,400.

Answer 1

$63,400.

Question 2

Why is the unemployment rate more difficult to measure in poorer countries such as China?

A) Many workers decide to stay in agriculture.
B) Lack of coordination between provincial authorities.
C) There is no reliable census figure to base the measure on.
D) Statistical agency is short on staff.
E) None of the above.

Answer 2

Many workers decide to stay in agriculture.

Question 3

The institution that is in charge of implementing monetary policy in Australia is:

A) the Reserve Bureau of Australia.
B) the Reserve Committee of Australia.
C) the Federal Reserve Bank of Australia.
D) the Commonwealth Bank of Australia.
E) the Reserve Bank of Australia.

Answer 3

the Reserve Bank of Australia.

Question 4

Why has the Chinese economy experienced higher output growth compared to those in Central Europe and former Soviet republics?

A) Tight political control from one party rule allowed for quick economic transitions.
B) Tight political control from one party rule allowed for widespread corruption.
C) Tight political control from one party rule allowed for better property rights protection.
D) Tight political control from one party rule allowed for market deregulation.
E) Tight political control from one party rule allowed for the sale of farmland.

Question 5

What is the Republican Party's prescription for reducing the US budget deficit?

A) The reduction is to be achieved through decreases in the bond rate.
B) The reduction is to be achieved through decreases in interest rates.
C) The reduction is to be achieved through decreases in the exchange rate.
D) The reduction is to be achieved through decreases in spending.
E) The reduction is to be achieved through decreases in taxes.

Question 6

Which of the following is an economic cost of having a common currency?

A) Loss of independence in setting an independent fiscal policy.
B) Loss of independence in setting an independent exchange rate policy.
C) Loss of independence in setting an independent monetary policy.
D) All of the above.
E) None of the above.

Question 7

Which of the following is an economic advantage of having a common currency?

A) No more changes in relative prices of goods and services.
B) No more need to change currencies when crossing national borders.
C) No more changes in the relative price of currencies.
D) Both A and B.
E) Both B and C.

Question 8

What is the central bank in the US formally known as?

A) The Bureau of Monetary Policy.
B) The Federal Reserve Board.
C) The Federal Bureau of Reserve.
D) The Federal Monetary Board.
E) The Federal Policy Board.

Question 9

The standard of living typically refers to:

A) the rate of unemployment.
B) expenditure per capita.
C) the rate of output growth.
D) wealth per capita.
E) output per capita.

Question 10

At what point did the Euro currency come into existence?

A) January 1, 2001.
B) January 1, 1999.
C) January 1, 1998.
D) January 1, 2002.
E) January 1, 2000.

Question 11

What method do macroeconomists use to accurately correct for relative standard of living between two countries?

A) Interest power parity.
B) Purchasing power parity.
C) Output power parity.
D) Income power parity.
E) Expenditure power parity.

Question 12

When comparing output per capita between China and the U.S.:

A) The comparison is more accurate in Euro.
B) The comparison is most accurate in U.S. dollars.
C) The comparison is more accurate in Australian dollars.
D) The comparison is more accurate when the PPP method is used.
E) The comparison is most accurate in Chinese yuan.

Question 13

Which basic variable do macroeconomists focus on about the health of an economy?

A) Unemployment.
B) Inflation.
C) Output growth.
D) All of the above.
E) None of the above.

Question 14

What was the Fed's policy response to lower consumption and falling firm investment?

A) Having a press conference.
B) Cutting interest rates all the way down to zero.
C) Raising interest rates to 10%.
D) Staying put with the same interest rates.
E) None of the above.

Question 15

What is the main reason for the persistently high unemployment in the US and the Euro area since the crisis?

A) Low consumption growth.
B) Low unemployment benefits.
C) Low output growth.
D) High output growth.
E) High consumption growth.

Question 16

What are the labour market rigidties that some economists suggest should be eliminated to lower unemployment in Europe?

A) Relatively high levels of worker protection.
B) Relatively high unemployment benefits.
C) Relatively high costs of hiring workers.
D) All of the above.
E) None of the above.

Question 17

What was the US government's policy response to lower consumption and falling firm investment?

A) Cut taxes and decreased spending.
B) Raised taxes and decreased spending.
C) Cut taxes and increased spending.
D) Raised taxes and increased spending.
E) None of the above.

Question 18

What is the main argument put forward by economists who are in favour of reducing the US budget deficit now and quickly?

A) The quick action instills credibility and helps to stabilise the interest rate.
B) The quick action instills credibility and helps to stabilise the bond rate.
C) The quick action instills credibility and helps to stabilise the level of debt.
D) The quick action instills credibility and helps to stabilise the current account.
E) The quick action instills credibility and helps to stabilise the exchange rate.

Question 19

What are the two transmission channels that turned the US crisis into a global crisis?

A) The exchange rate and consumption channels.
B) The trade and financial channels.
C) The financial and exchange rate channels.
D) The exchange rate and trade channels.
E) The consumption and trade channels.

Question 20

What is the US share of world GDP in 2011?

A) 22%.
B) 21%.
C) 18%.
D) 19%.
E) 20%.

Question 21

Briefly discuss the three possible reasons that allowed Australia to avoid the worst of the global crisis.

Question 22

What is the main argument put forward by economists who are in favour of a slow and steady reduction of the US budget deficit?

A) It eases the pain of lower demand and lower growth, at a time when unemployment is still very high.
B) It eases the pain of a lower exchange rate and lower growth, at a time when unemployment is still very high.
C) It eases the pain of a lower bond rate and a lower exchange rate, at a time when unemployment is still very high.
D) It eases the pain of lower demand and lower exports, at a time when unemployment is still very high.
E) It eases the pain of a lower exchange rate and a lower interest rate, at a time when unemployment is still very high.

Question 23

Briefly explain the factors behind the low output growth that contributes to the persistently high unemployment in advanced economies.

Question 24

Discuss why it is more accurate to use the purchasing power parity (PPP) method when comparing output per capita across countries?

Question 25

Australia managed to avert the worst effects of the global crisis because of:

A) expansionary monetary and fiscal policy.
B) the latest mining boom.
C) the rising level of productivity.
D) both A and B.
E) both A and C.

Question 26

Briefly explain the two channels of transmission that turned the US crisis into a world crisis.

Question 27

Economists have suggested that the relatively higher unemployment in Europe has been caused by which of the following?

A) Inadequate macroeconomic policies.
B) Relatively high unemployment benefits.
C) Increased labour costs.
D) Relatively high levels of worker protection.
E) All of the above.

Question 28

What is the Democratic Party's prescription for reducing the US budget deficit?

A) The reduction is to be achieved through increases in the exchange rate.
B) The reduction is to be achieved through increases in interest rates.
C) The reduction is to be achieved through increases in the bond rate.
D) The reduction is to be achieved through increases in spending.
E) The reduction is to be achieved through increases in taxes.

Question 29

Discuss the two sets of issues that dominated the agenda of European macroeconomists and macroeconomic policy makers in 2012.

Question 30

Discuss what is meant by labour market rigidities and explain how they might cause the relatively high unemployment in Europe.

Question 31

Why has the transition from a planned economy to a market economy been smoother in China than the process observed in central and eastern European countries?

Question 32

Discuss some of the potential benefits and costs of the adoption of the Euro.

Question 33

A comparison of the average growth rates for the periods 1980- 1999 and 2000- 2007 for Australia indicates that:

A) the average growth rates are the same.
B) the average growth rate has slightly increased in the more recent period.
C) the recent increase in average growth rates is due to large increases in capital formation.
D) the recent increase in average growth rates is due to the fact that Australia is a lucky country.
E) the average growth rates have decreased in the more recent period.

Question 34

Briefly explain the disagreement on when and how to reduce the US budget deficit.

Question 35

What are the sources of China's phenomenal output growth rates?

A) Very high accumulation of capital.
B) Very fast technological progress.
C) Very hard working people.
D) Both A and B.
E) Both B and C.

Question 36

Discuss the three variables on which macroeconomists generally focus.

Question 37

Discuss the developments in the US that turned the housing price decline into a major financial crisis.

Question 38

Discuss the possible sources of China's phenomenal output growth rates.

Question 39

Explain why some economists are concerned about recent increases in US budget deficits.

Question 40

Which group of economies had higher output growth on average between 2000 and 2012?

A) Emerging and developing economies.
B) The advanced economies.
C) All the economies in the world.
D) Economies that are member states of the International Monetary Fund.
E) Economies that belong to the Association of the Southeast Asian Nations.