Multiple Choice

Question 1

All other things being equal, a signif cut in rate of tax on companys profit is most likely to afffect on ad and lras

Answer 1

Increaase both ad and lras

Question 2

The annual rate of inflation in an economy falls from 5% to 2% but the annual rate of inflation of its main trading partners remains at 5%. As a result, all other things being equal, it is likely that in the lt for this econ

Impact on exports and imports

Answer 2

Exports increase

Question 3

Starting from an initial point of equilibrium on a verticle lras a reduction in ad will lead to a new lr equilibrium position with a lower

Answer 3

Price level

Question 4

The current account of the balance of payments comprises

Answer 4

Trade in goods and services, investment income and transfers

Question 5

What would result in a demand side shock to uk econ- large rise in

Answer 5

Uk wages due to wave of strikes

Question 6

All things being equal, in the lr a fall in the exchange rate is likely to

Answer 6

Increase ad because it can reduce the foriegn currency price of exports

Question 7

How to calculate percentage increase in the oevrall price index

Answer 7

X weighting by price index

Question 8

Which one of the following is a reason why the supply of cars is likely to be price elastci in sr when price of cars increases

Answer 8

There is considerable spare capacity in the car industry

Question 9

Another term for welfare losss

Answer 9

Deadweight loss of consumer

Question 10

There is a reduction in the market demand for product supplied by firms operating in a perfect comp indsutry
What will happen to firm av and marginal rev as a result of this change

Answer 10

Av rev and marginal rev both fall

Question 11

When marginal utility=0

Answer 11

Total utility is max

Question 12

In an econ experinceing an econ boom what is likely to happen to job vacancies

Answer 12

Increasing

Question 13

In a monopolistic comp in sr at profit max price output firm will

Answer 13

Make supernormal profits

Question 14

What count as liquid assets

Answer 14

Cash
Balancaes at central bank
Other liqid assets
Not retained profit- as likelyt to. Be used already

Question 15

Summer holidays at uk seaside towns have become less popular
Uk seaside holldiay towns are affected by seasonal unemployment and increasing structural unemployment
What is momst likely consewudne

Answer 15

Cost of living for people who live in uk seaside towns fall

Question 16

Real gorwth

Answer 16

Nomainal-inflation

Question 17

Each of top five decile groups has expeiernes a fall in tyehir share of total inocme
In ocntrast bottom five decile groups have experinced a sbstanntila increase in their share of total iocme
Thus distrubution of income most likely to hav ebecome

Answer 17

Mroe equal

Question 18

Essentail characterisistc sof customs union

Answer 18

Internal trade barriers
Common external tariffs
Common currency

Question 19

All other things being euqal in which one of the following circumstances is the boe most likely to raise bank rate to maintain fnancal stability

Answer 19

Fall in bank liquidity and capital ratios following several years of rapid growth in bank lending and a boom in house prices

Question 20

Upwards unitary totla rev curve
How will firm ave rev and marginal rev change as firm expands it s output

Answer 20

Constant av rev and constant marginal rev

Question 21

According to the hypothesis of diminishing marginal utility
When marginal utility is zero

Answer 21

The total utility from consuming the good is max

Question 22

Increased output results from specialisation and the divion of lab becuase they enable

Answer 22

More efficient use of the available resources

Question 23

Lr philips curve shows that

Answer 23

There is no trade off between reducing inflation and lower unemployment in long run

Question 24

The bahavour of a consumer buiing a 75 inch large screen tv is biased due to bounded rationality and the anchoring effect
Implies that the choice of which tv to buy is based on the price of

Answer 24

The first tv seen and imperfect info about availiable alternatives

Question 25

Rightwards shift in supply for exchange rate bewteen sterling and eros Due to an increase in eurozone

Answer 25

Compansies buing factories in uk

Question 26

Immobility of lab may lead to a missallocation of resources and market failure

Answer 26

A change in pattern of demand results in strutcural unemp

Question 27

As gini coefficient decreasese percentage

Answer 27

More equal society

Question 28

Primary measure of unemp in uk is based on the

Answer 28

Number of people actively seeking work and avaailble to star work

Question 29

A firm benefits from signif and persistent econ of scale as increase output Most likely consequence as it grows in size

Answer 29

Firms ability to set its own prices will increase

Question 30

Currency is undervalued by less signif diff

Answer 30

Purchasing power parity is closer to

Question 31

Rightwards shift in lras and sras is caused by

Answer 31

A large increase in teh availbaility of renewable energy within the econ

Question 32

A statemnet associated with behavoural econ theory

Answer 32

An individ econ decisions may be biased

Question 33

A reason for gov intervention in a markwet

Answer 33

Firms in an oligopolistic market may limit price comp

Question 34

A monopolistically comp firms demand curve is

Answer 34

The firms av rev curve

Question 35

A left wards shift of sras is likely to be caused by

Answer 35

A decrease in level of tarrifs on imports

Question 36

The existence of neg externalities in consumption results in a misallocation of resources. This is because at the free makret level of output the

Answer 36

Msb is less than msc

Question 37

An increase abouve trend level of real gdp (recooving from being below trend level) is likely tol lead to

Answer 37

An increase in investment due to accelerator process

Question 38

A kinked demand curve provides an explanation of why the

Answer 38

Firms price changes deend on competitors pricing behaviour

Question 39

Despute qe several years, econ has rising unemployment and rate of inflation signif below target rate, all other things being equal, which one of the following actions is the central bank most liekly to take in order to meet the targte for inflation

Answer 39

Provide forward guidnece indicating that the bank will continue with its programme of qe

Question 40

All other things beinng equal , which one of the following is most likely to cause the marginal rev product of lab curve in shoe manufacturing industry shift right

Answer 40

Increase in market demand for shoes

Question 41

A country experiences a large net capital outflow, the most likley consequence of this n the sr will be a decrease in

Answer 41

Its exchange rate

Question 42

A fall in price and increase in the quantity demanded of lemons could have been caused by

Answer 42

Favourable weather leading to a record harvest No shift seen

Question 43

Following flooding described by environ agency as a ‘once in a century event’ there is a sharp increase in the number of residents of a large town who buy additional flood insurance Biases in decisions seen

Answer 43

Availablillity bias and social norms

Question 44

Atc above mr=ar- what changes can be expected as the market moves into lr

Answer 44

Some firms will leave the market and the price will rise

Question 45

When trying to calculate diminishing marginal returns to labobur

Answer 45

Calculate diff in total output

Question 46

A firm faces a downward sloping demand crve. Firm discovers that any increase or decrease from its current level of output leads to a fall in total rev This means that at its current output marginal rev is

Answer 46

Zero

Question 47

Which one of teh following is the most likely result of a divorfce of ownership from control inan organisation

Answer 47

Adopting of satisficing behavour

Question 48

Gov moves from srpc to lrpc as unemployment rate increases- why

Answer 48

Econ agets have higher inflation expectations due to intervetion- money illusion

Question 49

Which one of the following is a role of the uks ovr

Answer 49

Eval gov performance agianst own fiscal targets

Question 50

Which one of the following would be classified as sa debit item in seocndary income section of current account bop

Answer 50

Emergency aid provided to another country following a natural disaster

Question 51

How to calculate comparative advantage

Answer 51

Divide by each other comes ot with decimal- to calauclate opp cost

Question 52

Rightwards shift lras leads to

Answer 52

An improveenyt in bop on current acccount

Question 53

Cause of globalisation

Answer 53

Containerisation

Question 54

Cost of internat trade

Answer 54

Less domestic jobs available

Question 55

Main feature of single european market

Answer 55

The free moement of capital and labour betwene memebr countries

Question 56

Portfoio investment

Answer 56

Any investment in securities intended only for financial gain which does not create a lasting interest

Question 57

Fdi

Answer 57

Investment made by a company or individ from one country in business interests in anotehr country

Question 58

One disadv of a fixed exchange rate system is that

Answer 58

It can lead to current account imbalances

Question 59

A country experiences a large net caiptal outflow All other tings beng equal the most likely consequence of this in sr is decrease in

Answer 59

Er

Question 60

In highly contestable makret, lr firm most likely to set price at

Answer 60

Ar=ac

Question 61

A monopolistically comp fimrs demand crve is

Answer 61

Firms av rev curve