Past Paper MC questions Flashcards
The quantity theory of money assumes that the:
A ratio of the velocity of circulation to the price level rises when the money supply
increases.
B ratio of the velocity of circulation to the price level is fixed.
C ratio of the money supply to the velocity of circulation is fixed.
D ratio of the money supply to the price level is fixed.
D
Assume that the actual rate of unemployment is below the natural rate of unemployment because
the expected rate of inflation is below the actual rate of inflation. If the expected rate of inflation
rises to equal the actual rate of inflation, then:
A real output will increase and unemployment will increase.
B real output will increase and unemployment will decrease.
C real output will decrease and unemployment will increase.
D real output will decrease and unemployment will decrease.
C
Which of the following factors could lead to an upward shift in the expectations-augmented Phillips curve?
I an increase in expected inflation
II an increase in actual inflation
III an increase in demand-deficient unemployment.
A I only
B I and II only
C I and III only
D I, II and III
B
Which of the following statements is NOT true?
A Stagflation can be explained in terms of Phillips loops.
B If inflation is falling, the adaptive expectations hypothesis suggests that inflation will be
consistently over-estimated.
C A fall in structural unemployment will shift the Phillips curve to the right.
D The vertical long-run Phillips curve suggests that inflation can be reduced without a
long-term increase in unemployment.
C
Which of the following is NOT a reason why the power of labour has reduced?
A a reduction in the power of trade unions
B an increase in the use of short-term contracts
C an increase in the number of nationally negotiated wage contracts
D an increase in the exposure to international competition
C
Which of the following is NOT an interventionist supply-side policy?
A the use of public-private partnerships
B the provision of infrastructure
C the location of government offices in depressed areas
D provision of R&D by government research institutions
A
Which of the following statements is FALSE?
A The neo-Austrian / libertarian school of thought advocates minimum liberty for economic
agents to pursue their own interests and to own property.
B Modern Keynesians advocate supply-side policies to shift the Phillips curve to the left.
C New classical economists favour market-orientated supply-side policies.
D ‘Third Way’ supply-side policies are based on the concept of helping people to help
themselves.
A
An increase in government spending has:
A a greater impact than an equal decrease in taxation has on national income.
B the same impact as an equal decrease in taxation has on national income.
C a smaller impact than an equal decrease in taxation has on national income.
D a multiplier effect on national income that is smaller than the multiplier effect of an equal
decrease in taxation.
A
A government wishing to increase aggregate demand might use any of the following measures EXCEPT:
A buying government securities on the open market.
B allowing interest rates to fall.
C increasing the tax on consumer goods.
D increasing social security benefits.
C
The payment of wages to refuse collectors is categorised as both:
A current expenditure and final expenditure.
B capital expenditure and final expenditure.
C current expenditure and transfers.
D capital expenditure and transfers
A
An exchange rate system in which rates are fixed for a period of time but may be revalued or
devalued in response to a substantial balance of payment surplus or deficit is referred to as:
A an adjustable peg.
B a crawling peg.
C a joint float.
D managed floating.
A
Which of the following is NOT a possible advantage of freely floating exchange rates?
A Current account deficits are corrected automatically.
B Their operation requires that there is sufficient international liquidity.
C It provides a degree of insulation against external shocks.
D Governments are free to implement their chosen domestic macroeconomic policy
B
In order to adopt the euro, each EU country had to meet convergence criteria that referred to all
of the following EXCEPT:
A the national debt.
B unemployment.
C interest rates.
D the inflation rate.
B
The loss of separate monetary policies within the eurozone is:
A an advantage of European Monetary Union.
B an argument against the principle of European Monetary Union.
C a criticism of the current design of European Monetary Union.
D none of the above.
B
Which of the following do you NOT associate with classical economists?
A loanable funds theory
B Say’s law
C quantity theory of money
D paradox of thrift
D
Possible causes of the financial crisis in 2008 include all of the following EXCEPT:
A the increase in sub-prime debt.
B the increased use of wholesale funding by the banks.
C moral hazard.
D counter-cyclical bank lending.
D
If a central bank decides to reduce the money supply to fight inflation, then if the country has a floating exchange rate this will assist in the process because the exchange rate of the domestic currency will tend to:
A appreciate and reduce the price of exports.
B appreciate and reduce the price of imports.
C depreciate and reduce the price of exports.
D depreciate and reduce the price of imports.
B
According to Keynesian analysis, the adoption of a policy to reduce the government’s budget deficit will involve:
A an increase in aggregate demand and a reduction in real output.
B an increase in aggregate demand and an increase in real output.
C a reduction in aggregate demand and a reduction in real output.
D a reduction in aggregate demand and an increase in real output.
C
Which of the following is best suited to reducing the level of structural unemployment?
A lowering the rate of interest
B raising the rate of unemployment benefit
C higher voluntary redundancy payments for workers in declining industries
D more government funds for retraining of the unemployed
D
Which of the following is a supply-side economic policy aimed at promoting economic growth?
A increases in social security benefits designed to increase expenditures of unemployed
workers
B measures designed to increase trade union powers so that real wage rises can increase
expenditures of employed workers
C increases in tariffs designed to increase production of domestic goods
D reduction in corporate taxation
D
Which of the following statements about a Taylor rule is NOT true?
A It can be used to influence expectations of inflation.
B It requires that interest rates be increased if inflation is above its target level.
C It requires that interest rates be increased if real GDP is above its potential level.
D It is open to political abuse.
D
Which of the following pairs is most likely to reduce aggregate demand?
A an increase in the budget surplus and decrease in the money supply
B an increase in the budget deficit and a tightening of credit availability
C an increase in the budget deficit and an increase in interest rates
D a decrease in interest rates and an increase in the budget surplus
A
Which of the following statements is TRUE?
A If aggregate demand exceeds actual output, then firms’ stocks will fall and national income will rise.
B If aggregate demand exceeds actual output, then firms’ stocks and national income will both rise.
C If aggregate demand exceeds actual output, then firms’ stocks and national income will both fall.
D If aggregate demand exceeds actual output, then firms’ stocks will rise and national income will fall.
A
Which one of the following will increase the size of the multiplier?
A an increase in the marginal propensity to import
B an increase in the marginal tax rate
C a decrease in the marginal propensity to consume
D a decrease in the marginal propensity to save
D