MCQ END OF YEAR 1 MACRO

An economy is currently operating inside its production possibility frontier. In the short run, if the rate of growth of aggregate demand is less than the rate of growth of productive capacity, then the economy is most likely to experience.

A) An increase in unemployment.

B) A decrease in output.

C) A decrease in its trend rate of growth.

D) A decrease in imports.

A) A reduction in the level of unemployment.

B) An increase in the economy's output gap

C) A rightward shift in the economy's LRAS curve.

D) An increase in income per head.

Which one of the following is most likely to shift the short run aggregate supply curve to the right?

A) A fall in money wages.

B) A reduction in government spending

C) A fall in the exchange rate

D) A decrease in the productivity of labour

All other things being equal, an economy is most likely to experience inflation if

A) aggregate supply increases at a faster rate than aggregate demand.

B) the country runs a balance of trade deficit at full employment.

C) aggregate demand is increased when the economy is on its PPF.

D) the government runs a budget deficit when long run aggregate supply increases.

A sustained rise in the exchange rate is most likely to increase

A) Inflation

B) Unemployment

C) Economic Growth

D) International Competitiveness

A) The purchasing power of money fell by 5%

B) The rate of inflation was 10%

C) The price of consumer goods increased by 10%

D) The standard of living increased by 5%

A) Interest rates and unemployment benefits.

B) Government spending on transport infrastructure and vocational retraining programmes.

C) The exchange rate and money supply

D) Measures to encourage emigration and greater saving.

�The UK steel industry pays for its imported inputs in US dollars and sells its output abroad in euros'. It follows from the above that the UK steel industry will benefit most when the pound is:

A) Strong against the US dollar, weak against the euro.

B) Weak against the US dollar, weak against the euro.

C) Weak against the US dollar, strong against the euro.

D) Strong against the US dollar, strong against the euro.

Structural unemployment is most likely to be caused by

A) A recession in the economy.

B) Changes in the demand for labour at different times of the year.

C) An increase in the number of people changing jobs.

D) The skills of the unemployed not matching those required for the available jobs.

'Economists predict that the negative output gap in the UK is likely to grow over the next couple of years'. In the short run, which of the following policies is most likely to help to prevent the negative output gap increasing?

A) The Monetary Policy Committee (MPC) raising interest rates

B) The government taking action to increase the exchange rate of the pound

C) An increase in government expenditure accompanied by a growing budget deficit

D) The implementation of supply-side policies that are designed to raise labour productivity

In recent years, the UK has experienced large deficits on the balance of payments of the current account. Which of the following would be LEAST likely to reduce such deficit?

A) A rise in aggregate supply.

B) A rise in the exchange rate.

C) A rise in income tax rates.

D) A rise in productivity.

MCQ END OF YEAR 1 MACRO

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