LNDN 07002 – Economic Principles Quiz 2 (Macroeconomics) Practice Questions
Choose the one alternative that best completes the statement or answers the question.
A circular flow diagram traces the flows of inputs and outputs between:households and the government.households and firms.households in one country and households in another country.
firms in one country and households in another country.
GDP measures:expenditure on all final goods and services.total income of everyone in the economy.total value added by all firms in the economy.
All of the answers are correct.
What is the correct ascending order of the following periods typically associated with the business cycle?
Upturn, rapid expansion, recession, peaking out
Formation, ascension, peaking out, recession
Upturn, diversification, peaking out, recession
Upturn, rapid expansion, peaking out, recession
An expansion or boom is the period in the business cycle from a:
A) peak down to a trough. B) peak to a peak.
C) trough to a trough. D) trough up to a peak.
Which of the following factors will not cause the AD curve to shift to the right?
Higher prices lead to higher interest rates.
The government reduces interest rates.
Consumer confidence improves.
Higher prices abroad lead to an increase in the demand for UK exports.
Which of the following would be most likely to cause a recession, according to the Keynesian model?
A) Excessive government borrowing. B) Inflationary policies.
C) A decrease in the saving rate. D) A decline in business investment.
A loan made by a bank is considered _ of that bank, whereas a time deposit in a bank is considered of that bank.
A) an asset, an investment. B) capital, a liability.
C) an asset, a liability. D) capital, an investment.
Which of the following is not a demand for money?
A) Transactions motive B) Precautionary motive
C) Goods motive D) Speculative motive
Which of the following is a monetary policy tool used to control inflation?
Interest rate
Exchange rate
Taxation
Fines
The Phillips curve shows an relationship between inflation and unemployment.
A) indirect B) perverse C) inverse D) direct
The inflation caused by supply shocks is called:expected inflation.wage inflation.demand-pull inflation.
cost-push inflation.
An individual who has a job but has been temporarily absent, with or without pay, is classified as:
A) a discouraged worker. B) employed.
C) unemployed. D) not in the labour force.
Disequilibrium unemployment means that:
at the going wage rate, there are people who want to work but who cannot find work.
there are some people who will not be working due to the season of the year.
the wage rate is too low to attract all those people who wish find employment.
the supply of labour exceeds the demand for it.
The increase in unemployment that occurs during recessions is called:
A) structural unemployment. B) cyclical unemployment.
C) normal unemployment. D) frictional unemployment.
The portion of unemployment that is due to changes in the economy that result in a significant loss of jobs in certain industries is called:
A) natural unemployment. B) structural unemployment.
C) cyclical unemployment. D) frictional unemployment.
The Ministry of Defence closes its Headquarters in Bath and transfers to a new buildingin Bristol.
A worker at the Bath office is given the opportunity and finance to move to Bristol. She turns down this opportunity because of family obligations. While she is searching for a new job she would be classified as:
not in the labour force because she turned down the opportunity to relocate.
cyclically unemployed.
frictionally unemployed.
structurally unemployed.
Unemployment that occurs when potential workers lack the skills required for available jobs is called:
A) Real-wage unemployment. B) Demand-deficient unemployment.
C) Structural unemployment. D) Frictional unemployment.
If the bank of England raises interest rates it will
lower aggregate demand and raise the exchange rate.
raise aggregate demand and lower the exchange rate.
raise aggregate demand and raise the exchange rate.
lower aggregate demand and lower the exchange rate.
Supply-side policies are government policies:
that focus on aggregate supply and increasing production.
used to control the money supply.
that directly attempt to control prices and wages.
regarding taxes and expenditures.
A decrease in the money supply aimed at decreasing aggregate output is:
A) an expansionary fiscal policy. B) a contractionary fiscal policy.
C) an expansionary monetary policy. D) a contractionary monetary policy.
Which of the following is NOT an example of fiscal policy?UK introduces new financial regulation for foreign-operated banksItaly cuts taxation on diesel fuel used by the timber industry
France cuts spending on state-run schools
If the government wants to reduce unemployment, government spending could be and/or taxes should be .
A) increased, decreased B) decreased, increased
C) decreased, decreased D) increased, increased
What is not a part of the balance of payments account?
A) Financial account B) Capital account
C) Fiscal account D) Current account
The record of a country’s transfers of land, inter-governmental payments and money sent by migrants to and from abroad is called its:
balance of payments.
balance of payments on current account.
capital account of the balance of payments.
financial account of the balance of payments.
The price of one country’s currency in terms of another country’s currency is the
A) currency valuation. B) exchange rate.
C) terms of trade. D) balance of trade.
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