Question 1

This refers to people of working age who are actively looking for a job but who are not employed.

Accepted Answer

Unemployment

Answer

Hidden Unemployment

Answer

Underemployment

Question 2

___________ is defined as the number of people who are employed (working) plus the number of people of working age who are unemployed (not working but seeking work)

Accepted Answer

Labour Force

Answer

Underemployment

Answer

Hidden Unemployment

Answer

Frictional Unemployment

Question 3

Discouraged workers are included in the Unemployment rate measure?

Accepted Answer

False

Answer

True

Question 4

Meet Donald: During his election campaign, he said many jobs and factories had moved from the US to other countries, notably China and Mexico. This created unemployment in the US. What type of unemployment would this be classified as?

Accepted Answer

Structural Unemployment

Answer

Frictional

Answer

Cyclical

Answer

Seasonal

Question 5

Meet Jenny: Jenny is a college student who recently graduated. She has had several offers from jobs in her field however she is holding out for a better offer. Is Jenny considered unemployed and if so, how would you class her unemployment?

Accepted Answer

Frictional

Answer

Structural

Answer

Cyclical

Answer

Seasonal

Question 6

An increase in CPI will predict a future increase in PPI

Accepted Answer

False

Answer

True

Question 7

Demand-Pull Inflation is caused by:

Accepted Answer

An increase in Aggregate Demand with potential output remaining constant

Answer

An increase in the cost of production for firms such as increased raw materials

Answer

Lower consumer confidence and lower spending

Question 8

Which of the following is not a consequence of high inflation?

Accepted Answer

Increased Export Competitiveness (Export Prices become more competative)

Answer

Uncertainty

Answer

Redistribution effect (From one stakeholder to another)

Answer

Menu Costs

Question 9

HL Only: Friedman "attacked" the view that there is a negative relationship between inflation and unemployment. Where did he believe about the LRPC?

Accepted Answer

He believed in is fixed at the economies NRU, thus there is no trade off or negative relationship in the long run

Answer

He believed in is fixed at a certain price level, thus there is no trade off or negative relationship in the long run

Answer

The concept of the Long Run Philips Curve does not exist

Answer

I am an SL Student Please give me points for free :D (PS I can check who is an SL Student

Question 10

Economic growth is defined as...

Accepted Answer

An increase in real GDP over a period of time

Answer

An increase in nominal GDP over a period of time

Question 11

An increase in GDP will also equal an increase in GDP per capita.

Accepted Answer

False

Answer

True

Question 12

Marketable Commodities are not required for an economy to achieve economic growth

Accepted Answer

True

Answer

False

Question 13

A shift from point A to B is an increase in

Accepted Answer

Actual Output

Answer

Neither Actual or Potential

Answer

Potential Output

Question 14

In the long run in order for the economy to experience an increase in output, a government must

Accepted Answer

Increase Investment so that leads to higher productivity

Answer

Increase Productivity that leads to higher investment

Question 15

Which of the following statements best explains the main reason why economies may have a more unequal distribution of income

Accepted Answer

Unequal access to factors of production leads to a more unequal distribution of income due to the unequal distribution of factor payments.

Answer

Unequal access to factors of production leads to a more equal distribution of income due to higher factor payments

Answer

Access to factors of production leads to a more unequal distribution of income due to more factor payments

Question 16

Using the data below, select the country that has the more equal distribution of income based on its Gini Coefficient.

Accepted Answer

Vietnam (0.38)

Answer

Bolivia (0.58)

Answer

Ghana (0.43)

Answer

Mexico (0.48)

Question 17

Which of the following is not a cause of poverty?

Accepted Answer

Low Living Standards

Answer

Inability to access social services (Merit Goods)

Answer

Geography

Answer

Discrimination

Question 18

________________________ - average tax rate is the same for everyone regardless of income. Often called a “flat tax” as the rate remains the same for everyone.

Accepted Answer

Proportional Tax System

Answer

Regressive Tax System

Answer

Indirect Tax

Answer

Progressive Tax System

Question 19

______________ - is the additional tax rate paid on an additional $1 earnt

Accepted Answer

Marginal Tax Rate

Answer

Tax Bracket

Answer

Average Tax Rate

Question 20

Which of the following could be a reason why some economists argue against the use of transfer payments?

Accepted Answer

They could act as a disincentive to work

Answer

They encourage firms to pay lower wages

Answer

Transfer payments cause high levels of household debt

Answer

They will increase taxes for others

Question 21

Indirect tax systems can be considered....

Accepted Answer

Regressive

Answer

Direct Tax

Answer

Progressive

Answer

Proportional

Question 22

All economists agree there is always a trade off between efficiency and equality. They all agree you can't achieve one without forgoing the other.

Accepted Answer

False

Answer

True

Question 23

Which of the following is not a role of the central bank?

Accepted Answer

Maintain unemployment at the NRU

Answer

Banker to the Government

Answer

Regulate Financial Markets

Answer

Monetary Policy

Question 24

Decreasing the supply of money, the interest rate will:

Accepted Answer

Increase

Answer

Decrease

Question 25

When the government wants to increase its debt, this causes the interest to rise (crowding out) due to...

Accepted Answer

An increase in demand for loanable funds with supply remaining constant, causes an increase in the interest rates, causing private firms to reduce investment

Answer

An increase in demand for loanable funds with supply remaining constant, causes an decrease in the interest rates, causing private firms to increase investment

Question 26

Which of the following is not an advantage of a central bank focusing on Inflation Targeting

Accepted Answer

Ability to respond to Financial Crises

Answer

Improved transparency for economic stakeholders

Answer

Accountability of Central Banks

Answer

A lower rate of inflation

Question 27

The government finds its economy in an inflationary gap. What policy would be best to close the gap?

Accepted Answer

Contractionary Monetary Policy

Answer

Interventionist Supply-Side Policies

Answer

Expansionary Fiscal Policy

Question 28

Which of the following make up Government Spending?

Accepted Answer

Current Expenditure, Capital Expenditure and Transfer Payments

Answer

Current Expenditure, Capital Expenditure and Deficit Spending

Answer

Transfer Payments, Deficit Spending, Capital Expenditure

Answer

Current Expenditure and Taxation

Question 29

If the government runs a prolonged budget deficit over time, this will increase countries:

Accepted Answer

Public Debt/Government Debt

Answer

Structural Debt

Answer

Budget Deficit

Question 30

In order to close the recessionary gap, the government should use:

Accepted Answer

Expansionary Fiscal Policy such as decreasing income and corporation taxes

Answer

Contractionary Fiscal Policy such as cutting taxes

Answer

Contractionary Fiscal Policy such as raising taxes

Answer

Expansionary Fiscal Policy such as decreasing government spending

Question 31

One limitation of contractionary fiscal policy may be:

Accepted Answer

Keynesian Rachet Effect

Answer

Keynesian Sticky Wage Effect

Answer

Keynesian Animal Spirits Effect

Question 32

Which of the following statements best describes the role of automatic stabilisers?

Accepted Answer

These are non discretionary policies which aim to automatically flattern out the fluctuations of the business cycle through the use of progressive tax systems and transfer payments. This is because during a recession, the average tax rate decreases and transfer payments increases and therefore consumption and investment increases and reduces the recessionary gap. Similarly, during an expansionary phase average tax rate increases and transfer payments increases and therefore the expansionary phase reduces.

Answer

These are non discretionary policies which aim to automatically flattern out the fluctuations of the business cycle through the use of progressive tax systems and transfer payments. This is because during a recession, the average tax rates increase and transfer payments decrease and therefore consumption and investment increases and reduces the recessionary gap. Similarly, during an expansionary phase average tax rate decreases and transfer payments increases and therefore the expansionary phase reduces.

Answer

These are non discretionary policies which aim to automatically flattern out the fluctuations of the business cycle through the use of proportional tax systems and transfer payments. This is because during a recession, the average tax rates increase and transfer payments decrease and therefore consumption and investment increases and reduces the recessionary gap. Similarly, during an expansionary phase average tax rate decreases and transfer payments increases and therefore the expansionary phase reduces.

Answer

These are discretionary policies which aim to automatically flattern out the fluctuations of the business cycle through the use of progressive tax systems and transfer payments. This is because during a recession, the average tax rates increase and transfer payments decrease and therefore consumption and investment increases and reduces the recessionary gap. Similarly, during an expansionary phase average tax rate decreases and transfer payments increases and therefore the expansionary phase reduces.

Question 33

One of the limitations from a Classical Perspective is the crowding-out effect of expansionary fiscal policy. Which of the following statements best describes what crowding out is?

Accepted Answer

If the government pursues an expansionary fiscal policy involving spending increases without an increase in revenues, it is forced to borrow; this is called deficit spending. Government borrowing involves an increase in the demand for money and leads to an increase in the rate of interest. A higher interest rate in turn can lead to lower investment spending by private firms, or a ‘crowding out’ of private investment. This means that the government’s expansionary fiscal policy is weakened since a greater G (government spending) is counteracted by a lower I (investment spending).In the diagram above there is a rightward shift from AD1 to AD2 due to the increase in G, and a leftward shift from AD2 to AD3 due to the fall in I. This shows partial crowding out.

Answer

If the government pursues an expansionary fiscal policy involving spending increases without an increase in revenues, it is forced to borrow; this is called deficit spending. Government borrowing involves an increase in the demand for money, and leads to a decrease in the rate of interest . A higher interest rate in turn can lead to lower investment spending by private firms, or a ‘crowding out’ of private investment. This means that the government’s expansionary fiscal policy is strengthened, since a greater G (government spending) is counteracted by a lower I (investment spending). Crowding out is shown above, there is a rightward shift from AD1 to AD2 due to the increase in G, and a leftward shift from AD2 to AD3 due to the fall in I. This shows partial crowding the demand for money, and leads to an increase in the rate of interest.

Question 34

HL Only: If the Marginal Propensity to Save is 0.1, Marginal Propensity to Import is 0.2, Marginal Propensity to Tax is 0.2, what is the MPC?

Accepted Answer

0.5

Answer

0.8

Answer

0.6

Question 35

HL Only: If a countries Marginal Propensity to Consume is 0.6, what would the Keynesian Multiplier be?

Accepted Answer

2.5

Answer

2

Answer

0.4

Answer

2.2

Question 36

Which statement best describes the Keynesian Multiplier effect:

Accepted Answer

Autonomous Spending leads to Induced Spending

Answer

Nonsense

Answer

Induced Spending leads to Autonomous Spending

Question 37

Tax cuts to a particular industry or for infant industries in an economy are considered

Accepted Answer

Interventionist

Answer

Market Based

Question 38

This type of supply-side policies tends to increase the unequal distribution of Income

Accepted Answer

Market-Based

Answer

Interventionist

Question 39

These type of supply side policies may cause an increase in externalities

Accepted Answer

Market Based

Answer

Interventionist

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