Question 1

All other things being equal, a large rise in interest rates is most likely to lead to an increase in

Accepted Answer

unemployment

Answer

economic growth

Answer

investment

Answer

aggregate supply

Question 2

In 2013, compared to 2012, which one of the following statements can be inferred from the data?

Accepted Answer

Real national income per head fell

Answer

Money national income rose by 10%

Answer

Population grew at a faster percentage rate than prices

Answer

Real national income rose

Question 3

Which one of the following is most likely to be regarded as a supply-side cause of higher economic growth?

Accepted Answer

Lower tax rates on income

Answer

Cheaper consumer credit

Answer

Higher welfare benefits for the unemployed

Answer

Increased exports of goods and services

Question 4

Which one of the following would be likely to lead to a new equilibrium position, with a fall in the price level?

Accepted Answer

A fall in exports

Answer

A fall in productivity

Answer

An increase in government spending

Answer

An increase in wage rates

Question 5

Investment by a foreign company is likely to have what effect on the host country?

Accepted Answer

A shift in AD and a shift in LRAS

Answer

A movement along AD and LRAS

Answer

A shift in AD and a movement along LRAS

Answer

A movement along AD and a shift of LRAS

Question 6

Which of the following combinations is most likely to have caused a shift to the right of AD?

Accepted Answer

Fall in interest rates, fall in exchange rates

Answer

Rise in interest rates, rise in exchange rates

Answer

Rise in interest rates, fall in exchange rates

Answer

Fall in interest rates, rise in exchange rates

Question 7

Between Year 1 and Year 2, aggregate demand increased by

Accepted Answer

£10 billion

Answer

£30 billion

Answer

£15 billion

Answer

£20 billion

Question 8

The relationship between the growth of national income and the resulting increase in investment is known as the

Accepted Answer

accelerator

Answer

output gap

Answer

economic cycle

Answer

multiplier

Question 9

Which one of the following is most likely to be deflationary? A reduction in

Accepted Answer

bank lending

Answer

income tax

Answer

spending on imports

Answer

interest rates

Question 10

Which of the following combinations, is most likely to lead to a deterioration in the UK balance of payments on current account?

Accepted Answer

C

Answer

A

Answer

B

Answer

D

Question 11

Which one of the following illustrates the most likely effects of an increase in oil prices and an increase in savings?

Accepted Answer

C

Answer

A

Answer

B

Answer

D

Question 12

What is the likely outcome of the changes shown in the exchange rate?

Accepted Answer

inflationary pressures eased

Answer

the price of imports increased

Answer

there was growth in employment in manufacturing

Answer

the balance of payments on current account improved

Question 13

Which one of the following combinations, A, B, C or D, is most likely to result from the reduction in AD?

Accepted Answer

D

Answer

A

Answer

B

Answer

C

Question 14

Which one of the following is most likely to reduce cyclical unemployment in the short run?

Accepted Answer

A reduction in the budget surplus

Answer

A reduction in the budget deficit

Answer

An increase in the exchange rate

Answer

An increase in interest rates

Question 15

X is the original equilibrium. Which will be the equilibrium after policies to lower the exchange rate and introduce a training scheme?

Accepted Answer

A

Answer

B

Answer

C

Answer

D

Question 16

The Consumer Prices Index (CPI) is a measure of changes in the

Accepted Answer

average cost of living

Answer

pattern of consumer expenditure

Answer

average standard of living

Answer

effective demand for consumer goods

Question 17

The type of unemployment shown below is best described as

Accepted Answer

cyclical unemployment

Answer

seasonal unemployment

Answer

frictional unemployment

Answer

structural unemployment

Question 18

If an economy imports raw materials and exports finished goods and services, a depreciation of the exchange rate will

Accepted Answer

increase both demand-pull and cost-push inflationary pressures

Answer

reduce both demand-pull and cost-push inflationary pressures

Answer

reduce demand-pull inflationary pressures but increase cost-push inflationary pressures

Answer

increase demand-pull inflationary pressures but reduce cost-push inflationary pressures

Question 19

Which one of the following is most likely to reduce the level of investment in a particular economy? A fall in

Accepted Answer

aggregate demand in the economy

Answer

the spare capacity of the economy

Answer

the value of a country’s currency

Answer

the level of unemployment

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