Question 1

When investment increases as a result of an increase in GDP, this is an example of:

Accepted Answer

The accelerator

Answer

Government failure

Answer

The multiplier

Answer

Monetary policy

Question 2

Which one of the following is not a macro-economic objective?

Accepted Answer

To reduce the tax burden

Answer

To maintain full employment

Answer

To ensure price stability

Answer

To ensure high levels of growth

Question 3

Which one of the following headlines indicates the use of monetary policy?

Accepted Answer

"Misery for homeowners as interest rates are raised."

Answer

"Big reduction in government borrowing announced in the budget."

Answer

"Government declares its determination to halt the fall in the value of money."

Answer

"More money in everyone's pockets as taxes are lowered."

Question 4

In the short run, a fall in the budget deficit is most likely to increase

Accepted Answer

Unemployment

Answer

The quantity of imports

Answer

Interest rates

Answer

The rate of inflation

Question 5

Which one of the following is a correct statement?

Accepted Answer

Fiscal policy can be used to affect the trade balance and the rate of inflation

Answer

The Bank of England uses fiscal policy to control the exchange rate

Answer

Fiscal policy is used only to affect the demand of the economy

Answer

The Bank of England is responsible for monetary and fiscal policy

Question 6

One of the main functions of supply-side policies in the UK economy is to

Accepted Answer

Creates incentives designed to improve economic performance

Answer

Reduce the size of the government's national debt

Answer

Cause the rate of growth of aggregate supply to exceed the rate of growth of AD

Answer

Lower the long-run trend rate of growth of the economy

Question 7

All other things being equal, a fall in the value of the pound against the euro would be likely to lead to

Accepted Answer

An increase in aggregate demand

Answer

A fall in raw material prices of EU imports coming into the UK

Answer

A worsening of the UK's trade deficit with the EU

Answer

A rise in the euro price of UK exports

Question 8

Which one of the following statements relating to monetary policy is correct?

Accepted Answer

A rise in interest rates may cause an appreciation of the exchange rate

Answer

A cut in interest rates always increases inflation

Answer

Interest rate changes have no effect on aggregate supply

Answer

An increase in interest rates will raise the level of business investment

Question 9

Which tax is most likely to be regressive?

Accepted Answer

Sales tax

Answer

An inheritance tax

Answer

A property tax

Answer

Income tax

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