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
- 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 banks
- Italy 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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