Economic growth occurs when there is an increase in
Aggregate demand
The productive capacity of the economy
The rate of inflation
Manufacturing output
The Retail Prices Index is a direct measure of changes in the
Level of consumer spending on goods and services
Average standard of living
Effective demand for consumer goods
Average cost of living
In 2000, the money national income of a country was $500 bn. In 2001 the money value of national income had grown to $550 bn but the price level had risen to 102. The approximate value of real national income for this country in 2001 (measured at constant 2000 prices) is
$550 bn
$539 bn
$525 bn
$510 bn
The measure of retail price inflation in the UK which excludes the effect of changes in mortgage interest payments is known as
RPI-X
RPIX
HICP
RPI
One of the advantages of an appreciation in the sterling exchange rate against other currencies is that
Manufacturing exports will grow
Raw materials will cost more for the UK to import
The government will run a larger budget surplus
The purchasing power of UK tourists overseas will rise
The Monetary Policy Committee of the Bank of England decides to reduce interest rates over a period of time from 5% to 4%. Other things being equal, this is likely to lead to
A rise in the average level of house prices
A fall in business sector investment
An increase in the sterling exchange rate on the foreign exchange market
A reduction in consumer confidence
Macroeconomic disequilibrium exists when
Aggregate output is not equal to aggregate real income
aggregate demand is not equal to aggregate supply
aggregate exports are not equal to aggregate imports
government expenditure is not equal to government tax revenue
Aggregate demand is most likely to fall when there is
A fall in business and consumer confidence
A fall in the basic rate of income tax
A fall in the sterling exchange rate
A fall in the level of interest rates
The diagram above shows aggregate demand and supply curves for an economy The most likely cause of the shift in SRAS shown in the diagram would be
A rise in the exchange rate
A rise in unit labour costs
A rise in government spending on public goods
A rise in business confidence
The chart below tracks the sterling exchange rate and the annual trade balance in goods for the UK economy for each year since 1987 The rise in the sterling exchange rate since 1996 is likely to have contributed to a larger trade deficit because
UK exports will have become more expensive in international markets
UK imports will have become more expensive
UK consumers will have seen a fall in their real incomes
UK consumers will have decided to save a greater proportion of their incomes
An increase in the standard of rate of valued added tax would (other things remaining equal) lead to
A fall in the average cost of living
A fall in people's disposable income
A fall in the real level of consumer spending
An increase in government borrowing
Supply-side economic policies are generally understood to be policies which
Reduce the rate of inflation by controlling consumer spending
Reduce the price of imported goods and services
Encourage a rise in business sector investment and productivity
Restrict the supply of labour from other European Union countries
Which one of the following types of unemployment would be associated with a decline in employment in the pharmaceuticals industry due to a global economic slowdown?
Structural unemployment
Cyclical unemployment
Frictional unemployment
Seasonal unemployment
A country experiences a persistent deficit in its balance of payments and a falling level of unemployment. Which one of the following government policies would suggest that the Government's main objective is to reduce the balance of payments deficit?
A reduction in the standard rate of income tax
An increase in government spending on the National Health Service
An increase in tax allowances for business investment
An increase in the standard rate of income tax
The external value of sterling is most likely to depreciate if
The UK government reduces grants and aid to overseas countries
The Bank of England increases UK interest rates
The UK inflation rate increases above that of other countries
There is an increase in the UK trade surplus in services
A tax is defined as regressive if
A lower income earner pays less in tax than a higher income earner
A lower income earner pays a lower percentage of their income in tax than a higher income earner
A lower income earner pays a higher percentage of their income in tax than a higher income earner
A higher income earner pays a higher percentage of their income in tax than a higher income earner
Real national income may be defined as
Money national income with direct taxes deducted
Money natiional income adjusted for changes in the general level of prices
The sum of all output from manufacturing and construction industries
Money national income minus the effects of international trade
The chart above shows Actual and Trend National Output for the UK since 1980. From the chart we can deduce that the output gap was
Positive in 1980
Negative in 1983
Negative in 1988
Positive in 2002
The chart above shows the annual growth of output in Manufacturing and Service industries for the UK. From the data contained in the table we can conclude that
Manufacturing industry has grown more quickly than the service sector over the period 1980 - 2001
Manufacturing industry was in recession in 1989
Manufacturing industry has grown more slowly than the service sector over the period 1980 - 2001
The service sector has avoided a recession throughout each of the years from 1980 - 2001
A government wishing to reduce the level of unemployment through the use of fiscal policy would be most likely to
Lower interest rates to stimulate private sector investment
Remove all controls on consumer credit and bank lending
Increase the size of the budget deficit
Encourage a depreciation of the exchange rate
If the aggregate supply curve is perfectly elastic, an increase in aggregate demand brought about by a rising level of UK exports will lead to a rise in
The rate of price inflation
The level of real national output
The government budget deficit
The levelof consumer debt
The position of the long run aggregate supply curve depends on
The size of the government budget deficit
The rate of inflation
The current rate of unemployment
The stock of capital and productivity of labour
Investment may be defined as
Spending on goods and services by consumers
Any addition to the capital stock of the economy
All types of spending by the government
That part of household spending which is financed by borrowing rather than saving
The chart below shows the estimated effects on economic growth and inflation of a sustained increase in world oil prices of $5 per barrel over a three year period. From the data we can deduce that
Higher oil prices will stimulate higher output and higher prices over the three year period
Higher oil prices will stimulate lower output and higher prices over the three year period
Higher oil prices will inevitably lead to a recession for those countries that import oil
Higher oil prices will increase inflation by over 2% across a three year period
The table below shows the annual trade balances for goods for the UK in each year since 1994 The data suggests that
The UK economy is a net importer of all types of goods
The UK trade deficit has fallen over the period 1994-2001
The UK economy has lost its comparative advantage in many manufacturing industries
Exports of goods from UK manufacturing industry fell over the period 1994 - 2001
A cut in interest rates will give a boost to aggregate demand if it leads to an increase in
saving
the value of the pound
consumer borrowing and spending
imports
Other things remaining constant, the economy's aggregate demand (AD) curve will shift to the right if
savings increase
imports increase
consumer confidence increases
interest rates increase
A multiplier effect occurs when an initial change in government spending leads to a larger change in the level of
investment
national income
prices
saving
Inflation is measured by
taking the difference between this year's prices and last year's prices
calculating the percentage change in prices between the two time periods
the level of the RPI (retail price index)
changes in the relative prices of goods and services
Real income may be obtained from data on money income by allowing for