AS Economics: Macroeconomics Revision Test (2)

Economic growth occurs when there is an increase in
1. Aggregate demand
2. The productive capacity of the economy
3. The rate of inflation
4. Manufacturing output
The Retail Prices Index is a direct measure of changes in the
1. Level of consumer spending on goods and services
2. Average standard of living
3. Effective demand for consumer goods
4. 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
1. $550 bn
2. $539 bn
3. $525 bn
4. $510 bn
The measure of retail price inflation in the UK which excludes the effect of changes in mortgage interest payments is known as
1. RPI-X
2. RPIX
3. HICP
4. RPI
One of the advantages of an appreciation in the sterling exchange rate against other currencies is that
1. Manufacturing exports will grow
2. Raw materials will cost more for the UK to import
3. The government will run a larger budget surplus
4. 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
1. A rise in the average level of house prices
2. A fall in business sector investment
3. An increase in the sterling exchange rate on the foreign exchange market
4. A reduction in consumer confidence
Macroeconomic disequilibrium exists when
1. Aggregate output is not equal to aggregate real income
2. aggregate demand is not equal to aggregate supply
3. aggregate exports are not equal to aggregate imports
4. government expenditure is not equal to government tax revenue
Aggregate demand is most likely to fall when there is
1. A fall in business and consumer confidence
2. A fall in the basic rate of income tax
3. A fall in the sterling exchange rate
4. 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
1. A rise in the exchange rate
2. A rise in unit labour costs
3. A rise in government spending on public goods
4. 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
1. UK exports will have become more expensive in international markets
2. UK imports will have become more expensive
3. UK consumers will have seen a fall in their real incomes
4. 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
1. A fall in the average cost of living
2. A fall in people's disposable income
3. A fall in the real level of consumer spending
4. An increase in government borrowing
Supply-side economic policies are generally understood to be policies which
1. Reduce the rate of inflation by controlling consumer spending
2. Reduce the price of imported goods and services
3. Encourage a rise in business sector investment and productivity
4. 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?
1. Structural unemployment
2. Cyclical unemployment
3. Frictional unemployment
4. 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?
1. A reduction in the standard rate of income tax
2. An increase in government spending on the National Health Service
3. An increase in tax allowances for business investment
4. An increase in the standard rate of income tax
The external value of sterling is most likely to depreciate if
1. The UK government reduces grants and aid to overseas countries
2. The Bank of England increases UK interest rates
3. The UK inflation rate increases above that of other countries
4. There is an increase in the UK trade surplus in services
A tax is defined as regressive if
1. A lower income earner pays less in tax than a higher income earner
2. A lower income earner pays a lower percentage of their income in tax than a higher income earner
3. A lower income earner pays a higher percentage of their income in tax than a higher income earner
4. 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
1. Money national income with direct taxes deducted
2. Money natiional income adjusted for changes in the general level of prices
3. The sum of all output from manufacturing and construction industries
4. 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
1. Positive in 1980
2. Negative in 1983
3. Negative in 1988
4. 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
1. Manufacturing industry has grown more quickly than the service sector over the period 1980 - 2001
2. Manufacturing industry was in recession in 1989
3. Manufacturing industry has grown more slowly than the service sector over the period 1980 - 2001
4. 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
1. Lower interest rates to stimulate private sector investment
2. Remove all controls on consumer credit and bank lending
3. Increase the size of the budget deficit
4. 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
1. The rate of price inflation
2. The level of real national output
3. The government budget deficit
4. The levelof consumer debt
The position of the long run aggregate supply curve depends on
1. The size of the government budget deficit
2. The rate of inflation
3. The current rate of unemployment
4. The stock of capital and productivity of labour
Investment may be defined as
1. Spending on goods and services by consumers
2. Any addition to the capital stock of the economy
3. All types of spending by the government
4. 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
1. Higher oil prices will stimulate higher output and higher prices over the three year period
2. Higher oil prices will stimulate lower output and higher prices over the three year period
3. Higher oil prices will inevitably lead to a recession for those countries that import oil
4. 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
1. The UK economy is a net importer of all types of goods
2. The UK trade deficit has fallen over the period 1994-2001
3. The UK economy has lost its comparative advantage in many manufacturing industries
4. 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
1. saving
2. the value of the pound
3. consumer borrowing and spending
4. imports
Other things remaining constant, the economy's aggregate demand (AD) curve will shift to the right if
1. savings increase
2. imports increase
3. consumer confidence increases
4. interest rates increase
A multiplier effect occurs when an initial change in government spending leads to a larger change in the level of
1. investment
2. national income
3. prices
4. saving
Inflation is measured by
1. taking the difference between this year's prices and last year's prices
2. calculating the percentage change in prices between the two time periods
3. the level of the RPI (retail price index)
4. changes in the relative prices of goods and services
Real income may be obtained from data on money income by allowing for
1. changes in wage rates
2. changes in interest rates
3. inflation
4. changes in government taxation

AS Economics: Macroeconomics Revision Test (2)

Economics Multiple-choice Quiz