AS Economics: Macroeconomics Revision Test 1

Which one of the following is not an example of the use of government fiscal policy? A change in
1. Government spending
2. Interest rates
3. The size of the budget deficit
4. A tax imposed on imports of goods and services
Which one of the following would cause an outward shift of the long run aggregate supply curve? An increase in
1. The demand for credit
2. Inflation
3. The volume fo exports produced
4. The productivity of labour
The chart above shows real consumer spending in the UK for each year from 1991. From the chart we can deduce that
1. Consumer spending fell in 1995
2. Consumer spending grew more strongly in the second half of the 1990s than the first half of the same decade
3. The economy was in recession in 1991 and 1992
4. The level of real consumer spending was at its highest at the start of the decade
The change in the aggregate demand curve shown in the diagram above might have been caused by
1. An increase in the level of household disposable income
2. An increase in the level of government spending
3. A fall in the sterling exchange rate
4. An increase in the level of direct taxation for consumers and businesses
Which of the following is likely to decrease aggregate supply in the economy?
1. A rise in the price of raw materials and components
2. Improvements in production technology
3. Increased geographical mobility of labour
4. A rise in business confidence
Inflation could co-exist with all of the following except
1. A more unequal distribution of income and wealth
2. An increase in the value of money
3. Falling unemployment
4. Rising real wages in the construction industry
Which one of the following is not a component of aggregate demand?
1. Exports
2. Government spending
3. Employment
4. Household spending
Supply-side economic policies are most likely to be concerned with influencing
1. The value of the sterling against the Euro
2. The long run trend rate of economic growth
3. Short run fluctuations in the general price level
4. Short run fluctuations in the volume of UK exports sold overseas
The chart above provides information on house prices in the UK from data published by the Halifax and the Nationwide, two of Britain's leading mortgage providers. From the data we can deduce that
1. House prices were at their lowest in January 2001
2. The Nationwide has sold fewer houses than the Halifax during the period 2001 - 2002
3. House prices have been rising ov average by over ten % per year throughout the period shown
4. House prices were growing at their fastest rate over the period shown during the autumn of 2002
Other things being equal, a rise in interest rates in the UK is likely to
1. Decrease the external value of the pound
2. Decrease the demand for new homes
3. Decrease the marginal propensity to save
4. Decrease the level of government spending
Which one of the following is a supply-side policy to reduce unemployment?
1. A cut in interest rates
2. An increase in unemployment benefits
3. A reduction in the starting rate of income tax
4. A cut in spending on the New Deal programme
If the aggregate supply curve is perfectly inelastic, an increase in aggregate demand will lead to an increase in
1. Inflation
2. Real national output
3. Both inflation and real national output
4. Real national output and employment
In the short run an increase in the budget deficit is most likely to reduce
1. The demand for imports
2. Unemployment
3. Interest rates
4. Inflation
A decrease in short term interest rates when the exchange rate is falling is most likely to lead to an increase in
1. Long run aggregate supply
2. Unemployment
3. The trade surplus in goods and services
4. Economic growth
From the data shown in the chart above we can deduce that
1. Consumers were spending less in 2001 than they were in 2000
2. Interest rates were higher in 1992 than there were in 2001
3. The average propensity to save has fallen since 1992
4. The demand for credit was higher in 2000 than in 2001
A fall in the exchange rate is most likely to lead to
1. A fall in the price of imports
2. A rise in the price of exports
3. Higher demand for imports
4. Higher demand for exports
The chart below shows the level of government borrowing over recent years. The data is taken from the Government Pre-Budget Report published in November 2002.

From the information contained in the chart we can deduce that
1. The government was running a budget surplus of nearly 4% of GDP in the early 1980s
2. The government was running a budget deficit of nearly 8% of GDP in 1993-94
3. The government expects to run a budget surplus from 2002-03 onwards
4. The government expects to have to raise taxation from 2002-03 onwards
The chart above tracks the rate of actual inflation and inflationary expectations for the UK economy since 1990. From the data we can see that
1. The rate of inflation has remained constant since 1992
2. There has been a gradual fall in inflation expectations since 1997
3. The price level was at its lowest at the end of the period shown in the data
4. Actaul inflation has exceeded inflation expectations throughout the period shown in the data
Economic growth occurs when there is an increase in
1. Aggregate demand
2. The rate of inflation
3. Wage rates
4. Productive capacity
Which one of the following would not be regarded as a macro-economic government objective?
1. Achieving a steady rate of economic growth
2. Increasing total investment in the UK steel industry
3. Controlling the rate of consumer price inflation
4. Reducing the rate of claimant count unemployment
The level of structural unemployment is most likely to be reduced by
1. Reducing interest rates
2. Reducing tariff barriers on imports
3. Funding training schemes to reduce occupational immobility
4. Increasing capital investment grants for small businesses
The diagram above shows the annual rate of growth of real GDP for the Euro Zone countries and the UK. From the data we can deduce that
1. The UK economy has grown faster than the Euro Zone throughout the period shown
2. Unemployment has fallen in both the Euro Zone and the UK since 1997
3. Both the Euro Zone and the UK economy experienced a recession in 2001
4. The UK economy experienced a upturn in growth in 2002
From the data shown in the chart above we can deduce that
1. Company profits were falling during 2001-02
2. The FTSE 100 index has fallen approximately 30% from its peak level in 1999
3. There was a fall in the share price of all of the leading UK companies in 2001-02
4. The number of business failures has increased since 1999
Which one of the following is most likely to lead to an increase in the underlying rate of inflation?
1. An increase in the exchange rate
2. A fall in the balance of payments surplus
3. A rise in the budget surplus
4. A fall in interest rates
A government wishes to increase the rate of economic growth and reduce a deficit on the balance of payments. Which of the following mix of policies would be most likely to achieve these objectives?
1. Expansionary fiscal policy with a rise in interest rates
2. Expansionary monetary policy with a rise in taxes
3. Supply side policies aimed at increasing capital investment and levels of education and training
4. Increased public sector investment in infrastructure such as roads and schools, together with policies aimed at raising the exchange rate
Household savings are most likely to rise if there is an increase in
1. the rate of taxation
2. the rate of interest
3. household spending
4. imports of consumer goods

AS Economics: Macroeconomics Revision Test 1

Economics Multiple-choice Quiz