AS Economics: Aggregate Demand and Aggregate Supply (Test 2)

Which one of the following is most likely to lead to an increase in aggregate demand? An increase in
1. demand for imports
2. household savings
3. government tax revenues
4. business capital investment
All but one of the following are usually regarded as OBJECTIVES of government macroeconomic policy. Which is the EXCEPTION?
1. Increasing the trend rate of economic growth
2. Achieving a sustained improvement in average living standards
3. Increasing the output of the cement industry
4. Achieving full employment in the British economy
A recession is said to occur in the UK economy when
1. the UK runs a trade deficit for two years in a row
2. real national output (GDP) falls for two successive quarters
3. real national income grows but at a much slower rate than before
4. the growth of output in the tourist and banking industries slows down leading to job losses
All other things being equal, an increase in the productivity of labour in an economy will lead to
1. an increase in the general price level
2. a rightward shift of the long run aggregate supply curve
3. an increase in the size of the labour force because more jobs will be needed
4. a fall in the level of aggregate demand
A large increase in borrowing by consumers is most likely to lead to a
1. rise in imports into the UK and a larger trade deficit
2. rise in exports of goods and services from the UK
3. fall in the rate of inflation and lower interest rates
4. fall in employment because everything we buy comes from overseas
Other things remaining constant (ceteris paribus) an initial increase in exports of goods and services sold overseas will lead to an even larger increase in national income. This statement refers to
1. the household savings ratio
2. the multiplier effect
3. the accelerator effect
4. the economy's underlying trend rate of growth
The figures below show productivity in various countries in 2000

PRODUCTIVITY: GDP per hour worked (UK = 100)
France 124
USA 122
Germany 110
Sweden 102
Canada 98
Japan 83

From this data it can be concluded that in 2000
1. Japan had the lowest national output
2. Sweden's productivity was lower than that of the UK
3. France had the highest level of GDP
4. Germany's output per hour worked was 10% higher than the UK's
Which one of the following statements about an economy's output gap is NOT correct?
1. There is a positive output gap when national income is higher than potential GDP
2. There is a negative output gap when national income is lower than potential GDP
3. The output gap can be negative or positive depending on where an economy is in its economic cycle
4. The output gap measures the extent to which an economy's national output is less than that of competitor nations
The chart below tracks the annual change in house prices in the UK in recent years

From the data it can be concluded that
1. House prices have been falling since the autumn of 2002
2. House prices in the south east have risen relative to house prices in the north east
3. House prices have risen by over 10% in each year since 2000
4. House prices in the summer of 2003 were over 15% higher than at the same time last year
Which one of the following is most likely to shift the short-run aggregate supply (SRAS) curve to the right (i.e. an outward shift)?
1. A fall in unit labour costs and falling commodity prices
2. A reduction in government spending on education and health
3. A sharp fall in the exchange rate against the US dollar ($)
4. A decrease in the productivity of labour due to an increase in strikes
"There are more people in work than at any time since records began and these people are seeing their pay rise at more than twice the rate of inflation" (Independent, 22 June 2001)

The above extract implies that
1. the population was declining
2. real national income was rising
3. inflation was falling
4. the exchange rate was rising
The chart above shows the estimated output gaps for selected countries. From the data it can be deduced that
1. The Japanese economy has had a positive output gap since 2001
2. The UK economy was in a recession in 2002 and 2003
3. The United States has experienced the fastest rate of growth between 2000 - 2003
4. Japan's economy has the highest negative output gap in 2003
Which one of the following is most likely to lead to a rise in business capital investment?
1. A rise in the rate of interest as set by the Monetary Policy Committee of the Bank of England
2. A rise in the level of company profits
3. A fall in consumer spending on UK produced goods and services
4. A rise in the rate of corporation tax (a tax on company profits)
Which one of the following policies is most likely to lead to an increase in national output (GDP) and employment WITHOUT increasing the rate of inflation?
1. Expansionary fiscal policy involving an increased budget deficit
2. Expansionary monetary policy involving lower interest rates
3. Supply-side policies involving an increase in capital investment and productivity
4. Policies to boost exports
From the data in the chart it can de deduced that
1. The economy was in a recession in 2002
2. The economy was in a recession in 1995
3. The economy was in recession in 1991
4. The economy experienced its fastest rate of growth in 2000
Which one of the following would be counted as investment by a UK manufacturing business?
1. Spending by a road haulage company on a new fleet of lorries
2. An increase in government spending on new hospitals
3. A decision by a fibre-optics producer to build a new plant in the West of England
4. A new investment project by Tescos - opening four new stores in Scotland

AS Economics: Aggregate Demand and Aggregate Supply (Test 2)

Economics Multiple-choice Quiz