Macroeconomics January 2009

Please choose one of the following options for each question:

1. Which one of the following statements about saving is correct?





2. An economy is currently operating inside its production possibility frontier. In the short run, if the rate of growth of aggregate demand is less than the rate of growth of productive capacity, then the economy is most likely to experience





3. As a component of aggregate demand, consumption is best defined as total expenditure in the





4. The policy most appropriate to close the output gap XY by influencing aggregate demand would be





5. Which one of the following is most likely to shift the short run aggregate supply curve to the right?





6. ‘The multiplier’ usually refers to the effect of a change in the level of





7. The movement of the economy from position X to position Y must indicate that there has been





8. Expansionary monetary policy is most likely to





9. The shift from AD1 to AD2 could be explained by an increase in





10. All other things being equal, an economy is most likely to experience inflation if





11. A rise in the level of domestic investment will most likely result from a rise in





12. A sustained rise in the exchange rate is most likely to increase





13. The figures indicate that, approximately, between 2007 and 2008





14. Which one of the following is most likely to be an example of a contractionary fiscal policy designed to reduce inflationary pressures?





15. Which one of the following combinations of government policy is most likely to have brought about the change in equilibrium from E to F? An increase in





16 ‘The UK steel industry pays for its imported inputs in US dollars and sells its output abroad in euros.’ It follows from the above that the UK steel industry will benefit most when the pound is





17 ‘Economists predict that the negative output gap in the United Kingdom is likely to grow over the next couple of years.’

In the short run, which one of the following policies is most likely to help to prevent this negative output gap increasing?





18. Which one of the following, A, B, C or D, represents the most likely outcome of cuts in interest rates for an economy, all other things being equal?





19. Structural unemployment is most likely to be caused by





20. All other things being equal, which one of the following is most likely to increase an economy’s underlying trend rate of growth?
A rise in the rate of growth of





21. The country experiences a 10% increase in oil prices and at the same time exports increase by 10%. As a result of these two events, equilibrium will





22. In recent years, the UK has experienced large deficits on the balance of payments on current account. Which one of the following would be least likely to reduce such deficits?





23. Which one of the following statements relating to monetary policy is correct?





24. All other things being equal, the most likely consequence of the changes in the exchange rate index shown in the table is that





25. When there is full employment, an advantage of supply-side policies is that they