Macroeconomics January 2012

Please choose one of the following options for each question:

1. All other things being equal, lower inflation in an economy is most likely to be achieved if there is an increase in





2. Structural unemployment is most likely to be caused by





3. The table below shows the index for nominal national income (GDP) and the price level index (CPI) for a country in 2009 and 2010.

According to these figures, between 2009 and 2010 the country’s real national income





4. Aggregate demand may fall as a result of a decrease in





5. All other things being equal, which one of the following sets of changes in an economy, A, B, C or D, would be most likely to bring about an improvement in its balance of payments deficit on current account?





6. The most likely cause of the inflationary pressures shown in the diagram is





7. In 2010, the euro declined in value against other major currencies. All other things being equal, which one of the following combinations, A, B, C or D, indicates the most likely consequences for the economies of the eurozone?





8. All other things being equal, more innovation in an economy is most likely to lead to





9. All other things being equal, which one of the following would be most likely to move the economy to point Y?





10. All other things being equal, which one of the following is most likely to cause the long-run aggregate supply curve to shift to the right?





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





12. The graph below shows the annual percentage change in an economy’s Gross Domestic Product (GDP) between 2000 and 2010, at 2000 prices.

Assuming that inflation was constant at 2% each year, it can be concluded that





13. A sustained fall in the exchange rate is most likely to decrease





14. Which one of the following is a correct statement relating to the supply side of the economy?

Supply-side improvements in the economy





15. The multiplier effect of an increase in investment in an economy is





16. All other things being equal, if inflation in the UK economy falls from 3% to 1%, it can be concluded that





17. A country experiences both unemployment and persistent surpluses in the balance of payments. Which one of the following is most likely both to increase employment and to reduce a balance of payments surplus?





18. The table below shows changes in macroeconomic indicators for an economy. During a time of rising unemployment, labour productivity has increased whilst at the same time income per head has fallen.

All other things being equal, which combination, A, B, C or D, is most likely to result from these changes?





19. In which one of the following situations is a government most likely to pursue an expansionary fiscal policy in order to increase aggregate demand?

When





20. The rapid expansion of large, developing economies such as China and India has led to rising world commodity prices and a larger market for the exports of countries such as the UK.

In the diagrams below, the initial equilibrium price level is P1 and the initial equilibrium level of real national output is Y1. Which diagram, A, B, C or D, best illustrates the effects of such events on the UK economy?





21. Which one of the following is most likely to affect aggregate demand in the short run?





22. In the short term, contractionary fiscal policy is most likely to cause





23. A conflict between macroeconomic policy objectives sometimes exists because





24. Which one of the following forms part of the institutional structure of an economy?





25. Given that X is the initial equilibrium position, what would be the new equilibrium position following an increase in the price of imported oil and a general restriction on bank lending in the economy?