Macroeconomics June 2009

Please choose one of the following options for each question:

1. An increase in imports of consumer goods is most likely to be caused by a





2. Real incomes rise whenever





3. A current account deficit on the UKís balance of payments means that generally





4. Which one of the following is an example of fiscal policy? A decision by the government to





5. The economy is currently operating at its normal capacity level of output. It is estimated that the long-run trend rate of growth of the economy is around 2.5% per annum. In the coming year, it is expected that inflation will be 4% per annum and money national income will grow by 5%.

Which one of the following is most likely?





6. From the graph, it may be deduced that average prices





7. All other things being equal, when an increase in exports leads to a larger increase in national income, this illustrates





8. The economy is currently operating at point X. At this point, the economy must be experiencing





9. In the short run, a decrease in aggregate demand is most likely to result in a reduction in





10. An economy is operating at full employment. Which one of the following is most likely to lead to an increase in real national output without an increase in the rate of inflation in the short term?





11. Which one of the following is most likely to lead to a fall in aggregate investment?





12. Inflation in an economy is currently at 10%. Which of the following changes in monetary and fiscal policy, A, B, C or D, is most likely to bring down the rate of inflation in the economy?





13. A rise in the exchange rate of the pound sterling is likely to assist UK government policies aimed at reducing the





14. The Consumer Prices Index (CPI) rises from 100 to 105. This shows that





The government predicts that aggregate demand will increase in the long run from AD1 to AD2. Which one of the following policies is most likely to move the economy to a new long-run equilibrium at point E rather than point F?





16. Which one of the following, A, B, C or D, is most likely to be associated with an accelerator process in an economy?





17. Between 2004 and 2006, an estimated 600 000 workers arrived in the UK from new members of the European Union (EU) in Eastern Europe. At the same time, inflation remained low, economic growth was strong, unemployment hardly changed and the current account position on the balance of payments deteriorated. Given this information, which one of the following is most likely to have been correct between 2004 and 2006?





18. The underlying trend rate of growth in an economy is declining and the economy is also experiencing an increase in its rate of unemployment. Which one of the following is likely to be most effective in dealing with these problems?





19. Which one of the following is most likely to be classified as a supply-side policy?





20. An economy is experiencing a balance of payments deficit and inflation. All other things being equal, which policy is most likely to reduce both the balance of payments deficit on current account and the rate of inflation?





21. All other things being equal, the shift in the aggregate demand schedule from AD1 to AD2 could have been caused by an increase in





22. A fall in the value of the pound relative to the euro would be expected to affect the UK economy because it is likely to lead to





23. A cut in the central bankís lending rate is an example of





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





25. Other things being equal, increased innovation in an economy is likely to lead to a