Macroeconomics June 2013

Please choose one of the following options for each question:

1. Which one of the following is most likely to shift the short-run aggregate supply curve to the left? A rise in





2. In the short run, a fall in a budget deficit is most likely to increase





3. The UK economy is in recession. The government increases its budget deficit whilst, at the same time, the exchange rate of the pound falls. These events are most likely to lead to a rise in





4. The table below shows both the unemployment rate and inflation rate for an economy between 2010 and 2012.

Which one of the following can be deduced from the data?





5. Which one of the following is a correct statement?





6 The diagram below shows the aggregate demand (AD), the short-run aggregate supply (SRAS) and the long-run aggregate supply (LRAS) curves for an economy.

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





7. Deflation is





8. The UK’s balance of payments on current account is in deficit and unemployment is high. The UK Government attempts to lower unemployment by significantly increasing aggregate demand.
All other things being equal, which one of the following combinations, A, B, C or D, is now most likely to occur in the short term?





9. The multiplier can refer to the effect of a change in the level of





10. The Bank of England raises interest rates to reduce aggregate demand. Which one of the following combinations, A, B, C or D, is most likely to reduce the effectiveness of such a policy?





11. The production possibility diagram below shows an economy operating on its frontier, producing the combination of consumption and capital goods shown at point Y.

With no change in the position of the production possibility frontier, there is now an increase in the production of capital goods. Which one of the following, A, B, C or D, is most likely to occur because of this increase?





12. A government wishing to reduce the level of unemployment through the use of fiscal policy would be most likely to





13. One of the main functions of supply-side policies in the UK economy is to





14. The economy is growing below its underlying trend rate and unemployment is rising. Which one of the following policies would be the best course of action to remedy the situation?
An increase in





15. Which one of the following types of unemployment is best defined as ‘unemployment for short lengths of time between jobs’?





16. If the world economy goes into recession, this is likely to increase unemployment in the UK because





17. The diagrams below show aggregate demand (AD) and short-run aggregate supply (SRAS) curves for an economy. AD1 and SRAS1 represent the initial position of the curves. AD2 and SRAS2 represent shifts in the position of the curves.
Which one of the following diagrams, A, B, C or D, indicates the effect on the economy of a general rise in wage costs and a rise in investment?





18. All other things being equal, a fall in the value of the pound against the euro would be expected to affect the UK economy because it is likely to lead to





19. Which one of the following is a correct statement about monetary policy in the UK?





20. In recent years, the UK has experienced large deficits on its balance of payments on current account.
All other things being equal, which one of the following would be most likely to reduce such deficits? A fall in





21. The diagram below shows the aggregate demand (AD) and the short-run aggregate supply (SRAS) curves for an economy, with the initial equilibrium being at point X.

All other things being equal, what would be the new equilibrium position following a rise in productivity and an increase in imports into the country?





22. The long-run 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?





23. Which one of the following is most likely to reduce inflationary pressures in the UK economy?





24. A negative output gap necessarily means that the economy





25. Which one of the following is a fundamental determinant of long-run aggregate supply?