Macroeconomics Specimen 1

Please choose one of the following options for each question:

1. Fiscal policy involves the use of





2. The diagram below shows two production possibility frontiers for an economy. The economy is initially producing at point X on production possibility frontier EE.

The outward movement of the production possibility frontier from EE to FF, with increased production of both types of good at point Y, is most likely to be the result of





3. Which one of the following combinations is correct regarding the rate of inflation and the responsibilities of the UK Government and Monetary Policy Committee (MPC) of the Bank of England?





4. Which one of the following is most likely to cause demand-pull inflation?





5. The diagram below shows two aggregate demand (AD) curves and the short-run aggregate supply (SRAS) curve for an economy

All other things being equal, a fall in the price level from P1 to P2 could be explained by a fall in





6. Which one of the following would be regarded as a supply-side shock for the UK economy?





7. The diagram below shows the aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves for an economy. The economy’s initial equilibrium is at point E.

Which one of the following developments affecting the economy is most likely to account for the movement of macroeconomic equilibrium from E to F?





8. A country has a slow rate of growth of productivity and rising cyclical unemployment. All other things being equal, which measures are most likely to increase the rate of growth of productivity and reduce cyclical unemployment?





9. The diagram below shows the actual level of real GDP and the trend level of real GDP over time for an economy.

Between the points P and Q, which one of the following is most likely to be correct?





10. Structural unemployment is most likely to be caused by





11. The table below shows the Consumer Price Index (CPI) of a country over a period of time.

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





12. All other things being equal, a rise in a country’s exchange rate is most likely to





13.The diagram below shows an economy’s aggregate demand (AD) and long run aggregate supply (LRAS) curves. OY1 is the initial equilibrium level of real output.

Which one of the following combination of events is likely to lead to a new equilibrium level of output of OY2?





14.The accelerator principle illustrates the relationship between investment and the rate of change of





15. The diagrams below show aggregate demand (AD) and short-run aggregate supply (SRAS) curves for the UK. All other things being equal, which one of the diagrams, A, B, C or D, shows the most likely effects of an increase in government spending financed by an increase in indirect tax?





16. Which one of the following is most likely to lead to a supply-side improvement in an economy? An increase in





17. The table below shows values (£billion) for components of aggregate demand (AD) in an economy:

What is the value of exports in £ billion?





18. Which one of the following is an example of expansionary monetary policy?
An increase in An increase in





19. Which one of the following is most likely to result from a growing negative output gap?





20. All other things being equal, which one of the following is most likely to increase the current account deficit on the balance of payments?