MCQ 3

Which one of the following would be an example of a loosening of fiscal policy?

A) A fall in the money supply.

B) A rise in the rate of inflation.

C) A fall in interest rates.

D) A rise in the government budget deficit.

Which one of the following is most likely to result in a demand-side shock to the UK economy? A large rise in:

A) World commodity prices.

B) UK wages due to a wage strikes.

C) UK interest rates.

D) The price of imported semi-manufactured goods.

The Monetary Policy Committee (MPC) of the Bank of England meets each month to decide on the rate of interest that is most likely to help it achieve the government's inflation target. The MPC is most likely to decrease interest rates if:

A) Inflation is above target and the exchange rate is high and rising.

B) The rate of growth of money wages is above the rate of growth of labour productivity.

C) Employment is rising.

D) There is a negative output gap.

The annual rate of inflation in the UK falls from 5 per cent to 2 per cent but the annual rate of inflation in the UK's main trading partners remains at 5%. As a result, all other things being equal, it is likely that in the long term:

A) UK exports will increase.

B) UK imports will increase.

C) the UK current account balance will deteriorate.

D) Withdrawals from the UK circular flow of income will increase.

A) Growth in export markets.

B) Improvements in the banking system that increase the funds available for investment.

C) An improvement in consumer confidence.

D) A sustained increase in government spending on welfare benefits.

Which one of the following is most likely to be an example of cyclical unemployment?

A) Gill lost her job as a television engineer two months ago and is waiting to start a new job next month.

B) Brian has not worked for 15 years since losing his job as a coal miner.

C) Hitesh lost his job as a construction worker six months ago when a recession led to a downturn in the construction industry.

D) Faith works in the hotel trade as a casual chef and spends November to April out of work.

A) Long-Run economic growth.

B) An increase in spare capacity.

C) A rise in real national income.

D) An improvement in technology.

All other things being equal, demand-pull inflation is most likely to result from an increase in

A) The level of interest rates.

B) Government spending.

C) The rate of income tax.

D) The cost of imported raw mateials.

All other things being equal, in the long run a fall in the exchange rate is likely to

A) increase unemployment because it makes domestic products less competitive abroad.

B) increase unemployment beecause it makes foreign products more competitive in the home market.

C) reduce aggregate demand because it increases the domestic price of imports.

D) increase aggregate demand because it can reduce the foreign currency price of exports.

Which one of the following is most likely to reduce the level of investment in a particular economy? A fall in:

A) The value of a country's currency on the foreign exchange market.

B) Aggregate demand in the economy.

C) The level of unemployment.

D) The spare capacity of the economy.

A) Structural Unemployment.

B) Cyclical Unemployment.

C) Seasonal Unemployment.

D) Frictional Unemployment.

A) Country B has a progressive tax system.

B) Country A has a regressive tax system.

C) Country D is the only country with a progressive tax system.

D) Country C has a regressive tax system.

Which of the following would be most likely to increase the multiplier?

A fall in the MPC.

A rise in the MPM.

A rise in the MPS.

A fall in the MPT.

MCQ 3

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