Macro Economics Question

Read and match the following correctly:

  1. Bank rate
  2. Expansionist Fiscal Policy
  3. Increase in Tax Rate
  4. Cash Reserve Ratio
  5. Open Market Operations

(Monetary Policy) (Contractionary Fiscal Policy) (Government Expenditure) (Monetary Policy Tool) (Monetary Policy Tool)

Demand Pull Inflation

  1. An increase in costs.
  2. An outward shift in aggregate supply.
  3. A reduction in government spending.
  4. A reduction supply and increased in demand.

A rise in general price is called:

Inflation

Inflation

  1. Always reduces the cost of living.
  2. Reduces the price of products.
  3. Reduces the purchasing power of a country.
  4. Always reduces the standard of living

An increase in money supply into economy may lead to:

  1. An outward shift of aggregate supply and cost-push inflation
  2. An outward shift of aggregate demand and demand-pull inflation
  3. An outward shift of aggregate demand and cost-push inflation
  4. An outward shift in aggregate supply and demand-pull inflation

An increase in raw material costs will:

  1. Increase the productivity of employees.
  2. Shift aggregate supply.
  3. Reduce the natural rate of unemployment
  4. Shift aggregate demand

When people change jobs or enter the workforce

  1. Frictional unemployment
  2. Cyclical unemployment
  3. Seasonal unemployment
  4. Structural unemployment

The Philip’s curve shows the relationship between inflation and what?

Unemployment

Cost-push inflation may be caused by:

  1. A reduction in government spending.
  2. An increase in GDP
  3. An increase in costs
  4. An increased in supply and demand

Increase in wages will result in:

  1. Increase in stock market index
  2. Cost push inflation
  3. An outward shift in aggregate supply
  4. A reduction in government spending

An outward shift in demand curve will lead to:

  1. Demand pull inflation
  2. A reduction in government spending
  3. Higher income.
  4. An outward shift in aggregate supply.

Inflation might affect a country’s international competitiveness by making exports relatively expensive reducing the competitiveness of a country.

  1. True
  2. False

Deflation occurs when there is a fall in the general price level.

  1. True
  2. False

Consumers may decide to hold back on spending because they are waiting for prices to fall further. This will reduce demand and may lead to more deflation. This can create a deflationary spiral.

  1. True
  2. False

In the long run the Phillips curve suggests there is no trade-off between inflation and unemployment.

  1. True
  2. False

Unanticipated may not be planned for and therefore may lead to significant shifts in investment or consumption when consumers or businesses are faced with unexpected increase in prices.

  1. True
  2. False

Aggregate demand shifts outwards. This increase prices and output.

  1. True
  2. False

Aggregate supply shifts inwards. This increases prices and reduces output.

  1. True
  2. False

Greater money supply can boost aggregate demand leading to higher prices and output.

  1. True
  2. False

An increase in the money supply is an example of expansionist monetary policy.

  1. True
  2. False

An increase in interest rates is an example of expansionist monetary policy.

  1. True
  2. False
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