Muhammad Shahid Iqbal Macroeconomics
1) Between 2008 and 2009 a country’s national
income at current prices increased by 15%. At
the same time the country experienced 5%
inflation.
Which index number most closely represents
the country’s national income in 2009 at 2008
prices (2008 = 100)?
A 103 B 110 C 115
D 120
2) What is most likely to cause a decrease
in a country's long-run rate of economic
growth?
A an ageing population
B increased inward migration
C a decrease in the government's budget
deficit
D a decrease in the share of agriculture in
the country's GDP
3) The Human Development Index (HDI)
measures three dimensions of human
development.
What is not included as one of these
dimensions?
A access to knowledge
B a decent standard of living
C a long and healthy life
D equal economic opportunity
4) What is the opportunity cost to society of an
increase in unemployment?
A the increase in taxes to pay for
unemployment benefits
B the loss in national output
C the reduction in the disposable income of
those who lose their jobs
D the resulting increase in the government’s
fiscal deficit
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Class: Quiz
5) An economy with unemployed resources
experiences an increase in government
expenditure financed by borrowing from the
non-bank private sector.
What would diminish the resulting increase in
GDP?
A an expansion of the money supply
B an increase in private investment
C a reduction in the marginal propensity to
save
D a rise in the level of interest rates
6) The weighting given to food in the
construction of the United Kingdom’s Retail
Price Index fell from 16.7% in 1987 to 11.8% in
2011.
What would help to explain this?
A The average price of food decreased by
4.9% points between 1987 and 2011.
B The demand for food is price inelastic.
C The income elasticity of the demand for
food is less than one.
D There was an increase in the relative price
of food over the
7) What will assist a country’s potential growth
in national output?
A an increase in cyclical unemployment
B an increase in the rate of inflation
C an increase in the government's budget
deficit
D increased participation in the labour force
Muhammad Shahid Iqbal
8) What is most likely to lead to an increase in
the natural rate of unemployment?
A more rapid technological and structural
change
B a widening in regional wage differentials
C a narrowing in regional house price
differentials
D a decrease in trade union membership
9) Which type of unemployment arose from the
worldwide decline in the demand for electronic
goods beginning in the summer of 2001?
A seasonal B voluntary C frictional D
structural
10) In 2009 the US central bank, the Federal
Reserve, increased the money supply.
Which policy measure taken by the Federal
Reserve would have achieved this outcome?
A a purchase of government securities in the
open market
B a reduction in the issue of short-term
government debt
C a requirement for commercial banks to
increase their liquidity ratios
D an increase in the bank rate
11) The weighting given to food in the
construction of the United Kingdom’s Retail
Price Index fell from 16.7% in 1987 to 11.8% in
2011.
What would help to explain this?
A The average price of food decreased by
4.9% points between 1987 and 2011.
B The demand for food is price inelastic.
C The income elasticity of the demand for
food is less than one.
D There was an increase in the relative price
of food over the
Macroeconomics Class: Quiz
12) What is most likely to lead to an increase in
the natural rate of unemployment?
A more rapid technological and structural
change
B a widening in regional wage differentials
C a narrowing in regional house price
differentials
D a decrease in trade union membership
13) During a recession, a government increases
its expenditure on goods and services by $10
million but leaves tax rates unchanged.
Why might the subsequent increase in national
income be less than $10 million?
A Increased government borrowing increases
interest rates.
B The marginal propensity to consume is less
than 1.
C The marginal propensity to import is
greater than 0.
D There is no accelerator effect on investment.
14) Over a given period, the nominal value of a
country’s national income increased by 20 %
and the rate of inflation was 10 %.
What can be deduced from this information?
A There was an increase in the volume of
output.
B There was a reduction in the demand for
money.
C There was an increase in the income
velocity of circulation.
D The country’s money supply increased by
10 %.
15) Assuming a constant income velocity of
circulation of money, if real output grows by 3
%, and the rate of growth of the money supply is
10 %, what will be the approximate change in
the price level?
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Muhammad Shahid Iqbal Macroeconomics Class: Quiz

A –7% B +7% C What is likely to be a consequence of this

+ 10 % D + 13 % policy?
16) Real output in an economy grows by 1.5 % A a high but constant rate of inflation
but at the same time the level of unemployment
B a low but constant rate of inflation
increases.
C a decelerating rate of inflation
What can be deduced from this information?
D an accelerating rate of inflation
A Labour productivity has decreased.
20) If the unemployment that exists in a country
B Actual output has grown more slowly than
is judged to be mainly cyclical, which is the
potential output.
most effective policy the government could
C Population of working age has fallen. implement?
D There has been an increase in the rate of A cut welfare spending on benefits
inflation.
B improve information about job vacancies
17) If the unemployment that exists in a country
C reduce tax rates
is judged to be mainly cyclical, which is the
most effective policy the government could D raise interest rates
implement?
21 The table gives data for an economy.
A cut welfare spending on benefits
2000 2001 2002 2003 2004
B improve information about job vacancies
Gross
C reduce tax rates Domestic
200 220 240 300 320
Product
D raise interest rates
(GDP)
18) Which statement is consistent with a In which year did real GDP decline compare
Keynesian view of the workings of the macro with the previous year?
economy?
A 2001 B 2002
A Recessions can result from fluctuations in C 2003 D 2004
private investment expenditure.
22) What is a central assertion of ‘Monetarist’
B Interest rates move to ensure continuous economics?
equality between savings and investment plans.
A Fiscal policy should be used for the
C Money wages in the economy in the short continuous management of the economy.
run are perfectly flexible.
B Major recessions can occur despite an
D Changes in aggregate demand cannot occur unchanged money supply.
without equivalent changes in the money supply.
C The money supply dominates the
19) A government uses monetary policy in an determination of aggregate monetary
attempt to keep actual unemployment expenditure.
continuously below the ‘natural’ rate of
unemployment D The velocity of circulation of money is
unstable over time.

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Muhammad Shahid Iqbal Macroeconomics
23) What is likely to be the effect of an oil price
increase on the global economy?
A a strengthening of demand inflation
B a weakening of cost inflation
C a decrease in the rate of growth
D a decrease in unemployment
24) What is most likely to cause the public to
hold less cash in relation to the level of money
income?
A a fall in interest rates
B a fall in the level of output
C a greater availability of cash substitutes
D a rise in the general price level
25) Which change would best indicate that a
country has experienced economic
development?
A an improvement in the average citizen’s
quality of life
B an increase in the country’s real GDP
C an improvement in the country’s trade
balance
D an appreciation in the country’s currency
26) A country's national income per head falls,
but there is a rise in consumption.
What could explain this?
A a decrease in the net property income from
abroad
B a fall in population
C an increase in the trade deficit
D a rise in negative externalities
27) Between 2000 and 2002 national output in
the United States increased by 2 %.
Class: Quiz
Over the same period the unemployment rate
increased from 4 % to 6 %. What would explain
this?
A There was a decrease in labour
productivity.
B There was a decrease in the size of the
labour force.
C There was a fall in the rate of inflation.
D Potential growth in national output was
above actual growth.
28) Which policy is most likely to result in a
decrease in the natural rate of unemployment?
A a reduction in interest rates
B an increase in government expenditure on
goods and services
C an increase in trade union membership
D a decrease in the level of government
payments to the unemployed
29) The monetary authorities increase interest
rates in order to control inflation.
What is likely to increase as a result of this?
A firms' sales revenue
B investment expenditure
C net capital outflows
D the exchange rate
30 What is most likely to be increased by a
policy of increased direct taxes and lower
government spending?
A the balance of payments deficit
B the budget deficit
C the rate of inflation
D the level of unemployment