KwameNkrumahUniversityofScienceandTechnology InstituteofDistanceLearning CEMBA552:EconomicEnvironmentofBusiness TakeHomeQuiz2-Macroeconomics

INDEXNO:_________________________________ Name________________________________

DeadlineForSubmission:9thApril(HO,Sunyani,Tamale,Koforidua,Central)and16thApril(KumasiandAccra) MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementoranswersthequestion. 1) Ofthefollowing,modernmacroeconomicsisLEAST concernedwith A) inflation. B) populationgrowth. C) long-termeconomicgrowth. D) theunemploymentrate. 2) Economicgrowthismeasuredby A) changesinrealGDP. B) changesintheemploymentrate. C) changesinemployment. D) Alloftheaboveareusedtomeasureeconomicgrowth. 1)

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3) Intheabovefigure,economicgrowthcanberepresentedasthemovementfrom A) pointatopointb. B) pointc topointd. C) pointbtopointc. D) pointd topointa. 4) RealGDPisdefinedas A) thevalueoftotalproductionwhentheunemploymentrateis6percent. B) thevalueoftotalproductionofallthenationsfarms,factories,shopsandofficesmeasuredat thepricesoftheyearitwasproduced. C) thevalueoftotalproductionofallthenationsfarms,factories,shopsandofficesmeasuredin thepricesofasingleyear. D) anincreaseintheaveragelevelofprices.

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5) PotentialGDPis A) themaximumGDPthataneconomyactuallyachievesthroughoutitsentirehistory. B) thevalueofproductionwhenallthenationslabour,land,capital,andentrepreneurialability arefullyemployed. C) thelevelofGDPachievedduringperiodswhen100percentofthelabourforceisemployed. D) agoalthatcanneverbeachievedbytheeconomy. 6) Abusinesscycleisthe A) patternofshort-runupwardanddownwardmovementsintotaloutput. B) cyclicalmovementintheinterestrates. C) increaseinconsumerspendingthataccompaniesanincreaseindisposableincome. D) cyclicalchangeinthenationsbalanceoftrade. 7) Arecessionis A) aperiodduringwhichrealGDPincreasesforatleasttwosuccessivequarters. B) aperiodduringwhichrealGDPdecreasesforatleasttwosuccessivequarters. C) theupperturningpointofabusinesscycle. D) thelowerturningpointofabusinesscycle.

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8) Intheabovefigure,arecessionbeginsatpoint________andanexpansionbeginsatpoint ________. A) b;a B) d;c C) a;b D) b;c 9) OneofthecostsofmorerapidgrowthinGDPisthat A) toomanygoodseventuallyareavailableforconsumption. B) itdoesnotincreasethewealthavailableforall. C) peoplemustgiveupcurrentconsumption. D) moremoneyisavailableforresearchanddevelopment.

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10) Intheabovefigure,atroughisatpoint________andapeakisatpoint________. A) b;c B) b;a C) a;b D) d;c 11) Theunemploymentrategenerally________duringrecessionsand________duringexpansions. A) falls;falls B) falls;rises C) rises;falls D) rises;rises

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12) Whichofthefollowingpointsislikelytobeassociatedwiththehighestunemploymentrate? A) a. B) b. C) c. D) d. 13) Inflationisa A) processoffallingprices. C) processofrisingprices. 3

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13) B) minorchangeinthepricelevel. D) large,one-time fallinthepricelevel.

14) TheCPIcanbeusedtomeasure A) changesinaveragepriceofthegoodsandservicesboughtbyatypicalhousehold. B) expectationsofthefuturerateofinflation. C) theunemploymentratesofdiscouragedworkers. D) howretailunemploymenthaschanged. 15) Iftheinflationrateisnegative,the________isfallingandthereis________. A) pricelevel;inflation B) pricelevel;deflation C) unemploymentrate;inflation D) unemploymentrate;deflation 16) In2003theCPIwas108;in2004itwas112.Theinflationratebetween2003and2004was A) 4.0percent. B) 108percent. C) 112percent. D) 3.7percent. 17) Thepricelevellastyearwas120andthisyearis150.Whatistheinflationratebetweenthesetwo years? A) 2.5percent. B) 30percent. C) 25percent. D) 20percent. 18) IntheGhana,theinflationrate A) isalwaysrising. B) isalwaysfalling. C) risesandfallsovertheyears. D) remainsastable3percentovertheyears. 19) Inflationisaproblemwhenit A) divertsresourcesfromproductiveuses. B) causesthevalueofmoneytovaryunpredictably. C) isunpredictable. D) Alloftheaboveanswersarecorrect. 20) Themostserioustypeofinflationiscalled________,whichisdefinedasoccurringwhenthe inflationrateexceeds50percenta________. A) hyperinflation;year B) superinflation;month C) superinflation;year D) hyperinflation;month 21) Whenthegovernmentspendslessthanitcollectsintaxrevenue, A) ithasagovernmentbudgetsurplus. B) ithasagovernmentbudgetdeficit. C) itmustenactmonetarypolicy. D) itmustenactfiscalpolicy. 22) Thegovernmenthasabudgetdeficitwhengovernmentspending A) exceedstaxreceipts. B) islessthantaxreceipts. C) iszero. D) equalstaxreceipts. 23) IfthegovernmentbudgetdeficitstaysthesameandGDPincreases,then A) theratioofthedeficittoGDPstaysthesame. B) theratioofthedeficittoGDPdecreases. C) theratioofthedeficittoGDPincreases. D) withoutmoreinformation,itisimpossibletodetermineiftheratioofthedeficittoGDP increases,decreases,orstaysthesame.

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24) Whenweexportgoodstoforeigncountries,we A) increaseourinflationrate. B) makepaymentstotherestoftheworld. C) receivepaymentsfromtherestoftheworld. D) decreaseourinflationrate. 25) Thecurrentaccount A) ispartofGDP. B) doesnotaccountforinterestpaymentspaidtoandreceivedfromtherestoftheworld. C) measuresourexportsminusourimportstakingintoaccountinterestpaymentspaidtoand receivedfromtherestoftheworld. D) measuresourimportsminusourexports. 26) AllofthefollowingarepolicygoalstargetedbymacroeconomicpolicyEXCEPT A) increasethecurrentaccountdeficit. B) reduceunemployment. C) keepinflationlow. D) stabilizethebusinesscycle. 27) AllofthefollowingarepartoffiscalpolicyEXCEPT A) settinggovernmentspending. B) choosingthesizeofthegovernmentdeficit. C) settingtaxrates. D) controllingthequantityofmoney. 28) MonetarypolicyinGhanaiscontrolledby A) Parliament. C) theBankofGhana.

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28) B) theGovernment. D) thefinanceminister. 29)

29) WhichofthefollowingisapolicytooloftheBankofGhana? A) Changesininterestrates. B) Changesintaxes. C) Changesinthegovernmentdeficit. D) Changesingovernmentspending. 30) Theprincipalaimofmonetarypolicyisto A) keepthebudgetdeficitsmalland/orthebudgetsurpluslarge. B) maintainlowinflation. C) reversetheproductivitygrowthslowdown. D) lowertaxes. 31) Iftheeconomyisinarecession,themonetarypolicycommittee(MPC)might A) increasegovernmentspending. B) cuttaxestostimulatetheeconomy. C) increaseinterestrates. D) reduceinterestratestostimulatetheeconomy. 32) Grossdomesticproductisthetotal________producedwithinacountryinagiventimeperiod. A) amountoffinalandintermediategoodsandservices B) marketvalueofallfinalandintermediategoodsandservicesplusinvestmentand depreciation C) marketvalueofallfinalandintermediategoodsandservices D) marketvalueofallfinalgoodsandservices

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33) Inthecircularflowmodelofaneconomywithnogovernmentsectorandnointernationaltrade, households A) receiveincomefromproducersfortheuseoffactorsinthefactormarkets. B) receiveincomefrombuyersofgoodsandservices. C) payfirmsfortheuseoftheirfactors. D) receiveincomefromthesaleoffactorsinthegoodsmarkets. 34) IfGhanaimportsarelessthanexports,the A) restoftheworldborrowsfromGhana. B) Ghanaborrowsfromtherestoftheworld. C) Ghanagovernmenthasabudgetdeficit. D) Ghanagovernmenthasabudgetsurplus. 35) Whichofthefollowingareequaltooneanother? I. aggregateproduction II. aggregateexpenditure III. aggregateincome A) IIequalsIII,butnotI. C) IequalsIIequalsIII.

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B) IequalsIII,butnotII. D) IequalsII,butnotIII. 36)

36) Ifthegovernmentrunsabudgetdeficit,then A) householdbutnotbusinesssavingmustpayforthedeficit. B) nationalsavingisnegative. C) nationalsavingcannotfundinvestment. D) partofprivatesavingfinancesthedeficit. 37) Afeatureofastockvariableandaflowvariableisthat A) anexampleofastockvariableisrealGDPandanexampleofaflowvariableisconsumption expenditure. B) astockonlymeasuresthevalueofgoodsandservicesproducedinacountryduringagiven timeperiod. C) astockisaquantityperunitoftimeandaflowisaquantitythatexistsatapointintime. D) astockisaquantitythatexistsatapointintimeandaflowisaquantityperunitoftime. 38) Whichofthefollowingisastockvariable? A) Income. B) Saving. 39) Whichofthefollowingisaflowvariable? A) Investment. B) Theamountofmoneyinyoursavingsaccount. C) Capital. D) ThenumberofCDsyouown. 40) WhichofthefollowingisFALSEaboutsaving? A) Savingisaflowvariable. B) Incomeleftafterpayingtaxescaneitherbeconsumedorsaved. C) Savingaddstowealth. D) Savingequalswealthminusconsumptionexpenditures.

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38) C) Investment. D) Wealth. 39)

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41) Atthebeginningoftheyear,yourwealthis10,000.Duringtheyear,youhaveanincomeof 40,000andyouspend30,000onconsumption.Youpaynotaxes.Yourwealthattheendofthe yearis A) 0. B) 80,000.00. C) 40,000.00. D) 20,000.00. 42) Depreciation A) doesnotchangethelevelofcapitalintheeconomy. B) isastockvariable. C) isthedecreaseinthecapitalstockbecauseofwearandtear. D) BothanswersBandCarecorrect. 43) WhichofthefollowingisnotincludedintheinvestmentcomponentofGDP? A) Abusinessfailstosellallofitsoutputandthereforeexperiencesanincreaseininventories. B) Ahouseholdinvestsinanexpensivedinner. C) Purchaseofnewequipmentbyabusiness. D) Afirmbuildsanewwarehouse. 44) Thetotalamountspentonaddingtothestockofcapitalandonreplacingdepreciatedcapitalis A) capitalconsumption. B) thenetstockofinvestment. C) grossinvestment. D) depreciation. 45) GDPcanbecomputedasthesumof A) thetotalexpendituresofconsumption,investment,andgovernmentexpendituresongoods andservicesoveraperiodoftime. B) thetotalexpendituresofconsumption,investment,governmentexpendituresongoodsand services,andnetexportsoveraperiodoftime. C) thetotalexpendituresofconsumersandbusinessoveraperiodoftime. D) allsalesthathavetakenplaceinaneconomyoveraperiodoftime. 46) LetCrepresentconsumptionexpenditure,S saving,I grossinvestment,G government expendituresongoodsandservices,andNXnetexportsofgoodsandservices.ThenGDPequals A) C+I+G-NX. B) C+ S+ G+ NX. C) C+I+G+NX. D) C+ S+ G- NX. 47) ThelargestcomponentofGDPis A) investment. B) netexportsofgoodsandservices. C) consumptionexpenditures. D) governmentpurchasesofgoodsandservices. 48) Goodsthatareproducedthisyear,storedininventories,andthensoldtoconsumersnextyear A) countinnextyearsGDP. B) arenotcountedasapartofGDP. C) countinboththisyearsandnextyearsGDP. D) countinthisyearsGDP.

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49) Allofthefollowingareincludedingrossinvestmentexpenditure EXCEPT a A) businessspurchaseofanothercompanysstock. B) aretailstorespurchaseofshoestoaddtoitsinventory. C) businessspurchaseofafleetofcars. D) householdspurchaseofanewhouse. 50) Inthenationalaccounts,governmentexpendituresongoodsandservicesexclude A) citygovernmentpurchases. B) transferpayments. C) spendingonnationaldefence. D) citygovernmentpurchasesbutincludenationalgovernmentpurchases.

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Component Grossinvestment Personalconsumptionexpenditure Depreciation Governmentexpendituresongoodsand services UKimports UKexports Compensationofemployees

Amount (billionsof pounds) 1300 1475 25 1315 260 249 65

51) Theabovetablegivesdataforahypotheticalnation.Grossdomesticproductis A) 4,079billion. B) 4,049billion. C) 4,054billion. D) 4,339billion. 52) Whichofthefollowingrelationshipsiscorrect? A) RealGDP=NominalGDP100 B) NominalGDP=(GDPDeflator RealGDP) 100 C) GDPDeflator=(NominalGDP RealGDP) 100 D) RealGDP=(NominalGDPGDPDeflator) 100 53) TocalculaterealGDP,theGDPdeflatorcanusedtoadjustnominalGDPforchangesin A) thecostofthetypicalworkersmarketbasket. B) theunemploymentrate. C) thegeneralpricelevel. D) nationalincome. 54) Inyearswithinflation,nominalGDPincreases________realGDP. A) atthesamerateas B) slowerthan C) fasterthan D) sometimesfaster,sometimesslower,andsometimesatthesamerateas

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55) Theworking-agepopulationisdefinedasthenumberof A) peopleworkingfull-timejobswhoareovertheageof16. B) peoplelookingforwork. C) peoplebetweentheageof16andretirementwhoarenotinjail,hospital,orotherinstitution. D) peoplewhohaveajob. 56) Theworking-agepopulationcanbedividedintotwogroups, A) peopleintheworkforceandpeoplewhoarenotintheworkforce. B) peoplelookingforworkandthoseinthearmedforces. C) peopleintheworkforceandpeoplelookingforwork. D) peopleintheworkforceandpeoplewithajob. 57) Theworkforceisthesumof A) theworking-agepopulationandthenumberofunemployedpeople. B) thenumberofemployedpeopleandthenumberofunemployedpeople. C) thenumberofemployedpeopleandtheworking-agepopulation. D) thetotalpopulationandthenumberofunemployedpeople. 58) Unemploymentasmeasuredincludesthetotalnumberofpeoplewho A) wouldliketohaveafull-timejobbutareworkingpart-time. B) havejobsorarecurrentlylookingforjobs. C) wouldliketohaveajobbuthavestoppedseekingwork. D) areavailableandlookingforworkbutunabletofindemployment. 59) WhichofthefollowingisNOTconsideredtobeintheworkforce? A) Apersonwhoiswaitingtostartanewjobinthenext30days. B) Astudentwhoworkspart-time. C) Apersonwhoisnotworkingandwhohasnottriedtofindajob. D) Apersonwhoisnotworkingbutwhohastriedtofindajobinthepastweek. 60) Theunemploymentrateiscalculatedas A) [(numberofpeopleunemployed) (working-agepopulation)] 100. B) [(workforce)(numberofpeopleunemployed)] 100. C) [(numberofpeopleunemployed) (workforce)] 100. D) [(workforce)(population)]100.

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Component Totalpopulation Working-agepopulation Workforce Employed Unemployed

Numberofpeople (millions) 246 207 139 133 6 61) D) 4.3percent. 62) C) 64.0percent. D) 56percent.

61) Usingtheinformationintheabovetable,theunemploymentrateis A) 4.5percent. B) 6.0percent. C) 2.8percent. 62) Theeconomicactivityrateis A) 95.7percent. B) 67.1percent.

63) Theemploymentrateis A) 64percent.

63) B) 67percent. C) 50percent. D) 62percent. 64)

64) Thedurationofunemploymentisthelengthoftimeaperson A) isunemployedeventhoughthatpersonisnotlookingforwork. B) isunemployedwhilelookingforwork. C) spendsworkinginajob. D) isemployedwhilelookingforwork. 65) Frictionalunemployment A) isunemploymentassociatedwithdecliningindustries. B) isvoluntarypart-timeunemployment. C) isunemploymentassociatedwiththechangingofjobsinachangingeconomy. D) includesdiscouragedworkers. 66) Whenastudentfinishescollegeandbeginslookingforwork, A) cyclicalunemploymentincreases. B) frictionalandcyclicalunemploymentincrease. C) frictionalunemploymentincreases. D) structuralunemploymentincreases. 67) Structuralunemploymentistheresultof A) irresponsibleworkerswithpoorworkhabits. B) aslowdownintherateofeconomicexpansion. C) normallabourmarketturnover. D) technologicalchangeorforeigncompetition. 68) Whentheeconomyswitchesproductiontowardservicesandawayfrommanufacturingand workersinthemanufacturingindustryarepermanentlymaderedundant, A) frictionalandcyclicalunemploymentincrease. B) frictionalunemploymentdecreases. C) cyclicalunemploymentincreases. D) structuralunemploymentincreases. 69) SupposethecountryofTinyTowndecidedtoopenitsborderstofreetrade.Asaresult,anumber ofitsworkerslosttheirjobstointernationalcompetitionandcantfindnewjobsbecausetheir skillsdontmatchwhatisrequiredforjobopenings.Theworkerswholosttheirjobswouldbestbe consideredpartof A) cyclicalunemployment. B) frictionalunemployment. C) structuralunemployment D) discouragedworkers. 70) Cyclicalunemployment A) occurswhentechnologyimprovementschangejobrequirements. B) fluctuatesoverthebusinesscycle. C) isduemainlytojobleavers. D) mayincreaseordecreaseduringanexpansion. 71) Cyclicalunemployment________duringexpansionsand________duringrecessions. A) decreases;decreases B) decreases;increases C) increases;decreases D) increases;increases

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72) Fullemploymentoccurswhen A) cyclicalunemploymentiszero. B) frictionalunemploymentiszero. C) structuralunemploymentiszero. D) cyclicalandfrictionalunemploymentarezero. 73) Thenaturalrateofunemployment A) istheunemploymentratewhentheeconomyisatpotentialGDP. B) isnotafixedpercentageoftheworkforce. C) occurswhenonlythereisnocyclicalunemploymentpresent. D) Alloftheaboveanswersarecorrect. 74) Fullemploymentmeans A) zerounemployment. B) onlyfrictionalandstructuralunemployment. C) onlycyclicalunemployment. D) Noneoftheaboveanswersarecorrect. 75) Priceindexescanoverstateinflationbecausethey A) donotcontainthepricesofforeigngoods. B) donotcontainthecorrectcollectionofgoodspurchasedbyconsumers. C) donotcontainthepricesofservices. D) omitsomequalityimprovements. 76) Aggregatesupplydescribesthebehaviourof A) producers. B) households.

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76) C) foreignbuyers. D) government. 77)

77) Anaggregatesupplycurvedepictstherelationshipbetween A) thepricelevelandtheaggregatequantitysupplied. B) householdexpendituresandhouseholdincome. C) thepricelevelandnominalGDP. D) thepricelevelandtheaggregatequantitydemanded. 78) Thelong-runaggregatesupply(LAS)curve A) hasapositiveslope. C) ishorizontal.

78) B) hasanegativeslope. D) isvertical. 79)

79) Inthemacroeconomiclongrun, A) regardlessofthepricelevel,theeconomyisproducingatpotentialGDP. B) theeconomyisatfullemployment. C) realGDP=potentialGDP. D) Alloftheaboveanswersarecorrect. 80) Theshort-runaggregatesupplycurve A) isvertical. C) ishorizontal.

80) B) hasanegativeslope. D) hasapositiveslope.

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81) Theshort-runaggregatesupplycurve A) illustratesthelevelofpotentialrealGDP. B) isvertical. C) shiftsbecauseofchangesinthepricelevel. D) showstheimpactchangesinthepricelevelhaveonthequantityofrealGDPwhenfactor pricesareconstant. 82) Yourrealwealthismeasuredasthe A) amountofgoodsandservicesyourwealthwillbuy. B) amountofgoodsyouhavedividedbythepricelevel. C) amountofmoneyyouhave. D) amountofassetsyouhaveindollarterms. 83) Onereasonthattheaggregatedemandcurvehasanegativeslopeisbecause A) peoplebuyfewergoodsandsavemorewhenthepricelevelrisesbecausetheirrealwealth decreases. B) peopleearnmoremoneywhenoutputrises. C) firmsproducemorewhenthepricerises. D) Thepremiseofthequestioniswrongbecausetheaggregatedemandcurvehasapositive slope. 84) Accordingtothewealtheffect,anincreaseinthepricelevel________realwealthand________ consumptionexpenditure. A) increases;decreases B) increases;increases C) decreases;increases D) decreases;decreases

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85) Intheabovefigure,whenthepricelevelis130,thequantityofrealGDPdemandedis A) 1,000billion. B) 1,050billion. C) 950billion. D) 900billion.

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86) IntheKeynesianmodelofaggregateexpenditure,realGDPisdeterminedbythe A) levelofaggregatedemand. B) pricelevel. C) leveloftaxes. D) levelofaggregatesupply. 87) Aconsumptionfunctionshowsa A) positive(direct)relationshipbetweenconsumptionexpenditureanddisposableincome. B) positive(direct)relationshipbetweenconsumptionexpenditureandthepricelevel. C) negative(inverse)relationshipbetweenconsumptionexpenditureandsaving. D) negative(inverse)relationshipbetweenconsumptionexpenditureandthepricelevel. 88) Thegraphoftheconsumptionfunctionhasconsumptionexpenditureontheverticalaxisand A) theinterestrateonthehorizontalaxis. B) thepricelevelonthehorizontalaxis. C) disposableincomeonthehorizontalaxis. D) timeonthehorizontalaxis. 89) Disposableincomeis A) incomeplustransferpaymentsminusconsumptionexpenditure. B) incomeminusnettaxes. C) totalincomedividedbythepricelevel. D) incomeminussaving. 90) Fullemploymentoccurswhenthe A) structuralunemploymentrateequalsthefrictionalunemploymentrate. B) cyclicalunemploymentrateequalsthenaturalrateofunemployment. C) naturalrateofunemploymentequalsthefrictionalunemploymentrate. D) unemploymentrateequalsthenaturalrateofunemployment. 91) WhichofthefollowingvariablesdoesNOT haveadirecteffectofchangingconsumption expenditure? A) Disposableincome. B) Wealth. C) Expectedfutureprofits. D) Expectedfutureincome. 92) Autonomousconsumptionisthatportionofconsumptionexpenditurethatisnotinfluencedby A) thelegalauthorities. B) income. C) prices. D) preferences. 93) Dissavingoccurswhenahousehold A) spendslessthanitreceivesindisposableincome. B) spendsmorethanitsaves. C) consumesmorethanitreceivesindisposableincome. D) savesmorethanitspends. 94) Whendisposableincomeis0,consumptionis2000.Then A) saving=2000. B) saving= 0. C) saving=-2000. D) theMPC= 0.2.

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95) Themarginalpropensitytoconsumeis A) thefractionofachangeindisposableincomethatisconsumed. B) oneminusthefractionoftotaldisposableincomethatissaved. C) thepercentageofagivenincomethatisconsumed. D) thepercentageofinterestincomeconsumed. 96) Themarginalpropensitytoconsume A) exceeds1. C) isnegativeifdissavingispresent.

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96) B) equals1. D) isbetween0and1. 97)

97) Ifconsumptionexpendituresforahouseholdincreasefrom1000to1800whendisposable incomerisesfrom1000to2000,themarginalpropensitytoconsumeis A) 0.5. B) 0.2. C) 0.3. D) 0.8. 98) Themarginalpropensitytoconsumemeasureshowmuch A) consumptionexpenditureoccursattheequilibriumincome. B) disposableincomeisconsumed. C) ofachangeindisposableincomewillbeconsumed. D) disposableincomegoestosaving. 99) ThelargertheMPC,the A) morelikelythatthemultiplierwillbeinconsequential. B) largerthevalueofthemultiplier. C) lesslikelythatthemultiplierwillbeaffected. D) smallerthevalueofthemultiplier.

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100) Intheabovefigure,autonomousexpenditurealongAE1 equals A) 300billion. B) 600billion. C) 0. D) anamountnotgivenintheaboveanswers.

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101) Intheabovefigure,equilibriumexpenditurealongAE2 is A) 1,200billion. B) 600billion. C) 300billion. D) anamountnotgivenintheaboveanswers. Consumptionexpenditure: Investment: Governmentexpenditures: Exports: Imports: C= 8+ 0.7Y I=5 G=7 X=10 M=0.2Y

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102) TheequationsabovedescribetheeconomyofLaLaLand.Whatistheequationfortheaggregate expenditurecurve? B) AE=30+ 0.9Y. C) AE = 13+ 0.5Y. D) AE=30-0.5Y. A) AE=30+0.5Y. 103) TheequationsabovedescribetheeconomyofLaLaLand.Whatistheequilibriumlevelof expenditure? A) 90. B) 29. C) 60. D) 30. 104) TheequationsabovedescribetheeconomyofLaLaLand.Whatistheequilibriumlevelof consumptionexpenditure? A) 60. B) 40. C) 50. D) Noneoftheaboveanswersarecorrect. 105) Whichofthefollowingisapurposeofthegovernmentsbudget? I. Tohelptheeconomyachievefullemployment. II. Tofinancetheactivitiesofthegovernment. III. Topromotesustainedeconomicgrowth. A) IIandIII. B) I,IIandIII. C) IandII.

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D) IandIII. 106)

106) Fiscalpolicyincludes A) decisionsrelatedtothepurchaseofgovernmentgoodsandservices,thevalueoftransfer payments,andtaxrevenue. B) onlydecisionsrelatedtothevalueoftransferpaymentsandtaxrevenue. C) onlydecisionsrelatedtothepurchaseofgovernmentgoodsandservicesandthevalueof transferpayments. D) onlydecisionsrelatedtothepurchaseofgovernmentgoodsandservices. 107) WhichofthefollowingisNOTasourceofrevenueforGhanagovernment? A) Nationalinsurancecontributions. B) Transferpayments. C) Taxesonincome. D) Noneoftheaboveanswersiscorrectbecausetheyalllistsourcesofrevenue. 108) Abalancedbudgetoccurswhengovernment A) outlaysexceedsrevenue. C) revenueexceedsexpenditures.

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108) B) revenueiscountedasanoutlay. D) revenueequalsoutlays.

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109) Ifthegovernmentrunsadeficit,thetotalamountofgovernmentdebtis A) constant. B) zero. C) increasing.

109) D) decreasing. 110)

110) Whenthegovernmentsexpendituresexceeditsrevenues,thegovernment A) incursabudgetdeficit. B) needstoborrow. C) debtincreases. D) Alloftheaboveanswersarecorrect. 111) Thedifferencebetweenthegovernmentdebtandthebudgetdeficitis A) thegovernmentdebtshowstheannualdiscrepancybetweengovernmentoutlaysandtax revenueandthebudgetdeficitshowstheaccumulatedbalanceofpastgovernmentdebts. B) thebudgetdeficitshowstheannualdiscrepancybetweengovernmentoutlaysandtax revenueandthegovernmentdebtshowstheaccumulatedbalanceofpastgovernmentdebts. C) notsignificantbecausebothmoveinthesamedirection. D) none. 112) Iftaxrevenueequal1.5billionandgovernmentoutlaysequal 1.6billion,then A) thegovernmentbudgethasadeficitof0.1billion. B) thegovernmentbudgethasasurplusof0.1billion. C) thegovernmentdebtdeclinesby0.1billion. D) thegovernmentdebtisequalto0.1billion. 113) Adiscretionaryfiscalpolicyisafiscalpolicythat A) involvesachangeintaxrates. B) involvesachangeingovernmentdefencespending. C) requiresactionbytheChancelloroftheExchequer. D) istriggeredbythestateoftheeconomy. 114) ThetaxincreasespassedtohelpmovetheeconomymorerapidlytowardpotentialGDParean exampleof A) lump-sumtaxes. B) automaticfiscalpolicy. C) discretionaryfiscalpolicy. D) contractionaryfiscalpolicy. 115) Anexampleofadiscretionaryfiscalpolicyiswhen A) lawsarepassedthatraisetaxes. B) unemploymentpaymentsrisewithunemploymentrates. C) autonomoustaxesareconstant. D) taxrevenuesfallasincomesfall. 116) Theeffectsofachangeingovernmentexpendituresismultipliedthroughoutaneconomy A) onlywhenthereisanincreaseinexpenditures. B) becausetaxesareleftunchanged. C) onlywhenthereisadecreaseinexpenditures. D) becausethesepurchasesgeneratechangesinconsumptionexpenditure. 117) Theterminducedtaxesrefersto A) salestaxesthatwepaybutcouldavoidifwechoosenottopurchasetheitem. B) theriseintaxesthataretheresultofanincreaseinrealGDP. C) thetaxesthatweareforcedtopay. D) localpropertytaxesthatwepayinadditiontotheincometax.

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117)

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118) Anautomaticstabilizer A) requiresactionbyParliamentforittotakeeffect. B) involvesachangeintaxrates. C) involvesachangeingovernmentexpenditures. D) istriggeredbythestateoftheeconomy. 119) Becauseofautomaticstabilizers,whenrealGDPdecreases A) governmentexpendituresequaltaxrevenues. B) theeconomyautomaticallygoestofullemployment. C) governmentexpendituresdecreaseandtaxrevenuesincrease. D) governmentexpendituresincreaseandtaxrevenuesdecrease. 120) Anexampleofanexpansionaryfiscalpolicyis A) adecreaseingovernmentexpenditures. B) acutintaxes. C) anincreaseintaxes. D) Noneoftheaboveisanexpansionaryfiscalpolicy. 121) Anexampleofacontractionaryfiscalpolicyis A) acutintaxes. B) anincreaseingovernmentexpenditures. C) anincreaseintaxes. D) Noneoftheaboveisacontractionaryfiscalpolicy. 122) IfthegovernmentwantstoengageinfiscalpolicytoincreaserealGDP,itcould________ governmentexpendituresinorderto________. A) decreaseincreaseaggregatesupply B) decrease;decreaseaggregatedemand C) increase;increaseaggregatesupply D) increase;increaseaggregatedemand 123) AnincreaseingovernmentexpendituresshiftstheAD curve________andanincreaseintaxes shiftstheADcurve________. A) rightward;rightward B) leftward;rightward C) leftward;leftward D) rightward;leftward 124) Thefunctionsofmoneyare A) mediumofexchange,unitofaccount,andstoreofvalue. B) pricing,contracts,andmeansofpayment. C) mediumofexchangeandtheabilitytobuygoodsandservices. D) mediumofexchange,unitofaccount,andmeansofpayment. 125) Incometaxesandtransferpayments A) increasetheeffectsofinvestmentandimports. B) preventtheeconomyfrommovingtowardequilibrium. C) increasethelong-runincomegrowthrate. D) actlikeeconomicshockabsorbersandstabilizefluctuationsinincome.

118)

119)

120)

121)

122)

123)

124)

125)

17

126) Anexampleofanautomaticfiscalpolicystabilizeriswhen A) thegovernmentpassesalawthatraisestaxrates. B) taxrevenuesdecreaseasrealGDPdecreases. C) thebudgetdeficitmovesintoasurplusduringarecession. D) thegovernmentdecidestocutgovernmentexpenditures. 127) WhichofthefollowingdoesNOTdescribeafunctionofmoney? A) Ahedgeagainstinflation. B) Aunitofaccount. C) Astoreofvalue. D) Amediumofexchange. 128) Barteris A) theexchangeofgoodsandservicesforanytypeofmoney. B) anothertypeofmoney. C) theexchangeofgoodsandservicesdirectlyforothergoodsandservices. D) printingtoomuchmoney. 129) Themostdirectwayinwhichmoneyeliminatestheneedforadoublecoincidenceofwantsis throughitsuseasa A) mediumofexchange. B) storeofvalue. C) unitofaccount. D) standardofdeferredpayment. 130) Theunitofaccountfunctionoccurswhenmoneyservesas A) ameansofpayment. B) amediumofexchange. C) adoublecoincidenceofwants. D) thewayinwhichpricesarequoted. 131) Whichofthefollowingisanexampleofusingmoneyasastoreofvalue? A) Keeping200onhandforanemergency. B) Payingrentwithachequeonademanddeposit. C) Payingforanewdresswithacreditcard. D) Payingcashforanewautomobile. 132) IntheGhanatoday,moneyconsistsof A) onlydepositsatbanksandotherfinancialinstitutions. B) onlycurrency. C) onlycoins. D) currencyanddepositsatbanksandotherfinancialinstitutions. 133) InGhanaM2+isameasureof A) liquidityandinwhichthemostliquidassetismoney. B) moneyandincludesbothcurrencyandalldeposits. C) moneyandincludessightdepositsbutnottimedeposits. D) moneyandincludesonlycurrency. 134) Chequesare A) money,asarecreditcards. C) notmoney,butcreditcardsare.

126)

127)

128)

129)

130)

131)

132)

133)

134) B) notmoney,andneitherarecreditcards. D) money,butcreditcardsarenot.

18

135) Usingacreditcardcanbestbelikenedto A) abarterexchange. B) takingoutaloan. C) usinganyotherformofmoneybecauseyouimmediatelygettotakethegoodshome. D) writingachequeonyourdemanddepositaccount. 136) WhichofthefollowinginstitutionsisNOT afinancialintermediary? A) Aruralbank. B) Acommercialbank. C) ThebankofGhana. D) Noneoftheaboveanswersiscorrectbecausealltheanswerslistedarefinancial intermediaries. 137) Afinancialintermediaryisbestdefinedas A) agovernmentagency,suchastheBankofEngland. B) themostpowerfulbodywithintheBankofEngland. C) asafirmthatacceptsdepositsfromhouseholdsandmakesloanstootherhouseholds. D) asthelenderoflastresort. 138) Themajorroleofacommercialbankisto A) makemortgageloans. B) restrainthegrowthofthequantityofmoney. C) receivedepositsandmakeloans. D) sellsharesandusetheproceedstobuystocks. 139) Whichofthefollowingbalancesheetitemsisaliabilityofacommercialbank? A) Thepublicsdepositswiththebank. B) ThebanksholdingsofGhanagovernmentbonds. C) ThebanksholdingsofBraziliangovernmentbonds. D) ReservesofthebankattheBankofGhana. 140) Foracommercialbank,thetermreservesrefersto A) abankersconcern(reservation)inmakingloanstoanindividualwithoutajob. B) thecashinitsvaultsanddepositsattheBankofGhana. C) theprofitthatthebankretainsattheendoftheyear. D) thenetinterestthatitearnsonloans. 141) Ofthefollowing,theriskiestassetsheldbycommercialbanksare A) reserves. B) GhanagovernmentTreasurybills. C) loansmadetobusinessfirms. D) Ghanagovernmentbonds. 142) Liquidityisthe A) easewithwhichanassetcanbeconvertedintoameansofpaymentwithlittlelossofvalue. B) degreetowhichanassetactsasmoneywithoutalossofvalue. C) easewithwhichcreditcardsareacceptedasameansofpayment. D) degreetowhichmoneycanbeconvertedintoanassetwithlittlelossofvalue. 143) Financialintermediariescreateliquiditywhenthey A) buyassetsthatareliquid. C) haveliabilitiesthatareilliquid.

135)

136)

137)

138)

139)

140)

141)

142)

143) B) borrowlongandlendshort. D) borrowshortandlendlong.

19

144) Poolingofriskoccurswhenfinancialintermediaries A) lendtoavarietyofdifferentborrowers. B) specializeinloaningonlytogoodborrowers. C) bringlenderstogether. D) makeassetsmoreliquid. 145) ThebankingsysteminGhanacreatesmoneythroughthecombinationofexcessreservesand A) stringentBankofGhanaregulations. B) banksloaningexcessreserves. C) banksassetsbeingmorethantheirliabilities. D) commoditymoney. 146) Youmakeadepositof2,000incurrencyatyourbank.Yourbankhasadesiredreserveratioof25 percent.Asaresultofyourdeposit,yourbankwillbeabletoloan A) 500. B) 2,000. C) 1,500. D) Noneoftheaboveanswersiscorrect. 147) Theformulaforthedepositmultiplieris A) 1/(desiredreserveratio). C) 1/(1-actualreserves).

144)

145)

146)

147) B) 1/(1- desiredreserveratio). D) 1/(1- desiredreserves). 148)

148) Thelargerthedesiredreserveratio,the A) loweristheinterestratethatbankschargeborrowers. B) smalleristhedepositmultiplier. C) largeristheratioofloanstodeposits. D) higheristheinterestratesthatbankspaydepositors. 149) Adesiredreserveratioof5percentyieldsadepositmultiplierof A) 5.0. B) 10. C) 1.25.

149) D) 20. 150)

150) Thequantityofmoneythatpeoplechoosetoholddependsonwhichofthefollowing? I. Thepricelevel. II. Financialinnovation. III. Theexchangerate. A) IandII. B) I. C) I,II,andIII. D) IandIII. 151) Thenominaldemandformoneyis A) measuredinconstantpounds. C) inverselyrelatedtoGDP.

151) B) proportionaltothepricelevel. D) inverselyrelatedtothepricelevel. 152)

152) Supposeyouhold50tobuygroceriesweeklyandthenthepriceofgroceriesincreasesby5per cent.Tobeabletobuythesameamountofgroceries,yournominalmoneyholdings A) mustincreaseby5. B) mustincreaseby2.50. C) candecreaseby5. D) mustincrease,buttheamountoftheincreaseisdifferentthantheaboveanswers.

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153) Theopportunitycostofholdingmoneyisthe A) easewithwhichanassetcanbecomemoney. B) priceofgoodsandservices. C) interestrate. D) levelofwageandrentalincome. 154) Theopportunitycostofholdingmoneyincreaseswhen A) thepriceofgoodsandservicesfalls. B) theinterestraterises. C) consumersincomesincrease. D) thepurchasingpowerofmoneyrises. 155) Whentheinterestraterises,thequantityofmoneydemandeddecreasesbecause A) thepricelevelalsorisesandpeopledecreasetheirdemandformoney. B) peoplewillbuyfewergoodsandholdlessmoney. C) peopleshiftfundsfrommoneyholdingstointerest-bearingassets. D) peoplemovefundsfrominterest-bearingassetsintomoney. 156) ________inrealGDPincreasethedemandformoneyand________intheinterestratedecrease thequantityofmoneydemanded. A) Decreases;increases B) Increases;increases C) Increases;decreases D) Decreases;decreases 157) Thedemandformoneycurve A) hasanegativeslope. C) hasapositiveslope. 158) Thesupplyofmoneycurve A) ishorizontal. C) hasapositiveslope.

153)

154)

155)

156)

157) B) isvertical. D) ishorizontal. 158) B) hasanegativeslope. D) isvertical. 159)

159) Bondpricesandinterestratesare A) unrelated. B) independentofanyactionbytheBankofEngland. C) inverselyrelated. D) positivelyrelated. 160) Ifbondpricesfall, A) interestratesrise. C) householdsincreasecashholdings.

160) B) bankreservesgrow. D) interestratesfall. 161)

161) Supposethattheinterestrateisgreaterthantheequilibriuminterestrate.Whichofthefollowing occurs? I. Thereisanexcessquantityofmoney. II. Thequantityofmoneyautomaticallyincreases. III. Peoplestartbuyingbonds. A) I. B) IandII. C) IandIII. D) I,IIandIII.

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162) TheBankofGhana A) regulatesthenationsfinancialinstitutions. B) conductsthenationsmonetarypolicy. C) BothanswersAandBarecorrect. D) NeitheranswerAnorBiscorrect. 163) WhichofthefollowingisNOTafunctionofacentralbank? A) Regulatingbanks. B) Operatingasabankforthegovernment. C) Operatingasaborroweroffirstresort. D) Operatingasabankforcommercialbanks. 164) Controllingthequantityofmoneyandinterestratestoinfluenceaggregateeconomicactivityis called A) fiscalpolicy. B) bankpolicy. C) monetarypolicy. D) foreignpolicy. 165) Themonetarybase(high-poweredmoney)isthesumof A) banksreservesattheBankofGhanaandrepoloanstobanks. B) governmentdepositsattheBankofGhana,notesheldbythepublic,coins,andbanks reservesattheBankofEngland. C) Treasurybillsandothergovernmentsecurities. D) notesheldbythepublic,coins,andbanksreservesattheBankofGhana. 166) WhichofthefollowingisatoolthatisusedbytheBankof Ghana tocontrolthesupplyofmoney? A) Excessreserves. B) Governmentexpendituremultiplier. C) Realinterestrates. D) Openmarketoperations. 167) TheBankofGhanaspurchaseorsaleofGhana governmentsecuritiesis A) donelessfrequentlythananyoftheBankofGhanasothermonetarypolicytools. B) anexampleoftheBankofGhanausingitsreporate. C) calledanopenmarketoperation. D) anexampleoftheBankofGhanaactingasalenderoflastresort. 168) Themoneymultiplierdetermineshowmuch A) themonetarybasewillexpandgivenachangeinthequantityofmoney. B) thequantityofmoneywillexpandgivenachangeinthemonetarybase. C) moneydemandwillexpandgivenachangeinthequantityofmoney. D) realGDPwillexpandgivenanincreaseinautonomousinvestment. 169) Whentherealinterestratefalls, A) netexportsdecrease. C) consumptionexpendituresdecrease.

162)

163)

164)

165)

166)

167)

168)

169) B) investmentexpendituresincrease. D) thepoundexchangeraterises. 170)

170) IftheBankofGhanadecreasesthesupplyofmoney,then A) aggregatedemanddecreases. B) long-runaggregatesupplyincreases. C) long-runaggregatesupplydecreases. D) aggregatedemandincreases.

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171) TheBankofEnglandsactionstofightinflationshiftthe A) long-runaggregatesupplycurverightward. B) long-runaggregatesupplycurveleftward. C) aggregatedemandcurveleftward. D) aggregatedemandcurverightward. 172) Thesupplyofanddemandformoneydeterminetheequilibrium A) interestrate. B) pricelevel. C) realwagerate. D) levelofrealGDP. 173) Anexpansionaryfiscalpolicy________theinterestrate. A) lowers B) raises C) doesnotchange D) Noneoftheaboveanswersiscorrectbecausetheeffectontheinterestratedependson whethertheexpansionaryfiscalpolicywasanincreaseingovernmentexpendituresoracut intaxes. 174) AtaxcutincreasesrealGDP.TheincreaseinrealGDP________thedemandformoney. A) increases B) decreases C) doesnotchange D) probablychangesbutmoreinformationisneededtodetermineifitincreasesordecreases 175) Theideathatanexpansionaryfiscalpolicydecreasesinvestmentiscalledthe A) capitalinvestmenteffect. B) crowding-outeffect. C) government-investmenteffect. D) offseteffect. 176) Fiscalpolicyismosteffectiveif A) achangeintheinterestratehasalargeeffectonthequantityofmoneydemanded. B) achangeintheinterestratehasasmalleffectonthequantityofmoneydemanded. C) achangeintheinterestratehasnoeffectonthequantityofmoneydemanded. D) thereisalotofcrowdingout. 177) Monetarypolicyismosteffectivewhen A) agivenchangeinthemoneysupplyhasalargeeffectontheinterestrate. B) agivenchangeinthemoneysupplyhasalargeeffectoninflation. C) theinterestratedoesnotinfluenceaggregateexpenditures. D) agivenchangeinthemoneysupplyhasnoeffectontheinterestrate. 178) Thegoodsandservicesthatacountrybuysfromothercountriesarecalledits A) imports. B) exports. C) tariffs. 179) Netexportsis A) thevolumeofexportsminusthevolumeofimports. B) thevolumeoftrademinusthevalueoftrade. C) totalUKtrademinusthetotaltradeoftherestoftheworld. D) thevalueofexportsminusthevalueofimports.

171)

172)

173)

174)

175)

176)

177)

178) D) quotas. 179)

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180) Acountryhasacomparativeadvantageinproducingagoodifincomparisontoanyother country,itcanproducethatgood A) withasmallerweightedaverageofinputs. B) withlesslabour. C) ataloweropportunitycost. D) atloweraveragecost. 181) Whentradebetweentwocountriesoccurs,theresultisthat A) bothcountriesgainbecausetheyeachproducemorethanbefore. B) onecountrygainsbecauseitcanconsumemorethanbeforeandtheothercountryloses. C) bothcountrieslosebecausetheincreaseindemandforeachcountrysoutputcausespricesto rise. D) bothcountriesgainbecausebothcanconsumemorethanbefore. 182) Atariffisa A) subsidyonanexportedgood. C) subsidyonanimportedgood. 183) Amajorpurposeoftariffsisto A) discourageimports. C) encourageexports.

180)

181)

182) B) taxonanimportedgoodorservice. D) taxonanexportedgoodorservice. 183) B) discourageexports. D) encourageimports. 184)

184) Anyactionotherthanatariffthatrestrictsinternationaltradeiscalleda A) subsidy. B) non-tariffbarrier. C) quota. D) surcharge. 185) Anon-tariffbarrieris A) alicensefeethatmustbepaidtogetanexportlicenseintheUnitedKingdom. B) anamountofmoneypaidfortheprivilegeofsellingagoodexportedfromthecountry. C) anyactionotherthanatariffthatlimitstheimportsofgoodsandservices. D) anyactionotherthanatariffthatlimitstheproductionofgoodsandservices. 186) Toolsusedtoprotectdomesticindustriesfromforeigncompetitionincludewhichofthe following? I. tariffs. II. membershipintheWTO. III. participationinGATT. A) I. B) IandII. C) IIandIII. D) I,II,andIII. 187) UKtradebarriersonbeef A) reduceUKbeefpricesanddecreaseUKjobsraisingcattle. B) raiseUKbeefpricesanddecreaseUKjobsraisingcattle. C) reduceUKbeefpricesandincreaseUKjobsraisingcattle. D) raiseUKbeefpricesandincreaseUKjobsraisingcattle. 188) Tariffs A) encourageproducerstoproduceless. B) earnrevenueforconsumers. C) encourageconsumerstobuymoreimports. D) earnrevenueforthegovernment.

185)

186)

187)

188)

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189) Quotas A) arenotusedbytheUnitedKingdom. B) arethesameastariffs. C) settheminimumpercentageofthevalueofaproductthatmustconsistofimported components. D) setthenumberofunitsofagoodthatcanbeimported. 190) Aquotadirectlyrestricts________andsoitprotectsdomestic________. A) exports;producers B) imports;producers C) imports;consumers D) exports;consumers 191) AllofthefollowingareargumentsforprotectionfrominternationalfreetradeEXCEPT A) protectionstrengthenstheefficiencygainsfromacomparativeadvantage. B) protectionpenalizeslaxenvironmentalstandards. C) protectionpromotesdiversityandstability. D) protectionpreservesdomesticculture. 192) Themostefficientwaytoencouragethegrowthofaninfant-industryisthrougha A) tariff. B) quota. C) voluntaryexportrestraint. D) subsidy. 193) Thebalanceofpaymentsaccountusedtorecordpaymentsforimportedgoodsandservicesisthe A) currentaccount. B) capitalaccount. C) importaccount. D) eximaccount. 194) TheUKcapitalaccountmeasures A) receiptsfromgoodsandservicessoldandtransferstoandfromforeigners. B) nettransferpaymentsbetweenUKresidentsandforeigners. C) netincreasesanddecreasesintheUKholdingsofforeigncurrency. D) foreigninvestmentintheUnitedKingdomminusUKinvestmentabroad. 195) Acreditornationmeansanationwhose A) lendingtotherestoftheworldexceedsitsborrowingfromtherestoftheworld. B) exportsexceeditsimports. C) currentaccountislargerthanitscapitalaccount. D) totalinvestmentsintherestoftheworldexceedstherestoftheworldsinvestmentsinthat country. 196) Adebtornationmeansanationwhose A) currentaccountislessthanitscapitalaccount. B) importsexceedsitsexports. C) totalinvestmentsintherestoftheworldarelessthantherestoftheworldsinvestmentsin thatcountry. D) lendingtotherestoftheworldexceedsitsborrowingfromtherestoftheworld.

189)

190)

191)

192)

193)

194)

195)

196)

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197) Whichofthefollowingapplytoexchangerates? I. Theexchangerateisaprice. II. Theexchangerateforacurrencydependsonwhichforeignexchangemarketyouuse. III. TheforeignexchangerateisdifferentfromotherpricesbecauseitisNOTdeterminedby supplyanddemand. A) IIandIII. B) I. C) I,II,andIII. D) IandII. 198) Bydefinition,currencydepreciationoccurswhenthevalueof A) thecurrencyrisesrelativetoanothercurrency. B) thecurrencyfallsrelativetoanothercurrency. C) allcurrenciesfallrelativetogold. D) goldfallsrelativetothevalueofcurrencies. 199) Thelawofdemandforcedismeansthatthe A) lowertheexchangerate,thegreaterthequantityofcedisdemanded. B) highertheexchangerate,thesmallerthequantityofcedisdemanded. C) lowertheexchangerate,thesmallerthequantityofGhanaexportsdemanded. D) BothanswersAandBarecorrect. 200) ThegreaterthedemandforGhanaexports,the A) largeristhecurrentaccountdeficit. B) largeristhequantityofGhanapoundsdemanded. C) largeristhedemandfornon-Ghanacurrencies. D) smalleristhequantityofGhanapoundsdemanded.

197)

198)

199)

200)

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