1. Which of the following would cause business investment spending to rise?

a. an increase in real interest rates from 5% to 8%

b. a decrease in the corporate profits tax rate from 48% to 34%

c. a reduction of the investment tax credit from 10% to 2%

d. sales falling in relation to capacity from 90% to 60%

2. National income can be defined as

a. the market value of goods and services produced in a state

b. the monetary value of all the goods and services produced in a country during an

accounting period, usually a year

c. the company value of all goods and services

d. the value of goods and services produced globally

3. Circular flow of income as a model

a. shows the movement of resources among states

b. shows the movement of fund

c. indicates the flow of human capital

d. shows the movement of resources between firms and households

4. Gross domestic product (GDP) refers to

a. total monetary value of all the final goods and services produced by the people living in a

country irrespective of their nationality within a given period of time, usually a year

b. monetary value of all final goods and services produced by the nationals of a

country whether currently living in the country or abroad

c. earnings of an individual for taking part in the production process

d. income which is left after personal income tax has been deducted

5. Depreciation also refers to

a. capital formation
 b. capital destruction

c. net national product

d. capital consumption

6. By ‘stock’ variable, we mean

a. total amount of existing output at a particular point in time

b. the amount of current output

c. value of output produced in a given year

d. excess capacity

7. National income computation by income approach

a. sum the value of households expenditure

b. sum all income received by factors of production

c. sum the value added to input

d. takes account of government intervention

8. One of the determinants of national income is

a. the number of political parties

b. the method of data gathering

c. business law

d. the state of technology

9. We measure national income so as to

a. criticise government programme and policies

b. make future economic forecast

c. develop an economic model

d. identify individual problems

10. One of the major problems encountered during national income accounting is

a. adjustment problem

b. valuation problem
 c. counting problem

d. communication problem

11. By excluding illegal or underground activities from national income accounting

a. the exact economic contribution is overestimated

b. the true economic contribution is taken

c. the correct economic contribution of each sector is underestimated

d. we can rely totally on the figures

12. Investment

a. is a part of the demand in the economy.

b. is a part of the supply in the economy.

c. is the inherited capital stock of the country

d. none of the above

13. The unintended inventory changes are negative

a. when the economy is recovering from a recession.

b. when the sales are unexpectedly low.

c. when firms expect their sales to increase

d. none of the above

14. Investment decisions depend on:

a. The cost of investment

b. The present value of expected profit from investment

c. The real investment rate

d. All of the above

15. Firms should invest more when:

a. The price of an addition unit of capital the price of its stock

 b. The price of an additional unit of capital exceeds the price of its stock

c. the price of its stock is less than real interest rate

d. The Tobin’s q is less than 1

e. The price of an additional unit of capital is less the price of its stock.

16. The accelerator principle says that investment ever

a. Increase at increasing rate if output remains constant

b. Increase as output increase

c. Remains constant if output increases at an ever-increasing rate

d. Is always constant

17. The total quantity of goods and services produced (or supplied) in an economy in a given

period is:

a. Aggregate demand

b. Aggregate output

c. Aggregate investment

d. Aggregate expenditure

18. Which of the following would cause the aggregate demand curve to shift to the right?

a. an increase in purchases by the federal government

b. an increase in real interest rates

c. an appreciation of the Naira

d. a decrease in the money supply

19. Full employment output

a. is also the potential output of the economy.

b. is also the trend output of the economy.

 c. Both (a) and (b) above

d. none of the above

20. Aggregate expenditure is equal to

a. spending by consumers on consumption goods

b. spending by businesses on investment goods

c. spending by government

d. spending by foreigners on net exports

e. the sum of a, b, c, and d

21. The income multiplier is larger when

a. the marginal propensity to consume is larger

b. the marginal propensity to save is larger

c. spending by government is larger

d. the change in income is smaller

e. the marginal propensity to consume is smaller

22. An example of the paradox of thrift is

a. consumers who attempt to save more but find they cannot go without basic

consumption goods

b. an increase in saving that leads to a lower equilibrium level of national

income and the same or lower saving

c. a high marginal propensity to save that is matched by a high marginal propensity

to consume

d. an increase in saving that leads to more investment, higher income, and higher

consumption
 e. an increase in interest rates that leads to lower investment and lower saving

23. Assuming there is no government spending and no foreign trade, then aggregate

expenditure is equal to consumption plus saving. (True/False)

24. Spending by consumers on consumption goods is equal to consumption goods production

at the equilibrium level of national income. (True/False)

25. When autonomous investment increases by N100, national income will increase by

N100. (True/False)

26. A decrease in autonomous investment will have a smaller effect on national income than

an equal increase in autonomous investment. (True/False)

27. Suppose that the consumption function is given by C = 500 + .8Y and investment is I =

500. The equilibrium level of income is

a. 2,500

b. 1,000

c. 5,000

d. 4,000

e. 7,500

Consider the following model of an economy. Output prices, factor prices and interest

rates are assumed constant. We have the following information, where YD is disposable

income and Y is national income.

Consumption: C = 50 + (0.8)YD

Taxes (net of all transfers) T= (0.3)Y

Investment: I = 100

Government Spending G = 350

 Exports: X = 300

Imports: IM = (0.36)Y

28. The equilibrium level of national income is:

a. 800

b. 1000

c. 1600

d. 1818

e. 4000

29. In equilibrium, the government:

a. is running a deficit of 50.

b. is running a deficit of 110.

c. has a balanced budget.

d. is running a surplus of 130.

e. is running a surplus of 50

30. Inflation can defined as

a. persistant rise in general price level

b. persistant fall in general price level

c. an Increase purchasing power

d. . increase in Value of money

31. What will be likely to cause inflation in an economy?

a. decrease in the cost of production

b. a decrease in total expenditure

c. An increase in productivity
 d. An increase in the average wage level

32. Demand pull inflation is caused by

a. Aggregate supply exceeds aggregate demand

b. Aggregate Demand exceeds aggregate supply

c. Aggregate demand and aggregate supply change in same direction.

d. Fall in equilibrium price

33. Cost push inflation is caused by

a. An increase in the price of raw- materials, wage rate, rent

b. A reduction in aggregate demand

c. An increase Aggregate supply

d. An increase in factors of production

34. Which of the following is the most obvious sign of inflation?

a. An increase in imports

b. A rise in the national debts

c. A rise in the rate of interest

d. A rise in retail prices

35. Fiscal policy deals with

a. Import and export

b. Taxation and public expenditure

c. Public expenditure and money supply

d. Taxation and interest rate

36. To reduce the rate of inflation, the government should

a. Increase public expenditure

 b. Encourage consumer spending

c. Increase income tax

d. Reduce interest rate.

37. If the price level was 100 in 1999 and 102 in 2000, the inflation rate was

a. 102%.

b. 20%.

c. 2%.

d. 0.2%.

38. If the CPI was 132.5 at the end of 2003 and 140.2 at the end of 2004, the inflation rate

over these two years was

a. 7.7 percent.

b. 5.4 percent.

c. 4.4 percent.

d. 5.8 percent.

39. The technique currently used to calculate the CPI implicitly assumes that over time

consumers buy

a. relatively more of goods whose relative prices are rising.

b. relatively less of goods whose relative prices are rising.

c. the same relative quantities of goods as in a base year.

d. goods and services whose quality improves at the rate of growth of real income

40. A type of unemployment in which workers are in-between jobs or are searching for new

and better jobs is called _______ unemployment:

a. frictional
 b. cyclical

c. structural

d. turnover

41. Suppose the working age population in Tiny Town is 100 people. If 25 of these people

are NOT in the labour force, the ____ equals ____

a. unemployment rate; 25/100 x 100

b. unemployment rate; 25/125 x 100

c. labour force; 75

d. labour force; 25/100 x 100

42. If a larger fraction of the adult population is working, household production

a. counted in real GDP increases.

b. not counted in real GDP increases.

c. counted in real GDP decreases.

d. not counted in real GDP decreases.

43. Cyclical unemployment

a. is due mainly to job leavers.

b. may increase or decrease during an expansion.

c. occurs when technology improvements change job requirements.

d. fluctuates over the business cycle.

44. Consider a small economy where the total population is 10,000. The size of the labour

force is 8,000, while the number of people employed is 7,000. What is the unemployment

rate in this economy?

a. 10%
 b. 12.5%

c. 20% d. 30%

d. 37.5%

45. If the number of people classified as unemployed is 20,000 and the number of people

classified as employed is 230,000, what is the unemployment rate?

a. 8%

b. 8.7%

c. 9.2%

d. 12.5%

46. The number of unemployed divided by the labor force equals

a. the inflation rate.

b. the labor force participation rate.

c. the unemployment rate.

d. the misery index.

47. The main cause of cyclical unemployment is that

a. firms engage in race, gender and sex discrimination in their hiring practices.

b. some individuals do not have marketable job skills.

c. the level of overall economic activity fluctuates.

d. workers often voluntarily quit a job to look for a better job.

48. If an individual who cannot find a job because his or her job skills have become obsolete

this is an example of

a. frictional unemployment.

b. structural unemployment.
 c. cyclical unemployment.

d. seasonal unemployment

49. According to the short-run Phillips Curve, there is a trade-off between

a. interest rates and inflation

b. the growth of the money supply and interest rates

c. unemployment and economic growth

d. inflation and unemployment

50. Which of the following characteristics are most likely to be found in developing

countries?

a. high population growth rates.

b. large number of people living in poverty.

c. very traditional methods of agricultural production.

d. all of the above

51. The Human Development Index (HDI) summarizes a great deal of social performance in

a single composite index, combining

a. disparity reduction rate, human resource development rate and the composite

index.

b. longevity, education and living standard.

c. minimum schooling, adult literacy and tertiary educational attainment.

d. human resource training, development and Research and Development (R&D).

52. Longevity is a proxy for ___________ in the Human Development Index

a. health and nutrition.

 b. living standard

c. infant mortality

d. purchasing Power Parity

53. Which of these measures is not utilized to evaluate economic performance of a nation….

a. purchasing Poverty Parity.

b. physical Quality of Life Index.

c. human Development Index.

d. gross Domestic Product

54. The Physical Quality of Life Index (PQLI) combines three indicators. They are

a. infant mortality, life expectancy and adult literacy rate.

b. crime rate, clean environment and quality of housing.

c. air pollution rate, water pollution rate and sanitation.

d. health, education and environment.

55. Infant mortality….

a. is defined as the annual number of deaths of infant under 1 year old per

1,000 live births.

b. reflects the availability of primary education, the rights of employment and social

security.

c. is life expectancy up to age 3.

d. reflects the availability of hospitals and childcare facilities, and the parents’

wealth.

56. Economic development refers to

a. economic growth.
 b. economic growth plus changes in output distribution and economic

structure.

c. Improvement in the well-being of the urban population.

d. sustainable increases in Gross National Product.

57. The poorest region of the world is

a. the Middle East.

b. Sub-Saharan Africa.

c. Asia.

d. Latin America.

58. Which of this continent is not classified as third-world regions?

a. Latin America.

b. Asia.

c. Africa.

d. Australia.

59. The economics of development focuses primarily on the poorest ___________ of the

world's

a. Population.

b. Two-thirds.

c. One-third.

d. 28 percent.

60. __________ a plan in which long range targets are set in advance for a period of 15,20

or 25 years
 a. Annual planning

b. Perspective planning

c. Rolling planning

d. Fixed planning

61. Government's use of coordinated policies to achieve national economic objectives is

a. commanding heights.

b. entrepreneurial programs.

c. public physical policy.

d. development planning.

62. All of the following are features of development plan except ….

a. It should be goal-oriented

b. It involves a continuous process

c. It involves choice and decision making.

d. None of the above

63. The merits of development planning include the following except……

a. sometime development planning can be misdirected.

b. it facilitates effective controls.

c. it helps in achieving economic development

d. planning encourages innovations

64. Which of the following is not a public policy to promote the private sector?

a. investigating development potential through scientific and market research, and

natural resources surveys.

b. providing adequate infrastructure for public and private agencies

 c. creating markets, including commodity markets, security exchanges, banks, credit

facilities, and insurance companies.

d. increasing market monopolies and oligopolies to help producers.

65. A plan that every year three new plans are made and acted upon is…

a. fixed plan.

b. rolling plan.

c. inductive plan

d. annual plan.

66. Planning in many LDCs has failed because detailed programs for the public sector have

not been worked out and…

a. governments depend primarily on their colonial masters.

b. excessive controls are used in the private sector.

c. the brain drain cost government substantially.

d. monopolies dominate in the agricultural sector.

67. Which of these reasons is not why development plans are prepared:

a. to anticipate the development needs of an area;

b. to identify relevant development issues;

c. to identify opportunities for and constraints to development;

d. none of the above

68. The ________ is the French system of planning which is based on the principle of

decentralization in the operation and execution of the national plans.

a. centralised planning

b. totalitarian planning
 c. democratic planning

d. indicative planning

69. One demerit of development planning is……

a. Sometime development planning can be misdirected.

b. It facilitates effective controls.

c. It helps in achieving economies

d. Planning encourages innovations

70. Fiscal Policy is controlled by

a. The Federal Reserve Board

b. Legislature and the President

c. The Supreme Court

d. Private banks

71. The purpose of fiscal policy is to

a. Alter the direction of the economy

b. Change people's attitudes toward government

c. Educate people as to the importance of economics

d. Offer insight into the way things work

72. Fiscal policy is purposeful movements in ____________ designed to direct an economy.

a. Interest rates

b. Legal structures

c. Government regulations

d. Governmen spending and taxes

73. Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that
 a. The former deals with interest rates and the latter deals with tax policy

b. The former is built into the system whereas the latter requires timely

decisions

c. The former requires timely decisions whereas the latter is built into the system

d. The former deals with tax policy and the latter deals with interest rates

74. Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that

a. The former deals with government spending and the latter deals with tax policy

b. The former is chosen by Congress while the latter is chosen by the President

c. The former is always stabilizing, while the latter is never stabilizing

d. The former often takes years to enact, while the latter takes effect automatically

75. Short-run contractionary Fiscal Policy would result in

a. Aggregate demand moving to the right

b. Aggregate supply moving to the right

c. Aggregate demand moving to the left

d. Aggregate supply moving to the left

76. Short-run expansionary Fiscal Policy would result in

a. Aggregate demand moving to the right

b. Aggregate supply moving to the right

c. Aggregate demand moving to the left

d. Aggregate supply moving to the left

77. An example of nondiscretionary fiscal policy would be

a. The existence of the progressive federal income tax

b. A federal jobs program adopted to stimulate consumption

 c. A tax cut adopted to stimulate consumption

d. An interest rate cut implemented to stimulate consumption

78. An example of discretionary fiscal policy would be

a. The operation of the welfare state

b. The operation of the progressive federal income tax

c. CA tax increase adopted to control inflationary pressures

d. An interest rate increase implemented to control inflationary pressures

79. If Nigerian interest rates rise, the exchange rate value of the dollar ________ and net

exports ________.

a. rises; increase

b. rises; decrease

c. falls; increase

d. falls; decrease

e. rises only if the U.S. interest rates fall concurrently; decrease

80. When a central bank sells securities in the open market, which of the following set of

events is most likely to follow?

a. An increase in the money supply, a decrease in interest rates, and an increase in

aggregate demand

b. An increase in the money supply, an increase in interest rates, and a decrease in

aggregate demand

c. An increase in interest rates, an increase in the government budget deficit, and a

movement toward trade surplus

 d. A decrease in the money supply, an increase in interest rates, and a decrease

in aggregate demand

e. A decrease in the money supply, a decrease in interest rates, and a decrease in

aggregate demand

81. The Bank rate is the interest rate that

a. the CBN charges the federal government on its loans

b. banks charge one another for short-term loans

c. banks charge their best customers

d. equalizes the yield on government bonds and corporate bonds

82. An increase in the money supply is most likely to have which of the following short run

effects on real interest rates and real output?

Real Interest Rates Real Output

a. Decrease Decrease

b. Decrease Increase

c. Increase Decrease

d. Increase No change

83. In the Keynesian model, an expansionary monetary policy will lead to

a. lower real interest rates and more investment

b. lower real interest rates and lower prices

c. higher real interest rates and lower prices

d. higher real interest rates and higher real income

84. Under which of the following conditions would a restrictive monetary policy be most

appropriate?
 a. High inflation

b. High unemployment

c. Full employment with stable prices

d. Low interest rates

85. One way in which the CBN works to change money supply is by changing the

a. Number of banks in operation

b. Velocity of money

c. Price level

d. Prime rate

86. Open market operations refer to which of the following activities?

a. The buying and selling of stocks in the New York stock market

b. The loans made by the Federal Reserve to member commercial banks

c. The buying and selling of government securities by the Federal Reserve

d. The government’s purchase and sales of municipal bond

87. Open market purchases raise the ___________ thereby raising the ___________.

a.money multiplier; money supply

b. money multiplier; monetary base

c.monetary base; money supply

d. monetary base; money multiplier

88. The CBN uses three main policy tools to manipulate the money supply: open market

operations, which affect the _________; changes in the discount rate, which affect the

____________ by influencing the quantity of discount loans; and changes in reserve

requirements, which affect the __________.

 a. money multiplier; monetary base; monetary base

b. monetary base; money multiplier; monetary base

c. monetary base; monetary base; money multiplier

d. money multiplier; money multiplier; monetary base

89. If the Federal Reserve wants to drain reserves from the banking system, it will

a. purchase government securities.

b. lower the discount rate.

c. sell government securities.

d. raise reserve requirements

90. If the current market interest rate for loanable funds is below the equilibrium level, then

the quantity of loanable funds

a. demanded will exceed the quantity of loanable funds supplied and the

interest rate will rise.

b. supplied will exceed the quantity of loanable funds demanded and the interest rate

will rise.

c. demanded will exceed the quantity of loanable funds supplied and the interest rate

will fall.

d. supplied will exceed the quantity of loanable funds demanded and the interest rate

will fall

91. What would happen in the market for loanable funds if the government were to decrease

the tax rate on interest income?

a. The supply of and demand for loanable funds would shift right.

b. The supply of and demand for loanable funds would shift left.
 c. The supply of loanable funds would shift right and the demand for loanable funds

would shift left.

d. None of the above is correct.

92. If the quantity of loanable funds supplied is greater than the quantity demanded, then

a. there is a shortage of loanable funds and the interest rate will fall.

b. there is a shortage of loanable funds and the interest rate will rise.

c. there is a surplus of loanable funds and the interest rate will fall.

d. there is a surplus of loanable funds and the interest rate will rise.

93. If at some interest rate the quantity of money demanded is greater than the quantity of

money supplied, people will desire to

a. sell interest bearing assets causing the interest rate to decrease.

b. sell interest bearing assets causing the interest rate to increase.

c. buy interest bearing assets causing the interest rate to decrease.

d. buy interest bearing assets causing the interest rate to increase

94. The real interest rate is defined as:

a. the actual interest rate plus the rate of inflation

b. the actual interest rate minus the rate of inflation

c. the actual rate people pay rather than the advertised rate

d. none of the above

95. Assume the nominal interest rate is 12 percent, the expected inflation rate is 5 percent,

and the marginal income tax rate is 25 percent. Then the after-tax real interest rate is:

a. 7 percent

b. negative 2 percent
 c. 4 percent

d. none of the above

96. In which of the following situations would you rather be borrowing?

a. the interest rate is 20% and expected inflation rate is 15%

b. the interest rate is 4% and expected inflation rate is 1%.

c. the interest rate is 13% and expected inflation rate is 15%

d. the interest rate is 10% and expected inflation rate is 15%

97. Suppose that the real interest rate remains constant at 3 percent while expected inflation

increases from 4 percent to 6 percent. Then the nominal interest rate:

a. increases from 4 percent to 6 percent

b. increases from 7 percent to 9 percent

c. increases from 1 percent to 3 percent

d. does none of the above

98. Higher expected inflation should

a. decrease the nominal interest rate and decrease the real interest rate

b. decrease the nominal interest rate and increase the real interest rate

c. increase the nominal interest rate and decrease the real interest rate

d. increase the nominal interest rate, but its effect on the real interest rate is unclear

99. When the growth rate of the money supply is increased, interest rates will rise

immediately if the liquidity effect is _____ the inflationary expectations effect.

a. equal to

b. larger than

c. smaller than
 d. all of the above

100. The policy mix that would cause the interest rate to increase and investment to

decrease, but have an indeterminate effect on aggregate output, is a mix of

a. Expansionary fiscal policy and expansionary monetary policy

b. Contractionary fiscal policy and expansionary monetary policy

c. Expansionary fiscal policy and contractionary monetary policy

d. Contractionary fiscal policy and contractionary monetary policy

101. In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy

a. Increases exports and decreases imports

b. Decreases exports and increases imports

c. Encourages foreign capital inflows

d. Both b and c

102. Fiscal policy affects the goods market through

a. changes in money supply.

b. changes in taxes and money supply.

c. changes in government spending and money supply.

d. changes in taxes and government spending.

103. A policy mix of an expansionary fiscal policy and a contractionary monetary

policy would cause

a. output to decrease and interest rates to decrease.

b. output to decrease and interest rates to increase.

c. output to decrease and interest rates to either increase, decrease, or remain

unchanged.
 d. output to either increase, decrease, or remain unchanged and interest rates to

increase.

104. A policy mix of an expansionary fiscal policy and an expansionary monetary

policy would cause output to ________ and interest rates to ________.

a. increase; increase

b. increase; increase, decrease, or remain unchanged

c. increase, decrease, or remain unchanged; increase

d. decrease; increase

105. The policy mix of a contractionary fiscal policy and a contractionary monetary

policy would cause output to ________, and interest rates to ________.

a. decrease; increase, decrease, or remain unchanged

b. decrease; decrease

c. decrease; increase

d. increase, decrease, or remain unchanged; decrease

106. The policy mix that would cause the interest rate to increase and investment to

decrease, but have an indeterminate effect on aggregate output, is a mix of

a. expansionary fiscal policy and expansionary monetary policy.

b. contractionary fiscal policy and expansionary monetary policy.

c. expansionary fiscal policy and contractionary monetary policy.

d. contractionary fiscal policy and contractionary monetary policy

107. The formula to calculate economic growth from 2013 to 2014 is given by

a. [(GDP2014 + GDP2013)/ GDP2013]×100

b. [(GDP2014 – GDP2013)× GDP2013]×100

 c. [(GDP2014 – GDP2013)/ GDP2013]×100

d. [GDP2013 – GDP2014]×100

108. If GNP Per Capita at constant prices for Nigeria is US$360 and US$364 in 2006

and 2007 respectively, the real economic growth from 2006 to 2007 is

a. 4%

b. 1.11%

c. 0.011%

d. 11%

109. One criticism of Rostow's theory of economic growth is that:

a. much available data contradicts his thesis about the takeoff stage.

b. there is no explanation of why growth occurs after takeoff.

c. his hypothesis of the stages of growth is difficult to test empirically.

d. all of the above are correct.

110. Criticisms of Rostow's stages of growth include:

a. the difficulty of testing the stages scientifically.

b. conditions for take-off are contradicted by historical evidence.

c. characteristics of one stage are not unique to that stage.

d. all of the above are correct.

111. The Harrod-Domar growth model suggests that growth is directly related to

savings and inversely related to the capital/output ratio.

a. directly related to the capital/output ratio and inversely related to savings.

b. indirectly related to savings and the capital/output ratio.

c. directly related to savings and the capital/output ratio.

112. Rostow's economic stages are

a. the preconditions for take-off, the take-off, the drive to maturity, and the age of

creative destruction.

b. the traditional society, the preconditions for take-off, the take-off, the drive

to maturity, and the age of high mass consumption.

c. the preconditions for consumption, the replication, the drive to maturity, and the

age of high mass consumption.

d. the learning curve, the age of high mass consumption, post-take-off, and the drive

to maturity.

113. Which of the following was not a classical economist?

a. Adam Smith.

b. David Ricardo.

c. John Stuart Mill.

d. John Maynard Keynes.

114. Adam Smith advocated

I. laissez-faire.
II. the invisible hand.
III. free-trade policy.
IV. competitive markets.

a. I and II only
b. II and III only
c. I, II and III only
d. I, II, III and IV

115. A theory..

I. is a systematic explanation of relationships between economic variables.

II. explains causal relationships among variables.
III. provides a basis for policy.
IV. provides an explanation of all factors influencing economic growth
 a. I only.
b. I and II only.
c. I, II and III only.
d. IV only.

116. The classical growth theory especially Ricardo growth model specifically
emphasizes scarcity of …………. as an obstacle that will hinder growth.
a. Capital.
b. Entrepreneur.
c. Land.
d. Human resources.