Mixed m/c

Q1.
In which one of the following combinations of events, A, B, C or D, is the Bank of England most
likely to reduce interest rates to try to boost demand?
 
Consumer
  Money wages Exchange rate  
spending

A Rising Falling Falling

B Falling Rising Rising

C Rising Falling Rising

D Falling Rising Falling

[1 mark]

Q2.
An economy experiences a positive supply-side shock. Other things remaining equal, the
impact on the economy is most likely to be
 
A higher inflation and faster economic growth.

B higher output and lower inflation.

C lower employment and slower economic growth.

D lower unemployment and a larger budget deficit.

[1 mark]

Q3.
 
All other things being equal, a large increase in interest rates in the UK is most likely to
 
A decrease the size of the government budget
deficit.

B increase aggregate investment.

C lead to an increase in bank lending.

D decrease house prices.

[1 mark]

Q4.
In which one of the following situations is there most likely to be cyclical unemployment in an

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 economy?
 
A Absence of an output gap

B Generous unemployment benefits

C Many firms with excess capacity

D Widespread investment in labour-saving equipment

[1 mark]

Q5.
All other things being equal, in the short-run, which one of the following is most likely to lead to
a rise in national income?
 
A A rise in interest rates and a rise in the exchange
rate

B A fall in interest rates and a fall in the exchange

rate

C A rise in interest rates and a fall in the exchange

rate

D A fall in interest rates and a rise in the exchange

rate
[1 mark]

Q6.
The table below shows four possible sets of circumstances for the UK economy. Which set of
circumstances is most likely to cause the Monetary Policy Committee of the Bank of England to
raise bank rate?
 
  Output gap Exchange rate  

A negative falling

B negative rising

C positive falling

D positive rising
[1 mark]

Q7.
The level of unemployment in an economy has fallen. The most likely cause is
 
A a reduction in firms’ profits.

B a rise in the retirement age.

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 C an increase in immigration.

D lower mortgage interest rates.

[1 mark]

Q8.
Many firms use profits to finance their capital investment instead of borrowing from banks.
For these firms, higher interest rates are most likely to
 
A cause them to change the type of investment
made with more investment in buildings.

B cause them to reduce their investment as they

can now earn more interest from saving their
profits.

C have no impact on the amount of investment

undertaken as they pay no interest.

D result in more investment as they can earn more

interest on money deposited in banks.
[1 mark]

Q9.
Which one of the following is a true statement about the Labour Force Survey (LFS) measure of
unemployment? The LFS measure of unemployment includes
 
A part-time workers who would like to work full-
time.

B people who are claiming unemployment benefits.

C people who would like a job but who are not

currently looking for one.

D students at university searching for a job starting

after they have graduated.
[1 mark]

Q10.
Europe and North America enter a period of recovery from a recession. Other things remaining
the same, the impact on the UK economy is most likely to be
 
A an increase in structural unemployment.

B an increase in the current account deficit.

C a reduction in cyclical unemployment.

D a reduction in UK economic growth.

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