MCQ questions:

1. An increase in oil prices, such as the oil shocks in the 70s, lead to _______ thereby causing ________

1. a movement along the AS curve; cost-push inflation
2. a leftward shift in the AS curve; demand-pull inflation
3. a rightward shift in the AS curve; cost-push inflation
4. a leftward shift in the AS curve; cost-push inflation

2.The aggregate supply curve shifts to the right whe

1. supplies of resources increase 
2. wage rates increase 
3. consumption decreases 
4. population decreases 

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

1.  Interest rates
2. Legal structures
3. Government regulations
4. Government spending and taxes

4.The long-run aggregate supply curve is the relationship between the quantity of real GDP supplied and ________________ when _______________

1. real GDP demanded; the wage rate is constant
2. the price level; real GDP equals nominal GDP
3. the price level; real GDP equals potential GDP
4. real GDP demanded; the unemployment rate is constant

5. If all international transactions were included and measured accurately, then the statistical discrepancy would be: 

1. Zero.
2. Short-term capital flows only. 
3. Positive only if the central bank intervened to support the currency. 
4. Negative if the country was running a trade deficit.

6. Which of the following is an example of fiscal policy

1. Tax increase
2. Controlling money supply
3. Manipulating Interest rates
4. Consumer Spending

7.Which of the following is not a component of GDP?

1. Investment
2. Consumption
3. Government Spending
4. Interest Rate

8. Structural or mismatch unemployment arises in which one of the following situations?

1. When people find themselves temporarily between jobs in the labour market
2. Due to a deficiency of aggregate demand
3. When inflation is accelerating
4. When labour released from declining industries does not have the skills required to fill, or is not living in the location where there are, existing job vacancies

9. As inflation increases and becomes more volatile, resulting in greater uncertainty, which of the following is most likely to occur?

1. The price system becomes less efficient as a coordinating mechanism
2. Investment by firms is likely to increase
3. International competitiveness is likely to improve
4. Consumption by households is likely to increase

10. If the economy is operating at its full capacity or potential GDP, following a decline in business confidence which one of the following is most likely to occur?

1. Investment is likely to fall and unemployment is likely to increase
2. Investment and employment are likely to remain unchanged
3. Firms are likely to increase their investment in new plant and machinery
4. None of the above

11. The Phillips curve describes the relationship between:

1. the federal budget deficit and the trade deficit
2. savings and investment
3. the unemployment rate and the inflation rate
4. marginal tax rates and tax revenues

12. Assume that there are 2 countries, A and B, and that they can both produce 2 goods, X and Y. The theory of comparative advantage predicts that:

1. Trade can only take place if country A has an absolute advantage in producing one of the goods, and country B has an absolute advantage in producing the other.
2. Trade can take place even if country A has an absolute advantage in both providing that B chooses to specialize in the good in which it has the least comparative disadvantage, and A specializes in the one in which it has the greater comparative advantage.
3. Trade between A and B will only take place if both countries are at a comparatively similar stage in the development of their economies.
4. None of the above.

13. Monetary Policy affects

1. Inflation only
2. Output only
3. Both inflation and output
4. Neither inflation nor output

14. According to the multiplier model, the best way to reduce inflation is to Inflation only

1. increase aggregate demand by cutting government spending or raising taxes.
2. increase aggregate demand by raising government spending or cutting taxes
3. decrease aggregate demand by cutting government spending or raising taxes.
4. decrease aggregate demand by raising government spending or cutting taxes.

15. What tends to shift the aggregate demand curve to the right?

1. An increase in imports.
2. A fall in the proportion of income that is saved
3. An increase in potential GDP
4. Reduce wage rate

16. The relationship between the quantity of goods and services supplied and the price level is called 

1. aggregate demand 
2. aggregate supply 
3. aggregate investment 
4. aggregate productio

17. A surplus in the balance of trade or in the balance on current account  implies that 

1. The country’s volume of employment is expanding.
2. The country is spending on goods and services more than it is earning from producing them. 
3. The country is lending to foreigners more than foreigners are lending to it. 
4. The country is accumulating reserves of foreign currency

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

1. an increase in purchases by the federal government
2. an increase in real interest rates
3. an appreciation of the American dollar
4. a decrease in the money supply

19. A type of unemployment in which workers are in-between jobs or are searching for new and better jobs is called _______ unemployment:

1. frictional      
2. cyclical       
3. structural      
4. turnover   

20.The period of the business cycle in which real GDP is increasing is called the: 

1.  expansion    
2. peak    
3. recession        
4. stagflation

21. The long-run equilibrium outcomes in monopolistic competition and perfect competition are similar, because in both market structures:

1. the efficient output level will be produced in the long run.
2. firms will be producing at minimum average cost
3. firms will only earn a normal profit
4. firms realise all economies of scale

22. Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve. Bob's Books maximizes its profit and sets the price of a book equal to ________ and has total annual revenue of ________

1. $20, $60,000
2. $30; $60,000
3. $10; $40,000
4. $40; $40,000

23. If a duopoly has a collusive agreement that maximizes joint profit, then each duopolist has

1. no incentive to cheat.
2. an incentive to cheat by raising its price.
3. an incentive to cheat by lowering its price.
4. an incentive to cheat by decreasing its output 44. 

24. A negative production externality means: 

1. The social marginal cost is greater than the private marginal cost 
2. The social marginal benefit is greater than the private marginal cost 
3. The social marginal cost is greater than the private marginal benefit
4. The social marginal cost is less than the private marginal cost

25. The three approaches to measure economic growth are the

1. cost, revenue, and expenditure approaches.
2. output, income, and expenditure approaches.
3. consumer, business, and government approaches.
4. private, public, and international approaches.

26. A type of unemployment in which workers are in-between jobs or are searching for new and better jobs is called _______ unemployment:

1. frictional      
2. cyclical       
3. structural      
4. turnover    

27. The GDP deflator is used to calculate real GDP by 

1. dividing nominal GDP by the GDP deflator and multiplying by 100 
2. dividing nominal GDP by the GDP deflator and dividing by 100 
3. multiplying the GDP deflator by nominal GDP 
4. dividing nominal GDP by the GDP deflator

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

1. A new law that requires the government to cover the full cost of medicines for the elderly
2. Lower government spending 
3. Higher real interest rates
4. The stock market crashes

29.Assume that an economy begins in macroeconomic equilibrium.  Then, taxes are significantly decreased.  As a result of this change:

1. there is stagflation in the economy
2. there is recession and deflation in the economy 
3. there is expansion and deflation in the economy
4. there is expansion and inflation in the economy     

30.During business cycles the opposite of a trough is  

1. an inflatio
2. a recessio
3. a trend 
4. peak 

31.If a government collect more in taxes than it spend  it has a ________________

1. Government budget surplus and a current account surplus
2. Zero government debt
3. Current account surplus
4. Government budget surplus

32. The long-run aggregate supply curve is the relationship between the quantity of real GDP supplied and ________________ when _______________

1. real GDP demanded; the wage rate is constant
2. the price level; real GDP equals nominal GDP
3. the price level; real GDP equals potential GDP
4. real GDP demanded; the unemployment rate is constant

33. Based on the supply and demand model of the exchange rate, which of the following should cause the Philippine peso to appreciate?

1. Concern abroad over the safety of Philippine toy exports.
2. An increase in remittances from Philippine workers abroad to their families at home.
3. Repayment by the Philippine government of its debt to the IMF.
4. Increased imports by Philippine consumers of electronics made in Taiwan.

34. Comparative advantage

1. exists only when one producer can make the product using fewer resources than any other producer
2. eliminates specialization, so that each country produces all of its own needs independently
3. leads to the most efficient allocation of resources and the greatest combined output
4. does not leads to international specializatio

35.If MPC is .80 and government spending increases by $200 billion, then

1. Total spending will increase by $200 billion
2. Total spending will increase by $400 billion
3. Total spending will decrease by $200 billion
4. Total spending will increase by $1,000 billion

36.Which is a monetary policy measure to increase employment 

1. Decrease in government spending 
2. Increase in government spending 
3. Decrease in interest rate 
4. Increase in interest rate 

37.Money spent on the purchase of a new house is included in the GDP as part of

1. Personal consumption expenditures
2. Depreciation
3. Investment
4. Personal saving

38.In a closed economy in which all taxes are autonomous and the price level is fixed, the autonomous tax multiplier is equal to __________________________

1. -MPC/(1 + MPC)
2. MPC/(1 - MPC)
3. -MPC/(1 - MPC)
4. MPC/(1 + MPC)

39.An automatic stabilizer is at work if as real GDP increases, _____________

1. transfer payments increase and tax revenues decrease
2. transfer payments decrease and interest rates decrease
3. tax revenues decrease and interest rates increase
4. tax revenues increase and transfer payments decrease

40.A tariff is a tax that is imposed by the ____________ when a good crosses an international boundary. 

1. exporting country
2. importing country
3. importing firm
4. exporting firm

41.Fiscal policy refers to the

1. Government's ability to regulate the functioning of financial markets.
2. Spending and taxing policies used by the government to influence the level of economic activity.
3. Techniques used by firms to reduce its tax liability
4. The policy by MAS to affect the cash rate.  

42.Which of the following does NOT function as an automatic stabiliser?

1. The personal income tax system
2. expenditure on road building programmes
3. benefit payments
4. Goods and Services Tax (GST)  

43.Paper currency is known as ‘fiat money’

1. Because only a fraction of total currency is in coins.
2. Because it is decreed legal tender.
3. Because it cannot be used as payment for debts.
4. Because it is in paper form

44.Barter cannot function well

1. Because goods are not always divisible. 
2. Because transaction costs are minimal. 
3. Because goods are always standardized.
4. Because it requires a permission  

45.A budget deficit 

1. Will facilitate a fall in interest rates
2. Will help to reduce aggregate demand
3. Means that imports are greater than exports
4. Will lead to an increase in the National Debt 

46.During periods of rapidly rising prices

1. Money fails to serve as a good store of value.
2. Money fails to serve as a unit of account.
3. Money fails to serve as a medium of exchange.
4. Money fails to serve as a standard of value. 

47.An intended goal of expansionary fiscal and monetary policy is 

1. A decrease in interest rates. 
2. A decrease in the price level.
3. The equalization of the distribution of income. 
4. An increase in the level of aggregate output.   

48.During a period of high inflation, the Federal Reserve is likely to 

1. Decrease the money supply. 
2. Lower the discount rate. 
3. Buy treasury bonds on the open market. 
4. Decrease the unemployment rate  

49.Which of the following statement is true about the circular flow

1. Output is greater than income
2. Income is more than expenditure
3. Output is less than expenditure
4. Output equals expenditure equals income  

50.GDP measures 

1. A country’s income
2. A country’s wealth
3. Consumer Spending
4. Net trade Income

51.Two large countries currently impose tariffs against each other. Each country would be better off with free trade. Which of the following statements are true?

• Each country might think ‘if the other country maintain it tariff, we will be better off maintaining our tariff.’
• Each country may think ‘if the other country unilaterally abolishes its tariff, we may be better off maintaining our tariff. 

1. Both I and II 
2. I only
3. II only 
4. Neither I nor II

52.The Gini coefficient measures

1. Income Inequality
2. Inflation
3. Unemployment
4. Economic Growth 

53.An increase in aggregate demand will have most effect on prices if: 

1. Aggregate supply is price inelastic
2. Aggregate supply is price elastic
3. Aggregate supply has a unitary price elasticity
4. Aggregate demand is price inelastic 

54.Changes to the benefit system, so that there was less incentive to work, would most likely:

1. Shift aggregate supply outwards so more is supplied at each price
2. Shift aggregate supply inwards so less is supplied at each price 
3. Shift aggregate demand outwards so more is demanded at each price
4. Shift aggregate demand inwards so less is demanded at each price 

55.Increased level of consumption: 

1. Shift aggregate supply outwards so more is supplied at each price 
2. Shift aggregate supply inwards so less is supplied at each price 
3. Shift aggregate demand outwards so more is demanded at each price 
4. Shift aggregate demand inwards so less is demanded at each price  

56.Which of the following statement is false? 

1. Two countries may benefit from trade, even if their production possibility frontier has identical shapes, if preferences differ in the two countries.
2. Two countries may benefit from trade, even if their production possibility frontier has identical shapes, if industries have substantial economies of scale
3. When two countries benefit from opening up of trade, all citizens in each country will benefit 
4. Differences in the degree of human capital will offer one reason why two countries may have production possibility frontiers that differ in shape 

57.Which of the following arguments for trade barriers offers potential benefits to consumers?  

1. To soften that fall of declining industries 
2. To protect industries from competition from low wage countries 
3. To protect industries from dumping 
4. To nurture infant industries by protecting them from cheaper imports  

58.In perfect competition, a firm maximizes its economic profit if it produces the output at which

1. Price equals marginal cost
2. Economic profit equals zero in the short run
3. Price equals average cost
4. Total revenue equals total cost 

59.When a monopoly perfectly price discriminates, there is 

1. A large consumer surplus
2. No producer surplus
3. No consumer surplus
4. An increase in supply

60.Which of the following does NOT function as an automatic stabiliser?

1. The personal income tax system
2. expenditure on road building programmes
3. benefit payments
4. Goods and Services Tax (GST)  

61.Barter cannot function well

1. Because goods are not always divisible. 
2. Because transaction costs are minimal. 
3. Because goods are always standardized.
4. Because it requires a permissio

62.During periods of rapidly rising prices

1. Money fails to serve as a good store of value.
2. Money fails to serve as a unit of account.
3. Money fails to serve as a medium of exchange.
4. Money fails to serve as a standard of value. 

63.During a period of high inflation, the Federal Reserve is likely to 

1. Decrease the money supply. 
2. Lower the discount rate. 
3. Buy treasury bonds on the open market. 
4. Decrease the unemployment rate 

64.Which of the following statement is true about the circular flow

1. Output is greater than income
2. Income is more than expenditure
3. Output is less than expenditure
4. Output equals expenditure equals income  

65.The Gini coefficient measures

1. Income Inequality
2. Inflation
3. Unemployment
4. Economic Growth 

66.Changes to the benefit system, so that there was less incentive to work, would most likely:

1. Shift aggregate supply outwards so more is supplied at each price
2. Shift aggregate supply inwards so less is supplied at each price 
3. Shift aggregate demand outwards so more is demanded at each price
4. Shift aggregate demand inwards so less is demanded at each price 

67.Which of the following statement is false? 

1. Two countries may benefit from trade, even if their production possibility frontier has identical shapes, if preferences differ in the two countries.
2. Two countries may benefit from trade, even if their production possibility frontier has identical shapes, if industries have substantial economies of scale
3. When two countries benefit from opening up of trade, all citizens in each country will benefit 
4. Differences in the degree of human capital will offer one reason why two countries may have production possibility frontiers that differ in shape 

68.Which of the following arguments for trade barriers offers potential benefits to consumers?  

1. To soften that fall of declining industries 
2. To protect industries from competition from low wage countries 
3. To protect industries from dumping 
4. To nurture infant industries by protecting them from cheaper imports   

69.A market structure in which many firms sell products that are similar but not identical is known as

1. Monopolistic competition
2. Monopoly
3. Perfect competition
4. Oligopoly  

70.Which of the following is not a characteristic of a monopolistically competitive market? 

1.  Free entry and exit 
2. Long-run economic profits 
3. Many sellers 
4. Differentiated products 

71.The market for hand tools (such as hammers and screwdrivers) is dominated by Draper,Stanley, and Craftsman. This market is best described as 

1. Monopolistically competitive 
2. A  monopoly 
3. An oligopoly 
4. Competitive

72.A budget deficit 

1. Will facilitate a fall in interest rates
2. Will help to reduce aggregate demand
3. Means that imports are greater than exports
4. Will lead to an increase in the National Debt 

73.Compared to a perfectly competitive market, a monopoly market will usually generate 

1. Higher prices and lower output 
2. Higher prices and higher output 
3. Lower prices and lower output 
4. Lower prices and higher output

74.A Single price monopoly causes deadweight loss because it  

1. Restricts output
2. Increase marginal cost
3. Maximises marginal revenue
4. Restricts demand

75.If a perfectly competitive firm currently produces where price is greater than marginal cost it 

1. Will increase its profits by producing more. 
2. Will increase its profits by producing less.  
3. Is making positive economic profits. 
4. Is making negative economic profits. 

76.Equilibrium quantities in markets characterized by oligopoly is 

1. Lower than in monopoly markets and higher than in perfectly competitive markets. 
2. Lower than in monopoly markets and lower than in perfectly competitive markets. 
3. Higher than in monopoly markets and higher than in perfectly competitive markets. 
4. Higher than in monopoly markets and lower than in perfectly competitive markets. 

77.For a perfectly competitive firm

1. Average revenue is greater than marginal revenue
2. Average revenue may be greater than or equal to marginal revenue
3. Average revenue equals price
4. Average revenue is less than marginal revenue

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