AQA Economics Year 1 - Macroeconomics (2)

All other things being equal, which one of the following is most likely to increase an economy’s underlying trend rate of growth? A rise in the rate of growth of...

• inflation

• household income

• imports of consumer goods

• labour productivity

It can be concluded from the data above that, over the 4-year period,

• the average price level has risen.

• the purchasing power of money has increased.

• assuming constant money incomes, real income has risen.

• prices of goods and services have fallen.

A government aiming to increase aggregate demand through the use of monetary policy might increase the

• rate of interest.

• exchange rate

• amount of money in circulation

• level of government expenditure.

Which one of the following is most likely to lead to an increase in spending on imports?

• A fall in the exchange rate

• A rise in unemployment

• A rise in the rate of Value Added Tax (VAT)

• A cut in income tax rates

The diagram shows two aggregate demand (AD) curves and the short-run aggregate supply (SRAS) curve for an economy. The shift in the aggregate demand curve from AD1 to AD2 could have been caused by a decrease in...

• imports

• labour productivity.

• household savings.

• the government budget deficit

All other things being equal, a large increase in interest rates in the UK is most likely to

• decrease the size of the government budget deficit.

• increase aggregate investment.

• lead to an increase in bank lending.

• decrease house prices.

Which one of the following is an example of a contractionary fiscal policy designed to reduce inflationary pressures?

• An increase in the government budget surplus

• A reduction in the supply of money available to banks for lending purposes

• Higher interest rates

• A reduction in the exchange rate

All other things being equal, a cut in the size of a government’s budget surplus is most likely in the short run to both

• reduce unemployment and increase economic growth.

• reduce unemployment and reduce inflation.

• reduce inflation and reduce the balance of payments deficit on current account.

• reduce the balance of payments deficit on current account and reduce unemployment.

All other things being equal, a significant cut in the rate of tax on a company’s profits is most likely to

• increase both aggregate demand and long-run aggregate supply.

• increase aggregate demand but not long-run aggregate supply.

• increase long-run aggregate supply but not aggregate demand

• increase neither aggregate demand nor long-run aggregate supply.

The economy is producing at full capacity when it

• grows more slowly than its long-run trend rate of growth

• has neither a positive nor a negative output gap

• is also in equilibrium on its balance of trade.

• grows more rapidly than its long-run trend rate of growth.