How the Macroeconomy Works

All other things being equal, which one of the following is most likely to lead to an increase in imports? A fall in

• the exchange rate

• national income

• government expenditure

• the savings ratio

Which one of the following statements concerning UK investment is correct?

• Increased investment leads to a reduction in saving.

• Investment is the largest component of aggregate demand.

• Investment is a withdrawal from the circular flow of income.

• Investment can increase the capital stock of the economy.

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 most likely to result in a demand-side shock to the UK economy? A large rise in

• world commodity prices

• UK wages due to a wave of strikes

• UK interest rates

• the price of imported semi-manufactured goods

Which one of the following is most likely to result in a rightward shift of the short-run aggregate supply curve?

• A decrease in wage rates

• A decrease in government spending

• An increase in taxation

• An increase in investment expenditure

Which one of the following is most likely to affect aggregate demand in the short run?

• An increased rate of innovation

• An increase in labour productivity

• An increase in government spending

• An increase in the mobility of labour

A leftward shift of aggregate demand could be explained by an increase in

• imports

• the price level

• costs of production

• investment

Which one of the following is most likely to reduce the level of investment in a particular economy? A fall in

• the value of a country’s currency on the foreign exchange market.

• aggregate demand in the economy.

• the level of unemployment.

• the spare capacity of the economy.

The relationship between the growth of national income and the resulting increase in investment is known as the

• accelerator

• output gap

• economic cycle

• multiplier

All other things remaining equal, the shift in the short-run aggregate supply curve to the right could have been caused by a decrease in

• the savings ratio

• energy prices

• labour productivity

• imports of consumer goods