Macroeconomics SAC Revision Quiz 3

Which of the following can be both a demand and supply side factor affecting the level of domestic economic activity

• Lower income and company taxes

• Productivity growth

• The labour force participation rate

• The levels of industrial unrest

Assume average wages in the national economy have increased by 5% per annum and average labour productivity has increased by 2% per annum. Which one of the following is the most likely outcome of these increases?

• An increase in real wages and a rise in the operating profits of Australian businesses

• An improvement in equity in income distribution as a result of the likelihood of declining unemployment

• An increase in inflationary pressures, reducing the price competitiveness of Australian exports and import-competing goods

• A significant increase in business confidence levels resulting in much higher levels of investment by business owners in new capital resources

Which of the following developments would tend not to cause stagflation in the economy

• Falling RULC’s

• Higher rates of company and personal tax and the introduction of a carbon tax on firms releasing carbon dioxide into the atmosphere

• Higher interest rates and an end to microeconomic efficiency reforms

• The abolition of bonuses and performance base pay for workers

Which of the following is most likely to cause producers to increase their demand for labour and thereby contributing to downward pressure on the unemployment rate

• An increase in real wages

• An increase in the minimum wage as announced by the Australian Fair Pay Commission

• A decrease in labour productivity

• Lower unit labour costs

Which of the following best describes the likely impact on labour force statistics following a reduction in interest rates

• An increase in vacancies, greater employment, lower unemployment and a lower participation rate

• A decrease in vacancies, lower employment, higher unemployment and a lower participation rate

• A decrease in vacancies, lower employment, higher unemployment and a higher participation rate

• An increase in vacancies, greater employment, lower unemployment and a higher participation rate

Which of the following would not tend to lift Australia’s long-term level of national output?

• A fall in the percentage of adult females choosing to be in the labour force

• Government policies designed to help lift efficiency by providing free re-training courses for the unemployed

• An increase in the normal retirement age from 65 to 67 years

• Encouragement of mineral exploration and R&D.

Concerning the effects of an increase in the level of economic activity, which of the following is false?

• Attempts to increase the level of economic activity through greater efficiency and cost cutting by firms can sometimes lead to higher structural unemployment in the short-term.

• Higher economic activity usually causes unemployment to fall.

• Without special government policies, such as progressive income taxes or welfare benefits for the needy, there is the danger that rises in economic activity may increase inequality in incomes.

• An increase in economic activity usually slows the rate of inflation.

The level of private investment spending (I) and rate of economic activity or GDP would tend to increase if there was a:

• rise in business confidence about future sales and profits.

• rise in interest rates on bank loans to businesses.

• fall in business profits.

• rise in the rate of company tax on firms.

The value of spending on Australian exports (X) is likely to rise if:

• there was a recession overseas.

• exports become dearer or less competitive for overseas buyers.

• the exchange rate for the A$ fell making exports cheaper for overseas consumers.

• there was a drought or floods in Australia that destroyed our crops.

Which one of the following would have an effect on the rate of economic activity and economic growth that is different from that of the other three?

• The government announces a cut in income tax.

• Households feel pessimistic about future employment prospects and fear that they may soon become unemployed.

• The rate of economic growth in the United States and Japan strengthens, combined with a lower exchange rate for the A$.

• Interest rates fall following an announcement by the RBA.