WorksheetsDemand and Supply Side Policies, Output Gaps, and Economy
Total questions: 20
Worksheet time: 11mins
Which is an expansionary demand-side policy?
lower interest rates
increase government regulation
increase interest rates
decrease government spending on infrastructure
Define monetary policy.
Involves the manipulation of monetary variables in order achieve government objectives.
any action taken by the government or monetary authorities (Monetary Policy Committee in the Bank of England) to shift the AD curve.
Involves the government running a government or fiscal deficit (budget deficit).
any action taken by the government or monetary authorities (Monetary Policy Committee in the Bank of England) to shift the AS curve.
Define fiscal policy.
any action taken by the government or monetary authorities (Monetary Policy Committee in the Bank of England) to shift the AD curve.
Involves the manipulation of monetary variables in order achieve government objectives.
Involves the government running a government or fiscal deficit (budget deficit).
any action taken by the government or monetary authorities (Monetary Policy Committee in the Bank of England) to shift the AS curve.
Define supply-side policy.
Involves the manipulation of monetary variables in order achieve government objectives.
Involves the government running a government or fiscal deficit (budget deficit).
any action taken by the government or monetary authorities (Monetary Policy Committee in the Bank of England) to shift the AS curve.
any action taken by the government or monetary authorities (Monetary Policy Committee in the Bank of England) to shift the AD curve.
Which of the following is 'contractionary' monetary policy?
decrease interest rates
increase income taxes
Bank of England 'buys' bonds, increasing the MS
Bank of England 'sells' bonds, decreasing the MS
Which of the following is 'expansionary' fiscal policy?
decrease interest rates
The Bank of England 'buys' bonds, increasing the money supply
decrease income taxes
decrease spending on the military and defence
Which of the following is an 'injection' into the circular of income?
Savings
Taxation
Imports
Exports
Which of the following is a withdrawal from the circular flow of income?
Exports
Savings
Investment
Government Spending
Which of the following is the equation for the multiplier?
1 / MPT
1 / MPW
1 / MPC
1 / MPX + MPM
Which of the following is an example of 'expansionary' supply-side policy?
Increasing competition in markets.
Decrease competition in markets.
Increase corporation taxes
increase interest rates
Given a government spending investment on infrastructure of £10 million, with a final GDP increase of £45 million, find the MULTIPLIER.
3
4
3.5
4.5
Given MPM = 0.3, MPS = 0.2, and MPT = 0.2
Given an injection of £20 million in exports.
Find the FINAL GDP increase.
£27.6 million
£28.6 million
£28 million
£26.5 million
which of the following is occurring here?
Economy is working at full capacity
positive output gap
negative output gap
Economy is working past potential GDP
What is this called?
Business cycle
AD/AS Diagram
Circular Flow of Income
Output gaps
At which point in the trade/business cycle is unemployment the HIGHEST?
Peak
Exapansion
Trough
Boom
Which of the following is an effect of a negative output gap?
Increase in actual GDP
deflation
disinflation
decrease in potential GDP
The government increases government spending. They enact the furlough scheme for the Covid pandemic. What does the final effect of the injection 'depend on' to increase real GDP? Think of the best answer here.
the MPC
LRAS and potential GDP
High employment
the exchange rate
Which of the following is a positive output gap?
Actual GDP = Potential GDP
Actual GDP > Potential GDP
Actual GDP < Potential GDP
None of the above
In the business/trade cycle, which of the following sections represents a 'negative output gap'?
expansion
recession
trough
peak
Which is a possible drawback of 'expansionary supply-side policy', such as deregulation?
increase in pollution
increase in LRAS
increase in AD
decrease in investment
