Macroeconomics Answers

The appropriate policy measure to combat inflation would be to …

a. 

increase aggregate spending.

a. increase aggregate spending.

b. 

decrease taxes.

b. decrease taxes.

c. 

decrease productivity.

c. decrease productivity.

d. 

increase the repo rate.

Which one of the following statements is correct?

a. 

Cost-push inflation is triggered by an increase in consumption spending.

a. Cost-push inflation is triggered by an increase in consumption spending.

b. 

Demand-pull inflation creates a situation known as stagflation.

b. Demand-pull inflation creates a situation known as stagflation.

c. 

Cost-push inflation is described as “too much money chasing too few goods”.

c. Cost-push inflation is described as “too much money chasing too few goods”.

d. 

An earthquake can trigger cost-push inflation.

In the case of demand-pull inflation, an increase in the general price level is accompanied by … in total production. In the case of cost-push inflation, an increase in the general price level is accompanied by…in total production.

a. 

an increase; an increase

a. an increase; an increase

b. 

a decrease; a decrease

b. a decrease; a decrease

c. 

an increase; a decrease

c. an increase; a decrease

d. 

a decrease; an increase

Inflation can be caused by a/an ...... Within the AD-AS model, this will be illustrated by a ......

a. 

fall in crude oil price; rightward shift of the AS curve

a. fall in crude oil price; rightward shift of the AS curve

b. 

rise in consumption spending; leftward shift of the AD curve

b. rise in consumption spending; leftward shift of the AD curve

c. 

decrease in exports earnings; leftward shift of the AD curve

c. decrease in exports earnings; leftward shift of the AD curve

d. 

high wage demands by trade unions; leftward shift of the AS curve

The distribution effects of inflation are best described by …

a. 

borrowers benefiting at the expense of lenders.

a. borrowers benefiting at the expense of lenders.

b. 

creditors benefiting at the expense of debtors.

b. creditors benefiting at the expense of debtors.

c. 

the poor benefiting at the expense of the rich.

c. the poor benefiting at the expense of the rich.

d. 

the elderly benefiting at the expense of the young.

Which one of the following is NOT an effect of higher inflation?

a. 

An increase in the cost of living.

a. An increase in the cost of living.

b. 

An increase in the standard of living.

b. An increase in the standard of living.

c. 

Redistribution of wealth from the lender to the borrower.

c. Redistribution of wealth from the lender to the borrower.

d. 

A decrease of the real value of existing savings.

In the AD-AS model, the aggregate supply curve is upward sloping because…

a. 

it illustrates the total real output supplied at each price level.

a. it illustrates the total real output supplied at each price level.

b. 

as the price level decreases, total production increases.

b. as the price level decreases, total production increases.

c. 

as the price level increases, total production decreases.

c. as the price level increases, total production decreases.

d. 

as the price of a good increase, quantity supplied increases.

Contractionary demand management policies tend to …

a. 

increase both inflation and the level of unemployment.

a. increase both inflation and the level of unemployment.

b. 

decrease the real GDP and the price level.

b. decrease the real GDP and the price level.

c. 

decrease real GDP and increase the price level.

c. decrease real GDP and increase the price level.

d. 

increase the price level and decrease real output.

The monetary transmission mechanism …

a. 

explains how the central bank transmits messages to the other banks.

a. explains how the central bank transmits messages to the other banks.

b. 

describes how the Monetary Policy Committee announces its decisions.

b. describes how the Monetary Policy Committee announces its decisions.

c. 

explains how developments in the economy affect the monetary sector, especially the banks.

c. explains how developments in the economy affect the monetary sector, especially the banks.

d. 

explains how banks create money.

d. explains how banks create money.

e. 

describes the ways in which changes in the monetary sector are transmitted to the rest of the economy.

Expansionary demand management policy measures tend to …

a. 

increase the real GDP, but reduce inflation.

a. increase the real GDP, but reduce inflation.

b. 

increase both inflation and the level of unemployment.

b. increase both inflation and the level of unemployment.

c. 

increase the production cost, which will decrease total production.

c. increase the production cost, which will decrease total production.

d. 

increase both the real GDP and inflation.