Macroeconomics Answers

If inflation accelerates due to the increase in the price of oil (an import), the best policy to combat
such inflation in a country with a high unemployment rate, would be to...
[1] apply the supply-side policy that will increase aggregate supply, which will be illustrated by
a rightward shift of the AS curve.
[2] respond with demand management policy that will increase aggregate demand, which will
be illustrated by a rightward shift of the AD curve.
[3] implement contractionary monetary policy, illustrated by the rightward shift of the AD
curve.
[4] apply incomes policy, illustrated by a leftward shift of the AS curve.

Which of the following best describes a difference between demand-pull inflation and cost-push
inflation?
[1] Demand-pull inflation occurs when there is a shortage in aggregate demand, while cost-
push inflation is the upward pressure on the general price level due to rising cost of
production.
[2] Cost-push inflation can be caused by increases in the cost of wages and intermediate
goods, while demand-pull can be caused by increase in exports.
[3] Demand-pull inflation is triggered by increases in the cost of production, while cost-push
inflation occurs when the aggregate demand for goods and services increases while
aggregate supply remains unchanged.
[4] There is no difference between demand-pull inflation and cost-push inflation as they are
triggered by the same sources.

Which one of the following is NOT an effect of higher inflation?
[1] Redistribution of wealth from the lender to the borrower.
[2] A decrease of the real value of existing savings.
[3] An increase in the standard of living.
[4] An increase in the cost of living.

. In the first quarter of 2020, the economy of South Africa entered a recession. Which of the
following best described what you would advice policymakers to do in order to move the
economy out of a recession without causing an increase in inflation?
[1] to apply supply-side policy that will increase aggregate supply.
[2] to respond with demand management policy that will increase aggregate supply.
[3] to implement contractionary monetary policy and expansionary fiscal policy.
[4] do nothing as any response will push the economy even deeper into recession.

Incomes policy measures tend to affect…
[1] output and the level of employment in opposite directions.
[2] output and the price level in the same directions.
[3] the level of employment and the price level in the same directions.
[4] the level of unemployment and the price level in the same directions.

Chpose the correct answer
A decrease in the marginal propensity to import results in
[1] A decrease in the multiplier.
[2] Less domestic consumption.
[3] A decrease in aggregate spending.
[4] Less foreign exchange flowing out of the country.

Choose the correct answer
Which of the following is used to measure a country’s real output per person? [1] Nominal GDP.
[2] Current GDP per capita.
[3] Real GDP.
[4] Real GDP per capita.

Choose the correct answer
According to the Phillips curve, unemployment will return to its original rate when [1] price level decreases due to the increase in the interest rate.
[2] increase in inflation rate is lower than a rise in real output demanded.
[3] real wages decline and cause equilibrium level of real output to increase.
[4] price of factors of production decrease and total production decreases.

Choose the correct answer
The multiplier is useful in determining the
1. The level of business inventories
2. A change in inflation resulting from a change in interest rates.
3. A change in equilibrium production or income resulting from a change in spending.
4. A change in unemployment resulting from a change in spending.

Which of the following statements is correct? (2)
(1) When a British firm invests in a bicycle manufacturing facility in South Africa,
the amount concerned is entered as an inflow on the current account of the
South African balance of payments.
(2) When someone purchases a second‐hand car, the transaction is included in
the calculation of GDP in the year the sale took place.
(3) A deficit on the current account of the balance of payments indicates that
the country exported more than it imported during the period in question.
(4) In the base year, the value of nominal GDP is equal to the value of real GDP.