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Macroeconomics
(1a) Describe the concept of inflation and list any three types of inflation.
(1b) Explain 5 factors that can shift the Aggregate Demand (AD) curve
(1c) Given the statistics for a small economy called Abua below, derive the GDP deflator and
assert if there is evidence of inflation or otherwise.
Real GDP = $650 million
Nominal GDP = $400 million
Inflation rate = 9%
Unemployment rate = 15%
(1b) Explain 5 factors that can shift the Aggregate Demand (AD) curve
(1c) Given the statistics for a small economy called Abua below, derive the GDP deflator and
assert if there is evidence of inflation or otherwise.
Real GDP = $650 million
Nominal GDP = $400 million
Inflation rate = 9%
Unemployment rate = 15%
Macroeconomics
1. …….. is a sudden and large increase in general price level (a) Hyperinflation (b) Creeping Inflation (c) Stagflation (d) Volatile inflation
2. …….. and ……… are two of the factors that can cause currencies to either appreciate or depreciate (a) relative prices (b) speculative activities (c) population (d) a and b
3. ….. occur because prices in the goods and services market are low relative to costs of production and resource prices (a) Inflation (b) Booms (c) Recessions (d) Deflation
30. The Central Bank sometimes uses ……. to persuade commercial banks through policy statements, public pronouncements, outright appeals, warning that excessive expansion or contraction of bank credit, might involve serious consequences for the banking system and the whole economy (a) Selective credit control (b) Credit ceiling (c) Moral Suasion/Directives (d) Open market operation
2. …….. and ……… are two of the factors that can cause currencies to either appreciate or depreciate (a) relative prices (b) speculative activities (c) population (d) a and b
3. ….. occur because prices in the goods and services market are low relative to costs of production and resource prices (a) Inflation (b) Booms (c) Recessions (d) Deflation
30. The Central Bank sometimes uses ……. to persuade commercial banks through policy statements, public pronouncements, outright appeals, warning that excessive expansion or contraction of bank credit, might involve serious consequences for the banking system and the whole economy (a) Selective credit control (b) Credit ceiling (c) Moral Suasion/Directives (d) Open market operation
Macroeconomics
25. ....... is a process where Central Bank classifies borrowing into preferred and less preferred sectors of the economy (a) Selective ratio (b) Credit ceiling (c) Selective ratio (d) None
26. …… depends on the interest rate, technology, the cost of capital goods, and capacity utilization (a) Investment (b) Consumption (c) Demand (d) Supply
27. …… demand represents the total spending in the economy at alternative price level (a) Total (b) National (c) Market (d) Aggregate
28. All these are qualitative monetary measures except: (a) Credit ceiling (b) Selective credit (c) Moral suasion (d) all of the above
29. .......... hypothesis states that unemployment eventually returns to its normal rate, regardless of the rate of inflation (a) unemployment-rate (b) Expected-rate (c) Natural-rate (d) Speculative-rate
26. …… depends on the interest rate, technology, the cost of capital goods, and capacity utilization (a) Investment (b) Consumption (c) Demand (d) Supply
27. …… demand represents the total spending in the economy at alternative price level (a) Total (b) National (c) Market (d) Aggregate
28. All these are qualitative monetary measures except: (a) Credit ceiling (b) Selective credit (c) Moral suasion (d) all of the above
29. .......... hypothesis states that unemployment eventually returns to its normal rate, regardless of the rate of inflation (a) unemployment-rate (b) Expected-rate (c) Natural-rate (d) Speculative-rate
Macroeconomics
21. Open Market Operations, Reserve Ratio, Discount Rate and Stabilization Securities are …. (a) Qualitative measures of monetary policy (b) Quantitative measures of monetary policy (c) Fiscal policy measures (d) None of the above.
22. If the Central Bank reduces the bank rate, this will cause …… (a) commercial banks to reduce lending (b) commercial banks to merge (c) money supply to increase (d) money supply to reduce
23. A change in the real value of wealth that causes spending to change when the level of prices changes is known as: (a) interest rate effect (b) International-Substitution effect (c) Consumption effect (d) Real Balance effect
24. If the economy is in an inflationary period, what action would Fiscal authority most likely take? (a) Decrease taxes (b) Decrease the discount rate (c) Increase government spending (d) Increase taxes
22. If the Central Bank reduces the bank rate, this will cause …… (a) commercial banks to reduce lending (b) commercial banks to merge (c) money supply to increase (d) money supply to reduce
23. A change in the real value of wealth that causes spending to change when the level of prices changes is known as: (a) interest rate effect (b) International-Substitution effect (c) Consumption effect (d) Real Balance effect
24. If the economy is in an inflationary period, what action would Fiscal authority most likely take? (a) Decrease taxes (b) Decrease the discount rate (c) Increase government spending (d) Increase taxes
Macroeconomics
16. In the short run money is neutral and in the long run money is not neutral (a) True (b) False
17. A currency is said to Depreciate if there is a fall in its market price due to market forces. As a result, the currency will buy less, foreign exchange in the foreign exchange market. (a) True (b) False
18. ……. expectation assumes that people form their expectations of inflation based on the inflation they have recently observed (a) Adaptive (b) Observed (c) Rational (d) Projected
19. The Balance of payments of a country is constructed on the principle of …. (a) Public sector accounting (b) Single-entry book-keeping (c) Reconciliation (d) Double-entry book-keeping
20. The main instruments of fiscal policy are: (a) CBN tools and Government project (b) Government expenditure and Tax rate (c) Government Budgets and Revenue (d) Interest rate and Bank rate
17. A currency is said to Depreciate if there is a fall in its market price due to market forces. As a result, the currency will buy less, foreign exchange in the foreign exchange market. (a) True (b) False
18. ……. expectation assumes that people form their expectations of inflation based on the inflation they have recently observed (a) Adaptive (b) Observed (c) Rational (d) Projected
19. The Balance of payments of a country is constructed on the principle of …. (a) Public sector accounting (b) Single-entry book-keeping (c) Reconciliation (d) Double-entry book-keeping
20. The main instruments of fiscal policy are: (a) CBN tools and Government project (b) Government expenditure and Tax rate (c) Government Budgets and Revenue (d) Interest rate and Bank rate
Macroeconomics
11. Unsustained…… occurs when prices in the goods and services market are high relative to resource prices and other costs (a) economic recession (b) economic boom (c) inflation (d) deflation
12. Why do people hold M1? (a) To earn interest on their money (b) To carryout transactions (c) As a hedge against inflation (d) As a means to have enough liquid assets to buy bonds and other securities
13. Decreases in Aggregate Demand lead to …… and …. (a) boom, full employment (b) recession, cyclical unemployment (c) boom, cyclical unemployment (d) recession, full employment
14. The type of expectation that asserts that individuals make use of both present and past information to make future predictions is ……… expectation (a) rational (b) future (c) speculative (d) anticipated
15. …. in the exchange rate value of the nation’s currency will shift the Aggregate Demand curve inward. (a) Reduction (b) Shock (c) Increase (d) Boom
12. Why do people hold M1? (a) To earn interest on their money (b) To carryout transactions (c) As a hedge against inflation (d) As a means to have enough liquid assets to buy bonds and other securities
13. Decreases in Aggregate Demand lead to …… and …. (a) boom, full employment (b) recession, cyclical unemployment (c) boom, cyclical unemployment (d) recession, full employment
14. The type of expectation that asserts that individuals make use of both present and past information to make future predictions is ……… expectation (a) rational (b) future (c) speculative (d) anticipated
15. …. in the exchange rate value of the nation’s currency will shift the Aggregate Demand curve inward. (a) Reduction (b) Shock (c) Increase (d) Boom
Macroeconomics
29. .......... hypothesis states that unemployment eventually returns to its normal rate, regardless of the rate of inflation (a) unemployment-rate (b) Expected-rate (c) Natural-rate (d) Speculative-rate
30. The Central Bank sometimes uses ……. to persuade commercial banks through policy statements, public pronouncements, outright appeals, warning that excessive expansion or contraction of bank credit, might involve serious consequences for the banking system and the whole economy (a) Selective credit control (b) Credit ceiling (c) Moral Suasion/Directives (d) Open market operation
30. The Central Bank sometimes uses ……. to persuade commercial banks through policy statements, public pronouncements, outright appeals, warning that excessive expansion or contraction of bank credit, might involve serious consequences for the banking system and the whole economy (a) Selective credit control (b) Credit ceiling (c) Moral Suasion/Directives (d) Open market operation
Macroeconomics
26. …… depends on the interest rate, technology, the cost of capital goods, and capacity utilization (a) Investment (b) Consumption (c) Demand (d) Supply
27. …… demand represents the total spending in the economy at alternative price level (a) Total (b) National (c) Market (d) Aggregate
28. All these are qualitative monetary measures except: (a) Credit ceiling (b) Selective credit (c) Moral suasion (d) all of the above
27. …… demand represents the total spending in the economy at alternative price level (a) Total (b) National (c) Market (d) Aggregate
28. All these are qualitative monetary measures except: (a) Credit ceiling (b) Selective credit (c) Moral suasion (d) all of the above
Macroeconomics
22. If the Central Bank reduces the bank rate, this will cause …… (a) commercial banks to reduce lending (b) commercial banks to merge (c) money supply to increase (d) money supply to reduce
23. A change in the real value of wealth that causes spending to change when the level of prices changes is known as: (a) interest rate effect (b) International-Substitution effect (c) Consumption effect (d) Real Balance effect
24. If the economy is in an inflationary period, what action would Fiscal authority most likely take? (a) Decrease taxes (b) Decrease the discount rate (c) Increase government spending (d) Increase taxes
25. ....... is a process where Central Bank classifies borrowing into preferred and less preferred sectors of the economy (a) Selective ratio (b) Credit ceiling (c) Selective ratio (d) None
23. A change in the real value of wealth that causes spending to change when the level of prices changes is known as: (a) interest rate effect (b) International-Substitution effect (c) Consumption effect (d) Real Balance effect
24. If the economy is in an inflationary period, what action would Fiscal authority most likely take? (a) Decrease taxes (b) Decrease the discount rate (c) Increase government spending (d) Increase taxes
25. ....... is a process where Central Bank classifies borrowing into preferred and less preferred sectors of the economy (a) Selective ratio (b) Credit ceiling (c) Selective ratio (d) None
Macroeconomics
21. Open Market Operations, Reserve Ratio, Discount Rate and Stabilization Securities are …. (a) Qualitative measures of monetary policy (b) Quantitative measures of monetary policy (c) Fiscal policy measures (d) None of the above.
