Macroeconomics Answers

To boost economic growth the government is most likely to...
1.reduce personal income tax.
2.increase taxes.
3.provide incentives to save (e.g; tax-free investment)
4.increase minimum wages in the private sector.

Which of the following indicators will most likely increase as a result of the increase in the U.S. poverty rate?

Life expectancy


Income polarization


Wealth mobility


Employment rate

Inflation is likely to...
1.reduce the cost of living.
2.raise the standard of living.
3.reduce the purchasing power of a currency.
4.increase the purchasing power of a currency.

Unemployment can decrease if...
1.there is an economic recession.
2.education system improves.
3.investment spending increase.
4.aggregate demand decrease.

To be counted into the pool of unemployment, a person must be:
1.any age 15 years.
2.discouraged work seeker
3.economically active.
4.hired and looking for a second job.

A. Which of the following best describe economic growth

1. An increase in real GDP per capita over time, where GDP per capita is real output divided by population
2. An increase in the value of final goods and services produced within the borders of the country in a one year period
3. A sustained increase in nominal GDP occurring over time
4. An absolute change of real GDP or real GDP per capita over time

B. In the AD-AS model, an expansionary fiscal policy may lead to a.......

1. Rightward shift of aggregate demand and demand-pull inflation
2. Leftward shift of aggregate demand and demand-pull inflation
3. Rightward shift of aggregate supply and cost-push inflation
4. Leftward shift of aggregate supply and cost-push inflation

A. The original Phillips curve......

1. Indicate the inverse relationship between the inflation rate and the unemployment rate
2. Illustrate the positive relationship between the inflation rate and unemployment rate
3. Shows the phenomenon of stagflation
4. Shifts to the right when aggregate demand increases

B. To reduce structural unemployment in South Africa, the government should....

1. Take steps to reduce population growth
2. Apply stricter immigration control
3. Raise taxes and increase government spending to boost aggregate demand
4. Make education and training available to everyone who is willing to improve their skills

The cost of production in South African economy accelerated, due to rising prices of electricity and petrol in the country, which led to an increase in the prices of domestic goods and services relative to foreign goods and services. This will likely to a (n).........

1. Increase in the net export and aggregate spending in the SA economy
2. Increase in the demand of South African goods by foreign countries
3. Increase in the quantity of goods and services demanded in the SA economy
4. Decrease in the quantity of goods and services demanded in the SA economy

B. If the government decides to increase personal income tax to raise its tax revenue, what will be the impact on the economy?

1. Both the price level and the equilibrium level of real output will decrease
2. Both aggregate demand and aggregate supply will increase
3. Price level will increase, and total production will decrease
4. Price level will decrease, total production will increase

In the classical model of the labour market, involuntary unemployment will increase if:

Explain the process of multipler in a two sector economy using suitable diagram.