Macroeconomics for business and government Essay

Macroeconomics for business and government - Essay Example This assignment is designed to test your knowledge about the basic terminology used in macroeconomics and your understanding of key macroeconomic concepts. It will also reinforce what is studied in modules 1, 2 and part of module 3. The assignment is made up two parts: part A and part B. The questions in Part A will be marked out of a maximum of 20 marks, and the questions in Part B will be marked out of a maximum of 30 marks in total. Part A This part comprises ten multiple choice questions each worth 2 marks. These questions are designed to test your knowledge of the course content. The questions in this section are typical of the kind of question that will be in part A of the examination paper. Q. 1 Policy makers can become concerned if the unemployment rate is too low because: Answer : B A. stock prices will fall. B. inflation might increase.- C. output will decrease. D. an exchange rate crisis might occur.. Q. 2 If nominal GDP rises from $10 trillion to $12 trillion, while the G DP deflator rises from 2.0 to 2.2, the percentage change in real GDP is: Answer: B A. -10% B. 10% C. 1.1% D. 9.1% E. 20% Q. 3 Which of the following events would cause a reduction in the size of the multiplier? Answer: D A. an increase in the marginal propensity to consume B. an increase in the marginal propensity to save C. a reduction in taxes D. a reduction in government spending E. none of the above Q. 4 Suppose the supply of money equals the demand for money. Given this information, we know that: Answer D A. the price of bonds will tend increase. B. the price of bonds will tend to fall. C. production equals demand. D. the goods market is also in equilibrium. - E. the supply of bonds also equals the demand for bonds. Q. 5 Suppose there is a simultaneous tax cut and open market sale of bonds. Which of the following must occur as a result of this? Answer : D A. Output increases. B. Output decreases. C. The interest rate increases. D. The interest rate decreases. E. Both output and the interest rate increase. Q. 6 The reservation wage is: Answer: C A. the wage that an employer must pay workers to reduce turnover to a reasonable level. B. the wage that ensures a laid-off individual will wait for re-hire, rather than find another job. C. the wage that would make an individual indifferent between working or not working.- D. the wage offer that will end a labour-strike. E. the bribe that must be paid to a maitre d' when you want a table but did not call in advance. Q. 7 Which of the following describe the rising distortionary effects of taxes in the economy: Answer : D A. the price-setting curve shifts downwards. B. the wage-setting curve shifts rightwards. C. an increase in the proportional tax wedge. D. an increase in the natural rate of unemployment. E. all of the above Q. 8 The aggregate demand curve will shift to the right when which of the following occurs? Answer : D A. a decrease in the money supply B. a reduction in consumer confidence C. a rise in the p rice level D. a decrease in taxes E. a decrease in the price level Q. 9 Which of the following represents the medium-run effect of an increase in the price target? Answer : D A. a decline in output B. an increase in the interest rate C. a decrease in the price level D. all of the above E. none of the above Q. 10 - When inflation has not been very persistent, we can expect that: Answer D A. expected price level for a given year will equal the previous year's actual price level. B. the current inflation rate will not depend heavily on past inflation. C. lower unemployment rates will be associated with higher inflation rates. D. all of the above - E. none of the above Part B Please answer each of the following questions using your own words. Use diagrams, tables or equations in your answer where appropriate. As a guide, you should be able to answer questions 11, 12 and 13 within 150 words (each question), and questions 14 and 15 within 250 words (each question), plus diagrams if approp riate (except where a question requires only a list or calculation). Note: