Unit 3.2/1

Using the following data for country A, what is the level of aggregate demand?

$Bn G = 250; C = 520; X = 120; I = 410; M = 180

• $1300B

• $1180B

• $1480B

• $1120B

Which of the following is not true about consumption expenditure?

• It often accounts for about 70% of total expenditure in an economy

• It is positively related to household income

• It is an injection into the circular flow of income

• It is total household spending on final goods and services

Which of the following is the best definition of an Interest rate?

• The net difference between the reward for saving money and the cost of borrowing money

• The cost of borrowing money from lenders

• The reward for saving money in a bank

• The reward for saving money and the cost of borrowing money

Which of the following is unlikely to increase investment?

• Fall in the Purchasing Managers Index

• A breakthrough in new technology in an industry

• Increase in corporate profits

• Central bank cutting base interest rates

Which of the following is not true about government expenditure?

• Wages of doctors, teachers & police are part of current expenditure

• Grants paid to business located in declining region is a current expenditure

• A significant road-building program by the government is capital expenditure

• Unemployment benefit is transfer expenditure

Using the following data for country X, which of the following is true?($Bn) G = 200; T = 150; National debt = 800; GDP 2000

• Country X has a budget surplus

• Country X’s budget deficit as a 2.5% of GDP

• Country X’s national debt is falling

• Country X’s national debt is 60% of GDP

Which of the following is most likely to cause an increase in the value of net exports of Country Y?

• Fall in Country Y’s exchange rate

• Fall in the value of exports of Country Y

• Rise in Country Y’s exchange rate

• Rise in the value of imports into Country Y

Which of the following is the most likely to cause a fall in AD to AD1 in Country B?

• A decrease in government transfer expenditure in Country B

• A decrease in tax in Country B

• A depreciation in Country B's currency

• A decrease in interest rates in Country B

Which of the following is most likely to cause Aggregate Demand in Country X to fall?

• A fall in the value of Country X's currency 

• A fall in direct tax in Country X

• A fall in consumer confidence in Country X

• A fall in the base interest rate set by Country X’s central bank

A fall in the base interest rate set by Country X’s central bank

• There is a positive relationship between consumption expenditure and household income

• Country B is in the recession phase of the business cycle

• Household real incomes are increasing

• All consumers are saving some of their income