Chapter 3

In an economic environment of high price inflation, those who owe money will gain and those who are owed money will lose. Is this statement true or false?

• T

• F

‘Equilibrium’ is the selling price above which the number of units demanded by the market starts to decline. 

• T

• F

Rapid economic growth may lead to increased demand for imports. Is this statement TRUE or FALSE? 

• T

• F

An increasingly high rate of unemployment of country A may lead to a decrease in government spending on social security

• T

• F

Which of the following is a typical macroeconomic policy objective of governments?

• 1. Economic growth

• 1. Money supply management 

Frictional unemployment is caused by changes in the skills required by the economy. 

• T

• F

Which of the following is NOT an element of fiscal policy? 

• 1. Government spending 

• Government borrowing

• Taxation

• Exchange rates

Which of the following is the name given to unemployment which is the result of aggregate demand in the economy being too small to create employment opportunities for all those willing, and able, to work? 

• 1. Structural unemployment 

• Cyclical unemployment (Demand deficient)

• Frictional unemployment

• Real wage unemployment

Increases in unemployment, reduced demand, falling household incomes and low business confidence and investment are associated most strongly with which of the following?

• 1. High interest rates 

• 2. Increase in the money supply. 

• 1.  

  2. A budget deficit 

• 2. Recession 

Which word correctly completes this statement? “………. taxes are collected by the Revenue authority from a business, which attempts to pass on the tax to consumers in the price of goods.” Choose the correct word. 

• Direct

• Indirect

• Progressive