Macroeconomic Policy Quiz

Which policy tool could help a government achieve its objective of low unemployment?

• A decrease in limits on bank lending

• A lower school leaving age

• An increase in income tax

• A revolution of exchange rate

A government wants to spend more on training the unemployed to reduce the unemployment rate and increase economic growth. It does not want to raise taxes to finance the extra expenditure and does not want to increase the money supply. Which source of borrowing should it use?

• Domestic commercial banks

• Foreign commercial banks

• Private individuals

• Its central bank

Which activity would increase economic growth but would not be sustainable?

• Cleaning up polluted rivers

• Deforestation

• Education

• Recycling

Which two government macroeconomic policy objectives are most likely to benefit from an income in aggregate demand?

• A decrease in cyclical unemployment and an increase in economic growth

• A decrease in import expenditure and a decrease in demand-pull inflation

• An increase in price stability and an increase in frictional unemployment

• An increase in exports and a decrease in cost-push inflation

A country's economic growth rate rises but so does its unemployment rate. What could explain this?

• A decrease in the rate of interest

• A decrease in the size of the labor force

• An increase in net exports

• An increase in productivity

A government has as its key macroeconomic objective that everyone shares in the benefits of economic growth?

• A decrease in the school leaving age

• A decrease in the unemployment rate

• An increase in income inequality

• An increase in the tax on basic necessities