Macro Economics Test

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Macro Economics Test

• This test consists of 10 questions designed to
  test your understanding of Macro Economics
• The links provide you with a choice of answer,
  along with explanations.

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Question 1.

• Which of the following is a Fiscal Policy?
• a. Increasing Interest Rates
• b. Increasing direct taxes
• c. Introducing Trade Union legislation

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Correct - Fiscal policy relates to Government
taxation and expenditure
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An example of monetary policy.
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An example of Supply Side policies
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Question 2.

• Which of the following is a direct tax?
• A. VAT
• B. Customs and excise duties
• C. Higher rate income tax

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Value added tax is an indirect tax - a tax on
income.
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Customs and excise duties are indirect taxes - a
tax on expenditure.
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Correct, direct taxes are taxes on income
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Question 3.

• Which of the following policies is likely to
  increase the value of the against the ?
• A. A reduction in income tax levels
• B. An increase in interest rates
• C. Switch from direct to indirect taxation

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This would probably increase imports therefore
reducing the value of the
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Correct. Demand for s would increase ( hot
money flows), therefore increasing value of
13
Likely to have no effect on value of
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Question 4.

• Which type of unemployment varies with
  fluctuations in economic activity?
• A. Cyclical
• B. Frictional
• C. Structural

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Frictional unemployment is job search
unemployment.
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Structural unemployment relates to changes in
technology or patterns of demand
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Well done! Cyclical unemployment results from
fluctuations in the economic cycle
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Question 5.

• Which of the following cause inflation?
• A. An increase in imports because of the
  increasing value of the on Forex markets.
• B. An increase in demand levels above the
  capacity of UK industry

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This is likely to lower the cost of imports and
therefore reduce inflationary pressure.
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Correct! In these circumstances firms can
increase prices, and maintain demand levels
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Question 6.

• A Which of the following is a cause of inflation?
• A. Fall in consumer confidence
• B. Increase in investment by firms
• C. Increase in firms costs

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Correct.
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Wrong.
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Wrong.
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Question 7.

• Which of the following defines supply side
  policies?
• A. The MPCs policy of controlling inflation
  through interest rates.
• B. Attempts to make the operation of the economy
  more efficient.

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Wrong, Monetary policy
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Correct. Supply side policies attempt to increase
aggregate supply in the economy, by making
labour, and all other markets operated more
efficiently
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Question 8.

• Which of the following is a government Macro
  economic objective?
• A. maintaining a stable exchange rate
• B. maintaining a low rate of crime
• C. maintaining stable and sustainable growth of
  GDP

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Wrong.The is allowed to float freely on the
Forex markets.
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Correct. This is one of the main macro economic
objectives along with, low rates of unemployment
and inflation, as well as balance on the Current
Account of Balance of Payments
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Wrong. A social objective
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Question 9.

• Which of the following are examples of monetary
  policy?
• 1. Controls on Bank lending
• 2. Changes in National Insurance rates
• 3. Controls on consumer credit
• A. 1 only B. all 3
• C. 1 and 3

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Wrong This is an example of monetary policy, but
not the only one given.
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Wrong. B is an example of Fiscal Policy.
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Correct. Both of these are examples of monetary
policy, but rarely now used.
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Question 10.

• For which of the following can fiscal policy be
  used?
• 1. Controlling demand in the economy
• 2. Controlling the budget deficit
• 3. Adjusting distribution of income and wealth
• A. 2 only
• B. 2 and 3
• C. All of the above

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True, but it is not the only one listed
.
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True, but look again
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Correct. Fiscal policy can and has been be used
for all three purposes.
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You have now completed the test. For further
more detailed revision please use the case
studies on the web site To exit the test just
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