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Question 1

Macroeconomics is concerned with:

a) The study of the behaviour of individual households and firms

b) The determination of the relative prices of particular goods and services

c) The knowledge and skills of workers in an economy

d) The study of the behaviour and performance of the economy as a whole

Question 2

The main objectives of macroeconomic policy are:

a) A high and stable level of employment

b) A low and stable rate of inflation

c) A stable and satisfactory rate of economic growth

d) All of the above

Question 3

Structural or mismatch unemployment arises...

a) When people find themselves temporarily between jobs in the labour market

b) Due to a deficiency of aggregate demand

c) When inflation is accelerating

d) When labour released from declining industries does not have the skills required to fill, or is not living in the location where there are, existing job vacancies

Question 4

The full costs of increased unemployment entail:

a) Loss of tax revenue for the authorities

b) Financial hardship experienced by the unemployed and their families

c) A range of potential social and political consequences

d) All of the above

Question 5

As inflation increases and becomes more volatile, resulting in greater uncertainty:

a) The price system becomes less efficient as a coordinating mechanism

b) Investment by firms is likely to increase

c) International competitiveness is likely to improve

d) Consumption by households is likely to increase

Question 6

When outflows to the unemployment pool are greater than inflows, the level of unemployment will:

a) Rise

b) Fall

c) Remain unchanged

d) Rise initially and then fall

Question 7

If the economy is operating at its full capacity or potential GDP, following a decline in business confidence:

a) Investment is likely to fall and unemployment is likely to increase

b) Investment and employment are likely to remain unchanged

c) Firms are likely to increase their investment in new plant and machinery

d) None of the above

Question 8

According to the original Phillips curve as unemployment falls:

a) Inflation decreases

b) Inflation remains unchanged

c) Inflation increases

d) Output falls

Question 9

The natural rate of unemployment can be reduced by:

a) Increasing aggregate demand via expansionary fiscal and monetary policies

b) Introducing various supply-side initiatives designed to improve the structure and functioning of the labour market

c) Increasing aggregate demand via expansionary fiscal and monetary policies, and Introducing various supply-side initiatives designed to improve the structure and functioning of the labour market

d) None of the above

Question 10

The UK's current inflation target is:

a) 1%

b) 1-2%

c) 2-3%

d) 2%

Oxford University Press, Online Resource Centre, Chapter 06.

Chapter 06

Instructions