Macroeconomics

Question 1

What is GDP?

Answer 1

Gross Domestic Product is the market value of all final goods and services produced in a country

Question 2

How is GDP measured?

Answer 2

Income Method

GDP=Total National Income
+Sales Taxes+Depreciation
+Net Foreign Factor Income
where:

Total National Income=Sum of all
wages, rent, interest, and profits

Sales Taxes=Consumer taxes
imposed by the government
on the sales of goods and
services

Depreciation=Cost allocated to a
tangible asset over its useful life

Net Foreign Factor Income=Difference
between the total income that a
country’s citizens and companies
generate in foreign countries,
versus the total income foreign
citizens and companies generate
in the domestic country
​

Expenditure Method

GDP=C+I+G+(X−M)

where:
C=Consumer spending on goods and services

I=Investor spending on business capital goods

G=Government spending on public goods and services

X=Net exports

M=imports
​

Question 3

What is included in measuring GDP?

Answer 3

Only the market value of final goods and services.

A final good or service is one that is purchased by its final user and is not included in the production of any other good or service.

An examples is a haircut purchased by a consumer or a computer by a business.

Question 4

What is excluded from measuring GDP?

Answer 4

Intermediate goods and services.

Example, Bakery - flour, not final good, used to produce final good.

Used goods and services.

GDP does not factor in goods and services produced in a different time period. If calculating GDP for 2022 we do not include goods produced in 2021.

If a product was purchased and sold months later in the same year we only count the goods when they were initially purchased, not resold (second hand).

Question 5

Nominal GDP v Real GDP

Answer 5

Nominal GDP assesses economic production in an economy but includes the current prices of goods and services in its calculation.

Real gross domestic product (real GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.

Real GDP is calculated by dividing nominal GDP by a GDP deflator.

Question 6

What are the limitations of GDP?

Answer 6

GDP does not factor in welfare or human well being

Question 7

Economic Growth - how can you measure economic growth?

Answer 7

Economic Growth is measured by calculating the percentage change in real GDP or the average growth rates or using the rule of 70 to calculate the number of years it will take for GDP to double.

Question 8

What is the Business Cycle?

Answer 8

a cycle or series of cycles of economic expansion and contraction

Question 9

What are the 4 phases of the business cycle?

Answer 9

expansion
peak
contraction
trough

Question 10

How does the business cycle effect inflation and unemployment?

Answer 10

Unemployment increases during business cycle recessions and decreases during business cycle expansions (recoveries).

Inflation decreases during recessions and increases during expansions (recoveries).

Question 11

What happens to economic growth if there is an increase in capital?

Question 12

What happens to economic growth if there is a technological change?

Answer 12

In economics, it is widely accepted that technology is the key driver of economic growth of countries, regions and cities.

Technological progress allows for the more efficient production of more and better goods and services, which is what prosperity depends on.

Question 13

How is total production in the economy measured?

a. as the market value of all final goods and services produced in the economy

b. as the total number of goods and services produced in the economy

c. as the total number of services produced in the economy

d. as the total number of goods produced in the economy

Answer 13

a. as the market value of all final goods and services produced in the economy

Question 14

When does ‘inflation’ occur?

a. when the value of money is rising

b. when the value of real GDP decreases

c. when the value of real GDP increases

d. when the general price level is rising

Answer 14

d. when the general price level is rising

Question 15

What happens when real GDP increases?

Answer 15

An increase in real GDP (i.e., economic growth) will cause an increase in average interest rates in an economy.

Question 16

What happens when real GDP decreases?

Answer 16

A decrease in real GDP (a recession) will cause a decrease in average interest rates in an economy.

Question 17

The interest-rate effect is described as an increase in the price level which:

a. raises the interest rate, thereby reducing government spending.

b. lowers the interest rate, thereby reducing government spending.

c. raises the interest rate, thereby reducing investment and consumption spending.

d. lowers the interest rate, thereby reducing investment and consumption spending.

Answer 17

c. raises the interest rate, thereby reducing investment and consumption spending.

Question 18

What is the interest rate effect?

Answer 18

The interest rate effect refers to the effect of an increase or decrease in aggregate demand in an economy due to changes in interest rates set by the central bank of a country. Interest rates have an inverse relationship with aggregate demand. When rates are high, demand is low and vice versa.

Question 19

If an economy is growing at a rate of 2.3% per year, how long will it take the economy to double in size?

a. 60 years

b. 43 years

c. 36 years

d. 30 years

Answer 19

d. 30 years

The rule of 70 states the number of years it takes an economy to double is 70 divided by the growth rate.

Question 20

During which of the following periods was global growth in GDP per capita the strongest?
a. Prior to 500 AD.

b. 500 AD to 1800 AD.

c. 1800-1900 AD.

d. 1900-2000 AD.

Answer 20

d. 1900-2000 AD.

Question 21

What is the rule of 70?

a. it takes an economy 70 years to double in size.

b. the number of years it takes an economy to double is 70 divided by the growth rate.

c. the number of years it takes an economy to double is the growth rate multiplied by 70.

d. the number of years it takes an economy to double is the growth rate divided by 70.

Answer 21

b. the number of years it takes an economy to double is 70 divided by the growth rate.

Question 22

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

a. Real GDP is falling.

b. Incomes are growing at a slower rate than the population.

c. Real GDP per capita is rising.

d. Living standards are falling.

Answer 22

c. Real GDP per capita is rising.

Question 23

What were the four main categories of spending identified by John Maynard Keynes (Keynesian economics)

Answer 23

Keynes argued that inadequate overall demand could lead to prolonged periods of high unemployment. An economy’s output of goods and services is the sum of four components: consumption, investment, government purchases, and net exports (the difference between what a country sells to and buys from foreign countries).

Question 24

For purposes of unemployment, how is a full-time student who is not working categorised?

a. not in the labour force

b. a discouraged worker

c. employed

d. unemployed

Answer 24

a. not in the labour force

Question 25

An example of an ‘intermediate good’ would be:

a. a new car.

b. a used car.

c. the tyres on a new car.

d. new tyres to replace old tyres on a used car.

Answer 25

c. the tyres on a new car.

Question 26

Which of the following is included in the gross domestic product for an economy in a given year?

a. The value of intermediate goods produced in that year.

b. The value of used goods sold in that year.

c. The value of final goods produced in that year.

d. All of the above would be included in the gross domestic product for an economy in a given year.

Answer 26

c. The value of final goods produced in that year.

Question 27

Which of the following is the most liquid asset?

a. a Monet painting

b. a government bond

c. a house

d. a demand deposit account

Answer 27

d. a demand deposit account

Question 28

Jill lost her job six months ago and she’s been actively looking for a new job ever since. How would the Australian Bureau of Statistics classify Jill?

Answer 28

c. unemployed

Question 29

Macroeconomics involves the economic issues of:

a. how the economy should organise resources within a particular industry.

b. how to generate full employment, price stability and maintain long-term economic growth.

c. how firms choose the prices they should charge for their products.

d. profit maximisation by firms.

Answer 29

b. how to generate full employment, price stability and maintain long-term economic growth.

Question 30

How are ‘intermediate goods’ treated in the calculation of GDP?

a. Their value is not counted separately, but included as part of the value of the final good of which they are an input.

b. Their value is counted separately, and their value is also included as part of the value of the final good of which they are an input.

c. They are included in the year that they are produced.

d. They are included only if they are imported.

Answer 30

a. Their value is not counted separately, but included as part of the value of the final good of which they are an input.

Question 31

The wealth effect occurs when the price level falls, causing the:

a. real value of household wealth to fall.

b. nominal value of household wealth to fall.

c. nominal value of household wealth to rise.

d. real value of household wealth to rise.

Answer 31

d. real value of household wealth to rise.

Question 32

What is the real wealth effect?

Answer 32

The intuition behind the real wealth effect is that when the price level decreases, it takes less money to buy goods and services.

The money you have is now worth more and you feel wealthier.

So, in response to a decrease in the price level, real GDP will increase.

Question 33

The aggregate demand curve shows the relationship between the ________ and ________.

a. inflation rate; quantity of real GDP demanded

b. real interest rate; quantity of real GDP supplied

c. nominal interest rate; quantity of real GDP demanded

d. price level; quantity of real GDP demanded

Answer 33

d. price level; quantity of real GDP demanded

Question 34

Which of the following is the best measure of the standard of living?

a. Nominal GDP for the whole economy.

b. Real GDP for the whole economy.

c. Nominal GDP per capita.

d. Real GDP per capita.

Answer 34

d. Real GDP per capita.

Question 35

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run, assuming ________ is constant.

a. total production; total income; real GDP

b. total spending; real GDP; total income

c. total spending; real GDP; the price level

d. total income; real GDP; the price level

Answer 35

c. total spending; real GDP; the price level

Question 36

what is the aggregate expenditure model?

Answer 36

The aggregate expenditure model, also known as the Keynesian cross diagram, was created by British economist John Maynard Keynes. The aggregate expenditure model centers around the short-run relationship between total spending and real GDP at a given price level

Question 37

A company named Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP?

a. The sale of a used door to a homeowner.

b. The sale of a new door to a homeowner.

c. The sale of a used door for installation into a new home.

d. The sale of a new door for installation into a new home.

Answer 37

b. The sale of a new door to a homeowner.

Question 38

‘Labour productivity’ is the quantity of:

a. output that can be produced in one hour by several workers.

b. labour produced in one hour in an economy.

c. output produced in one hour by one worker.

d. output produced in one hour by one machine.

Answer 38

c. output produced in one hour by one worker.

Question 39

‘GDP’ is:

a. the value of all final goods and services produced in a country during a given time period.

b. the sum of consumption, investment, government spending and net exports during a given time period.

c. the sum of the market value of final production, rather than the quantity of production, during a given time period.

d. All of these options are correct.

Answer 39

d.
All of these options are correct.

Question 40

In the long run, _________ differences in GDP per capita are the result of _______________differences in economic growth rates.

a. small; large

b. large; no

c. large; small

d. small; no

Answer 40

a.
small; large

Question 41

The only way the standard of living of the average person in a country can increase is by increasing ________ faster than ________.

a. production; population

b. income; population

c. population; production

d. population; income

Answer 41

a.
production; population

Question 42

What is a ‘final good‘?

a. a good not used as an input in the production process

b. a natural resource used to produce a good

c. a good purchased as an input in the production process

d. a good used in the production of another good

Answer 42

a.
a good not used as an input in the production process

Question 43

Gross domestic product in the economy is measured by the:

a.
total number of goods and services produced in the economy.

b.
market value of all final goods and services produced in the economy.

c.
total number of goods produced in the economy.

d.
total number of services produced in the economy.

Answer 43

b.
market value of all final goods and services produced in the economy.

Question 44

________ is considered a newly industrialised country, ________ a developing country, and ________ a high income country.

a.
Japan; Hong Kong; South Korea

b.
Malaysia; Malawi; Japan

c.
Canada; Singapore; Malawi

d.
Honduras; New Zealand; South Korea

Answer 44

b.
Malaysia; Malawi; Japan

Question 45

A truck that is produced in 2018 will not be sold until 2019. According to the definition of GDP, in which year’s GDP should it be counted?

a.
2019

b.
2018

c.
both years

d.
2018 real GDP; 2019 nominal GDP

Answer 45

b.
2018

Question 46

The ‘unemployment rate’ is the percentage of the:

a.
labour force receiving unemployment benefits.

b.
population that is unemployed.

c.
working-age population that is unemployed.

d.
labour force that is unemployed.

Answer 46

d.
labour force that is unemployed.

Question 47

In comparing China and Japan in terms of growth rates and standards of living, we find:

a.
life expectancy is longer in China than in Japan.

b.
GDP growth rates currently are higher in China, while the standard of living is lower.

c.
infant mortality is higher in Japan.

d.
life expectancy at birth is higher in China than in Japan.

Answer 47

b.
GDP growth rates currently are higher in China, while the standard of living is lower.

Question 48

A ‘transfer payment’ is a payment by the government to an individual for:

a.
a service, such as a payment to hospital nurses and school teachers.

b.
an investment good.

c.
a consumption good.

d.
which the government does not receive a good or service in return.

Answer 48

d.
which the government does not receive a good or service in return.

Question 49

What is a transfer payment?

Answer 49

A transfer payment is a payment of money for which there are no goods or services exchanged. Transfer payments commonly refer to efforts by local, state, and federal governments to redistribute money to those in need. In the U.S., Social Security and unemployment insurance are common types of transfer payments.

Question 50

Which of the following would not be considered a positive addition to household wealth?

a.
the equity that homeowners have in their own homes

b.
1000 shares in Qantas Airlines

c.
a credit card balance

d.
the balance in a savings account

Answer 50

c.
a credit card balance

Question 51

Consumption is $6 million, planned investment spending is $7 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $24 million, what unplanned changes in inventories occurred?

Select one:

a.
There was an unplanned decrease in inventories equal to $1 million.

b.
There was no unplanned change in inventories.

c.
There was an unplanned increase in inventories equal to $3 million.

d.
There was an unplanned decrease in inventories equal to $19 million.

Answer 51

a.
There was an unplanned decrease in inventories equal to $1 million.

GDP = C + G + I + NX

C = Consumption

G = government expenditures

I = represent an Investment

NX = Net exports

GDP = 24

C = 6

G = 10

I = 7

NX = 2

24 = 6 + 10 + 7 + 2 (25)

Question 52

The major difference between an open economy and a closed economy is that:

Select one:

a.
an open economy interacts with the rest of the world, a closed economy does not.

b.
a closed economy uses rules rather than discretionary policy, an open economy uses discretionary policy.

c.
an open economy is a market economy while a closed economy relies on central planning.

d.
a closed economy balances budgets, an open economy does not.

Answer 52

a.
an open economy interacts with the rest of the world, a closed economy does not.

Question 53

If GDP grows at a rate of 2.8% per year, approximately how long will it take for GDP to double in size?

Select one:

a.
12 years

b.
21 years

c.
23 years

d. 25 years

Answer 53

d.
25 years

The rule of 70

70/2.8 =25

Question 54

If GDP is currently $13 trillion and is growing at a rate of 2.6% per year, how long will it take GDP to reach $26 trillion?

a. about 15 years

b. about 17 years

c. about 27 years

d. about 30 years

Answer 54

c.
about 27 years

The rule of 70

70/2.6 =26.923

Question 55

‘Labour productivity’ will increase if the ________ increases and ________.

Select one:

a.
quantity of capital per hour worked; technological change occurs

b.
quantity of labour per unit of capital; technological change occurs

c.
quantity of capital per hour worked; immigration increases while capital is fixed

d.
quantity of labour per unit of capital; immigration increases while capital is fixed

Answer 55

a.
quantity of capital per hour worked; technological change occurs

Question 56

The formula for calculating the CPI is:

Select one:

a.
(Expenditures in the current year/Expenditures in the base year) × 100.

b.
(Expenditures in the current year × Expenditures in the base year)/100.

c.
(Expenditures in the base year/Expenditures in the current year).

d.
(Expenditures in the base year × 100)/(Expenditures in the current year).

Answer 56

a.
(Expenditures in the current year/Expenditures in the base year) × 100.

Question 57

The most widely used measure of inflation is based on which of the following price indices?

Select one:

a.
producer price index

b.
consumer price index

c.
GDP deflator

d.
wholesale price index

Answer 57

b.
consumer price index

Question 58

To calculate GDP using the value-added method, we add up:

Select one:

a.
the market value of final goods and services produced during a particular period.

b.
only the value added by the underground economy.

c.
the value added by each firm involved in the production of final goods and services.

d.
the market value of intermediate goods and services produced during a particular period.

Answer 58

c.
the value added by each firm involved in the production of final goods and services.

Question 59

If a country’s real GDP is rising by 4% per year while its population is rising at 3% per year, which of the following is true?

Select one:

a.
The country’s standard of living is falling.

b.
The country’s standard of living is rising.

c.
Growth in nominal GDP outweighs growth in the population.

d.
Growth in nominal GDP is less than the growth in the population.

Answer 59

b.
The country’s standard of living is rising.

Question 60

Which of the following is true of ‘discouraged workers’?

Select one:

a.
They are not considered part of the unemployed because they are not qualified to work.

b.
They are considered part of the unemployed because they are not working.

c.
They are considered part of the unemployed because they are still in the labour force.

d.
They are not considered part of the unemployed because they are not actively seeking work.

Answer 60

d.
They are not considered part of the unemployed because they are not actively seeking work.

Question 61

Which of the following describes the growth in real GDP per person in Australia from 1901 to 2016?

Select one:

a.
It has decreased more times than it has increased.

b.
It has increased by more than five times.

c.
It has doubled.

d.
Nominal GDP has increased but real GDP has slowly decreased.

Answer 61

b.
It has increased by more than five times.

Question 62

What is ‘human capital’?

Select one:

a.
A term used to describe the underground labour market.

b.
Manufactured goods that are used to produce other goods.

c.
Accumulated knowledge and skills acquired by a worker.

d.
The manager or owner of a business.

Answer 62

c.
Accumulated knowledge and skills acquired by a worker.

Question 63

What is the broadest measure of the price level which includes all final goods and services?

Select one:

a.
producer price index

b.
consumer price index

c.
wholesale price index

d.
GDP deflator

Answer 63

d.
GDP deflator

Question 64

What does the short-run aggregate supply curve show?

Select one:

a.
the relationship between the price level and the quantity of real GDP supplied

b.
the relationship between the unemployment rate and real GDP

c.
the desired level of national expenditure at different price levels

d.
the relationship between labour supplied and the average wage rate

Answer 64

a.
the relationship between the price level and the quantity of real GDP supplied

Question 65

When the capital stock per hour worked:

Select one:

a.
increases, labour productivity in increases.

b.
increases, labour productivity falls, as workers are being replaced with capital and machinery.

c.
decreases, labour productivity increases.

d.
increases, capital productivity increases.

Answer 65

a.
increases, labour productivity in increases.

Question 66

If a part-time worker becomes a full-time worker, the:

Select one:

a.
official unemployment rate will fall.

b.
official unemployment rate will not change.

c.
economy will move closer toward full employment.

d.
economy will move closer toward the natural rate of unemployment.

Answer 66

b.
official unemployment rate will not change.

Question 67

Refer to Table 6.1 for the following question.

Table 6.1

Country

GDP

(billions of dollars)

Population

(millions of people)

Sweden

3.85

9.05

Ireland

2.23

4.21

Refer to Table 6.1.Which country has a higher standard of living and why?

Select one:

a.
Sweden has a higher standard of living because their GDP is higher.

b.
Ireland has a higher standard of living because their GDP per capita is higher.

c.
Sweden has a higher standard of living because their GDP per capita is higher.

d.
Ireland has a higher standard of living because growth in GDP is greater in Ireland than in
Sweden.

Answer 67

b.
Ireland has a higher standard of living because their GDP per capita is higher.

Question 68

‘Inflation’ is an increase in the:

Select one:

a.
overall level of economic activity.

b.
rate of growth of GDP.

c.
average hourly wage rate.

d.
general price level in the economy.

Answer 68

d.
general price level in the economy.

Question 69

What is Expansionary fiscal policy?

Answer 69

Expansionary fiscal policy is when the government expands the money supply in the economy using budgetary tools to either increase spending or cut taxes—both of which provide consumers and businesses with more money to spend.

Question 70

What are examples of expansionary fiscal policy?

Answer 70

The two major examples of expansionary fiscal policy are tax cuts and increased government spending.

Both of these policies are intended to increase aggregate demand while contributing to deficits or drawing down budget surpluses.

Question 71

What is expansionary money policy?

Answer 71

An expansionary monetary policy is a type of macroeconomic monetary policy that aims to increase the rate of monetary expansion to stimulate the growth of a domestic economy.

The economic growth must be supported by additional money supply. The money injection boosts consumer spending, as well as increases capital investments by businesses.

Question 72

Examples of expansionary money policy

Answer 72

1. Lower the short-term interest rates

The adjustments to short-term interest rates are the main monetary policy tool for a central bank. Commercial banks can usually take out short-term loans from the central bank to meet their liquidity shortages. In return for the loans, the central bank charges a short-term interest rate. By decreasing the short-term interest rates, the central bank reduces the cost of borrowing to commercial banks.

Subsequently, the banks lower the interest rates they charge their consumers for loans. Therefore, whenever the central bank lowers interest rates, the money supply in the economy increases.

2. Reduce the reserve requirements
   Commercial banks are obliged to hold a minimum amount of reserves with a central bank. In order to increase the money supply, the central bank may reduce reserve requirements. In such a case, commercial banks would have extra funds to be lent out to their clients.
3. Expand open market operations (buy securities)
   The central bank may also use open market operations with government-issued securities to affect the money supply in the economy. It may decide to buy large amounts of the government-issued securities (e.g., government bonds) from institutional investors to inject additional cash into the domestic economy.

Question 73

What are the effects of expansionary monetary policy?

Answer 73

Effects of Expansionary Monetary Policy

Effects of an Expansionary Monetary Policy
An expansionary monetary policy can bring some fundamental changes to the economy. The following effects are the most common:

1. Stimulation of economic growth
   An expansionary monetary policy reduces the cost of borrowing. Therefore, consumers tend to spend more while businesses are encouraged to make larger capital investments.
2. Increased inflation
   The injection of additional money into the economy increases inflation levels. It can be both advantageous and disadvantageous to the economy. The excessive increase in the money supply may result in unsustainable inflation levels. On the other hand, the inflation increase may prevent possible deflation, which can be more damaging than reasonable inflation.
3. Currency devaluation
   The higher money supply reduces the value of the local currency. The devaluation is beneficial to the economy’s export ability because exports become cheaper and more attractive to foreign countries.
4. Decreased unemployment
   The stimulation of capital investments creates additional jobs in the economy. Therefore, an expansionary monetary policy generally reduces unemployment.

Question 74

What is the formula for GDP?

Answer 74

GDP = C + G + I + NX

C = Consumption

G = government expenditures

I = represent an Investment

NX = Net exports

Question 75

What is the formula for Unemployment rate?

Answer 75

Unemployment Rate= Total number of Unemployed / Total number of employed individuals.

Question 76

What is the formula for Real GDP?

Answer 76

Real GDP = GDP on Nominal Terms / Deflator of GDP.

Question 77

What is the formula for Consumer Price Index?

Answer 77

Consumer Price Index = Cost of products and Services for the Given Year/Cost of Products and Services for the Determined Base Year.

Question 78

How do you calculate Inflation?

Answer 78

Inflation Rate = (Changes in CPI levels/levels of CPI last year) x 100

Question 79

How do you calculate the Real Interest Rate?

Answer 79

Interest Rate in Nominal Terms – Rate of Anticipated Inflation

(1 + Nominal Rate) / (1 + rate of inflation) – 1

Question 80

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

a. consumption

b. planned investment

c. government purchases

d. transfer payments

Answer 80

d. transfer payments

Question 81

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

Question 82

During the expansion phase of the business cycle:

Select one:

a.
production increases.

b.
employment decreases.

c.
income decreases.

d.
unemployment increases.

Answer 82

a.
production increases.

Question 83

What happens during the contraction phase of the business cycle?

Select one:

a.
production increases

b.
unemployment increases

c.
income increases

d.
employment increases

Answer 83

b.
unemployment increases

Question 84

Which of the following accurately describes economic growth and standards of living from BC to 1300 AD?

Select one:

a.
Standards of living in 1300 AD were substantially better than what they were BC.

b.
Standards of living substantially declined from BC to 1300 AD.

c.
Significant economic growth took place from BC to 1300 AD.

d.
No sustained economic growth occurred from BC to 1300 AD.

Answer 84

d.
No sustained economic growth occurred from BC to 1300 AD.

Question 85

GDP in a country grew from $10 billion to $14 billion over the span of five years. The percentage change in GDP was:
Select one:

A.
7%.

B.
40%.

C.
10%.

D.
4%.

Answer 85

B.
40%.

Question 86

During which of the following periods was global growth in GDP per capita the strongest?
Select one:

A.
500 AD to 1800 AD.

B.
1900-2000 AD.

C.
1800-1900 AD.

D.
Prior to 500 AD.

Answer 86

B.
1900-2000 AD.

Question 87

Refer to Figure 6.1 for the following questions.

Figure 6.1

Suppose the economy gains more capital per hour worked and experiences technological change. This is shown in Figure 6.1 by the movement from:
Select one:

A.
A to E.

B.
A to B to C.

C.
A to D.

D.
E to B to D.

Answer 87

A to D.

Production function curve increases with greater hours work and greater capital per hours worked leading to an increased curve as opposed to a movement along the curve

Question 88

Refer to Figure 6.1 for the following questions.

Figure 6.1

In Figure 6.1, more capital per hour worked is shown by the movement from:
Select one:

A.
B to D.

B.
B to A.

C.
B to E.

D.
A to B.

Answer 88

A to B.

more capital per hour worked is a movement along the curve with an increase in capital per hour worked

Question 89

In the long run, a country will experience an increasing standard of living only if it experiences:
Select one:

A.
a high rate of consumption.

B.
a high rate of labour force growth.

C.
continuous technological change.

D.
a slow rate of population growth.

Answer 89

C.
continuous technological change.

Question 90

Which factors explain labour productivity?
Select one:

A.
Diminishing returns and the quantity of labour per hour.

B.
Diminishing returns and the quantity of capital per hour.

C.
Technological change and the quantity of labour per hour.

D.
Technological change and the quantity of capital per hour.

Answer 90

Technological change and the quantity of capital per hour.

Question 91

If there is a change in the ability of a firm to produce a given level of output with a given level of inputs, we say there is:
Select one:

A.
human capital investment.

B.
an increase in labour productivity.

C.
technological change.

D.
a movement along a given per-worker production function.

Answer 91

technological change.

Question 92

Refer to Figure 6.1 for the following questions.

Figure 6.1

The movement from A to E in Figure 6.1 illustrates:
Select one:

A.
diminishing returns to labour.

B.
negative technological change.

C.
zero returns to capital.

D.
a decline in capital per worker.

Answer 92

negative technological change.

A to E is a shift in the curve downward instead of movement along the curve.

The production curve is an increase in capital per hour worked and no movement in real GDP per hour worked.

Question 93

Refer to Figure 6.1 for the following questions.

Figure 6.1

Which of the following combination of points illustrates changes in the Soviet Union’s economy from 1950-1980, as illustrated in Figure 6.1?
Select one:

A.
E to B.

B.
A to B to C.

C.
B to E.

D.
B to D.

Answer 93

A to B to C.

There is a movement along the production curve with an increase in real GDP per hour worked and capital per hour worked.

Question 94

Lack of investment in strong education and health care systems:
Select one:

A.
causes a deterioration in human capital and a decline in labour productivity.

B.
causes a decline in physical capital and a decline in labour productivity.

C.
increases human capital and causes a decline in labour productivity.

D.
causes a deterioration in human capital and an increase in physical capital.

Answer 94

causes a deterioration in human capital and a decline in labour productivity.

Question 95

Which of the following countries had the lowest GDP per capita in 2008?
Select one:

A.
Somalia.

B.
New Zealand.

C.
Mexico.

D.
Brazil.

Answer 95

Somalia

Question 96

If a book, film, or piece of software was created today, for how long would Australian copyright law guarantee exclusive legal rights to the creator to use the creation?
Select one:

A.
The creator’s lifetime plus 70 years for the creator’s heirs.

B.
10 years.

C.
The creator’s lifetime plus 50 years for the creator’s heirs.

D.
20 years.

Answer 96

The creator’s lifetime plus 70 years for the creator’s heirs.

Question 97

Which of the following countries had low income in 1960 but grew the fastest between 1960 and 2012?
Select one:

A.
Argentina.

B.
Australia.

C.
Central African Republic.

D.
South Korea.

Answer 97

The correct answer is: South Korea.

Question 98

Which of the following is a reason why low income countries might experience economic growth?
Select one:

A.
The country fails to enforce a rule of law.

B.
The country has a high rate of saving and investment.

C.
The country has endured extended periods of war.

D.
The country suffers from poor health infrastructures.

Answer 98

The country has a high rate of saving and investment.

Question 99

Globalisation is positively associated with:
Select one:

A.
poverty.

B.
declining rates of investment.

C.
declining standards of living.

D.
economic growth.

Answer 99

economic growth.

Question 100

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics?

Economic growth

Health care costs

Inflation

Unemployment

Air pollution

Petrol prices

Answer 100

Economic growth -Macroeconomics

Health care costs - Microeconomics

Inflation -Macroeconomics

Unemployment -Macroeconomics

Air pollution -Microeconomics

Petrol prices -Microeconomics