cima cimapra17 ba1 1 practice test

If a government adopted a fiscal policy of cutting its budget deficit, the aggregate demand and
supply model shows that the result would be:

• A. a shift in the aggregate demand curve to the right, a fall in output and employment and a rise in the price level
• B. a shift in the aggregate demand curve to the left, a fall in output and employment and a fall in the price level
• C. a shift in the aggregate demand curve to the left, a fall in output and employment and a rise in the price level
• D. a shift in the aggregate demand curve to the right, a rise in output and employment and a rise in the price level

Which of the following is most likely to lead an economy to suffer high unemployment?

• A. Withdrawals exceeding injections
• B. Aggregate demand exceeding aggregate supply
• C. Injections exceeding withdrawals
• D. A fiscal deficit

Which one of the following would raise both national income and disposable income ?

• A. An increase in transfer payments
• B. A reduction in rates of personal income tax
• C. An increase in business profits
• D. A rise in the rates of personal income tax

In the aggregate supply and demand model, a significant rise in the cost of energy for industry would
lead to the

• A. Aggregate supply curve moving to the right
• B. Aggregate supply curve moving to the left
• C. Aggregate demand curve moving to the right
• D. Aggregate demand curve moving to the left

Part of a country's unemployment figures will consist of people moving between jobs. Which type of
unemployment is this?

• A. Structural unemployment
• B. Cyclical (or demand deficient) unemployment
• C. Frictional unemployment
• D. Real wage unemployment

All of the following are characteristics of a recession except which one?

• A. Rising levels of unemployment.
• B. Increased inflationary pressure.
• C. Improving trade balances.
• D. Increased government budget deficits.

Which of the following is the most likely cause of a demand deficient unemployment (or cyclical
unemployment)?

• A. A fall in domestic interest rates
• B. Significantly lower labor costs available in a developing country
• C. Improvement in the terms of trade
• D. Excess aggregate demand in the economy of a trading partner

Which of the following economic conditions is likely to lead to demand-pull inflation?

• A. An increase in interest rates and a rise in the world price of oil
• B. An increase in government spending and firms operating at full capacity
• C. Increased monopoly power in goods and labor markets
• D. A worsening balance of payments deficit and a rising exchange rate

Which ONE of the following would best indicate that economic growth is taking place?
An increase in:

• A. The economy's output gap
• B. Investment to make good wear and tear of the national capital stock
• C. Investment in human capital
• D. Gross domestic product sustained over a number of years

In a recession, the appropriate policy for a government seeking a recovery in the economy would be
to:

• A. cut public expenditure, reduce taxes, and lower interest rates
• B. raise public expenditure, reduce taxes and lower interest rates
• C. raise public expenditure, raise taxes and lower interest rates
• D. cut public expenditure, raise taxes and raise interest rates