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ECON1002 ln-semester Test

This is a previewof the pubIished version of the quiz.

Started:sep 2 at 11:21

Question 1 1 pts

Consider a hypothetical economy producing and consuming only hamburgers. In this economy, the amount of money in this economy equals $200 and only 50 hamburgers are produced and sold for $4 each. Assuming a constant velocity of circulation, what would happen to the price of hamburgers if the amount of money increases to S400, other things equal?

Hamburger price will double.

Hamburger price will remain constant.

Hamburger price will increase to $10.

Hamburger price will fall as there are money available.

Question 2 1 pts

'Crowding out' by government spending implies that

households consume less as they become more pessimistic

private sector investment decreases due to an increase in government borrowing

some people cannot find jobs due to an increase in government debt

private sector investment and consumption decrease as the government size increases

Question 3 1 pts

Data for an economy shows that the unemployment rate is 5%, the participation rate is 60%, and 20 million people 15 years or older are not in the labour force. How many people are unemployed this economy?

1.8 million

1.5 million

1.2 million

0.6 million

Question 4 1 pts

GDP understates economic activity because:

Public goods and services are not included

It uses market prices to value output

It does not include non-market economic activity

The value of intermediate goods and services are not included

Question 5 1 pts

If household saving decreases by $4 million, business saving increases by $4 million and the government budget deficit decreasesby $4 million, then private saving and public saving .

does not change; decreases

increases; increases

increases; decreases

does not change; increases

Question 6 1 pts

If the inflation rate is 2% then the real interest rate cannot be less than:

2%

1%

0%

-2%

Question 7 1 pts

Suppose that a country experiencing deflation decides to set the nominal interest at zero. We can then infer tha

treal interest rate equals the nominal interest rate

real interest rate is negative

real interest rate can be greater or less than the nominal interest rate

real interest rate is positive

Question 8 1 pts

Suppose the income tax schedule in Australia is:

Income Tax on this income

0-$20,000                  None

$20,000 and above     30 cents per dollar of income over $20,000

Your income in 2022 was $30,000.  Inflation between 2022 and 2023 is 10% and your pre-tax income rises between 2022 and 2023 at the inflation rate.

Your after-tax income increases by more than 10%

Your after-tax income increases by 10%

Your after-tax income increases by less than 10%

Your after-tax income is unchanged.

Question 9 1 pts

Suppose the overnight cash rate is above the Reserve Bank's target. The Reserve Bank should respond by:

increasing its purchase of financial assets, putting the exchange settlement accounts into a deficit position that contracts lending on the overnight market

decreasing its purchase of financial assets, putting the exchange settlement accounts into a surplus position that expands lending on the overnight market

increasing its purchase of financial assets, putting the exchange settlement accounts into a surplus position that expands lending on the overnight market

decreasing its purchase of financial assets, putting the exchange settlement accounts into a deficit position that contracts lending on the overnight market

Question 10 1 pts

Suppose there an unexpected increase in inflation. Then:

Borrowers and lenders are worse off by the same amount

There is a redistribution from borrowers to lenders

Borrowers and lenders are better off by the same amount

There is a redistribution from lenders to borrowers

Question 11 1 pts

Suppose unemployment benefits in 2022 are equal to $300 per week. If unemployment benefits are indexed to inflation andinflation between 2022 and 2023 if 5% then the change in unemployment benefits between 2022 and 2023 is:

$5

None of the other answers

$15

$0

Question 12 1 pts

The demand and supply of labour in a certain industry are described by the following equations: Nd =400-2w and Ns =240+2w, where Nis the number of workers emplovers want to hire, and N is the number of people willing to work.  Both labourdemand and labour supply depend on the real wage w, which is measured in dollars per day.  Suppose that government hasdecided to impose a minimum wage at $50 per day.  What will be the resulting change in (un)employment?

The employment will decrease by 40 while unemployment will increase by 40.

The employment will decrease by 300 while unemployment will increase by 344.

There will be no change in employment or unemployment as the minimum wage is not high enough to change demand and supply.

The employment will decrease by 20 while unemployment will increase by 40.

Question 13 1 pts

The government debt measured as a fraction of GDP will fall, other things equal,

all of the others lead to a fall

the higher the growth rate of GDP

the higher the primary surplus

the higher the inflation rate