Macroeconomic Objectives and Policy Conflicts
109 questions· page 1 of 11
If prices increase in country X but stay the same in country Y, what will be the most likely impact on the internal and external value of money in country X?
Options
| internal value of money | external value of money | |
|---|---|---|
| A | falls | falls |
| B | falls | rises |
| C | rises | falls |
| D | rises | rises |
A country’s government decides to set artificially low interest rates.
What describes a negative consequence to this country of this policy?
Options
A a higher rate of consumer price inflation
B a rapid growth in gross domestic product
C an increase in investment by manufacturers and real estate developers
D a reduction in borrowing by consumers
A government increases its inflation rate target from 3% to 5%.
What is a likely reason for this?
Options
A to increase economic sustainability
B to increase saving
C to reduce a balance of payments deficit
D to reduce unemployment
What would be a macroeconomic policy objective for a government in a developed economy?
Options
A to improve sustainability
B to provide public goods
C to reduce the power of trade unions
D to subsidise the electricity supply industry
An economy is at its natural rate of unemployment.
Under which circumstances will an increase in government spending aimed at reducing unemployment be most likely to conflict with a government’s objective of low inflation?
Options
A if inflationary expectations are unchanged
B if inflationary expectations fall
C if labour productivity increases
D if labour supply increases
An economy imports a large proportion of its raw materials. Its exchange rate depreciates.
What is the impact on the external and internal value of money?
Options
| external value of money | internal value of money | |
|---|---|---|
| A | rises | rises |
| B | rises | falls |
| C | falls | rises |
| D | falls | falls |
In a closed economy, the central bank raises interest rates to reduce an increasing rate of inflation.
Which macroeconomic policy objective is this targeting?
Options
A a surplus on the current account of the balance of payments
B faster economic growth
C full employment
D stable prices
A government sets a target for the annual rate of inflation to be no more than 3%.
Which circumstances would make it difficult to achieve the target?
Options
A if devaluation of the currency leads to a trade surplus
B if interest rates are increased to control effective demand
C if the government increases its tax revenue
D if wage increases are kept in line with productivity
The central bank of a country decreases interest rates.
What are the likely consequences?
Options
| internal value of the currency | external value of the currency | |
|---|---|---|
| A | falls | falls |
| B | falls | rises |
| C | rises | falls |
| D | rises | rises |
A country's government decides to set artificially low interest rates.
What describes a negative consequence to this country of this policy?
Options
A a higher rate of consumer price inflation
B a rapid growth in gross domestic product
C an increase in investment by manufacturers and real estate developers
D a reduction in borrowing by consumers