Started on Sunday, 7 October 2018, 7:49 AM

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Completed on Sunday, 7 October 2018, 8:13 AM
Time taken 24 mins 26 secs
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Question 1
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The multiplier effect on real GDP occurs because

Select one:

a. of income taxes.

b. of recessionary or inflationary gap.

c. changes in price levels affect our willingness to invest, consume, import and export.

d. an autonomous change in expenditure causes an induced change in consumption

expenditure.

e. of government stabilisation policies.

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Your answer is correct.

The correct answer is: an autonomous change in expenditure causes an induced change in
consumption expenditure.

Question 2
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Consumer confidence in the economy rises and, as a result, real GDP increases above
potential GDP. To move real GDP back to potential GDP, the Reserve Bank should

Select one:

a. raise the cash rate.

b. decrease the government's budget deficit.

c. lower the cash rate.

d. cut the income tax rate.

e. increase the government's budget deficit.

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Your answer is correct.

The correct answer is: raise the cash rate.

Question 3
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Disposable income is computed as

Select one:

a. nominal total income divided by the price level.

b. income plus transfer payments minus savings.

c. income minus household saving.

d. income minus taxes plus transfer payments.

e. all the above.

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Your answer is correct.

The correct answer is: income minus taxes plus transfer payments.
Question 4
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In an AS/AD model, reducing the short term interest rate initially shifts the

Select one:

a. long-run AS curve leftward.

b. AD curve rightward.

c. AD curve leftward.

d. long-run AS curve rightward.

e. demand for money curve upwards.

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Your answer is correct.

The correct answer is: AD curve rightward.

Question 5
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In the Keynesian model of aggregate expenditure, real GDP is determined by the

Select one:

a. level of taxes.
b. level of aggregate demand.

c. level of long run supply.

d. price level.

e. none of the above.

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The correct answer is: level of aggregate demand.

Question 6
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The marginal propensity to save is best defined as

Select one:

a. total saving divided by the change in disposable income.

b. nominal savings adjusted for taxes.

c. total saving divided by gross disposable income.

d. the change in saving divided by the change in consumption expenditure.

e. the change in saving divided by the change in disposable income.

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The correct answer is: the change in saving divided by the change in disposable income.

Question 7
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The multiplier effect exists because a change in autonomous spending

Select one:

a. leads to changes in income, which generate further spending.

b. leaves the economy in the form of imports.

c. prompts further exports.

d. will undergo its complete effect in one round.

e. all of the above are correct.

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Your answer is correct.

The correct answer is: leads to changes in income, which generate further spending.

Question 8
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The marginal propensity to import indicates the relationship between changes in imports
and changes in

Select one:

a. next exports.

b. consumption expenditure.

c. nominal exports.

d. real GDP.
e. net investment spending.

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The correct answer is: real GDP.

Question 9
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Which of the following makes the multiplier larger?

Select one:

a. An increase in the marginal propensity to save.

b. An increase in the tax rate.

c. An increase in the marginal propensity to import.

d. An increase in the marginal propensity to consume.

e. All of the above.

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Your answer is correct.

The correct answer is: An increase in the marginal propensity to consume.

Question 10
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One feature of automatic fiscal policy is that it

Select one:

a. is never implemented in developing economies.

b. automatically produces surpluses during recessions and deficits during inflation.

c. requires no legislative action by government to be made effective.

d. reduces the size of the government debt during times of recession.

e. has no influence on unemployment.

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Your answer is correct.

The correct answer is: requires no legislative action by government to be made effectiv e.

Question 11
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The Keynesian model of aggregate expenditure is based on the assumption that

Select one:

a. both individual firms' prices and the price level are fixed.

b. both individual firms' prices and the price level are volatile.

c. individual firms' prices are flexible but the price level is fixed.

d. induced expenditure does not influence price level

e. individual firms' prices are fixed but the price level is flexible.

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The correct answer is: both individual firms' prices and the price level are fixed.

Question 12
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The Laffer curve describes the relationship between

Select one:

a. tax rates and tax revenue.

b. tax rates and nominal expenditure.

c. government purchases and potential GDP.

d. tax revenue and potential GDP.

e. tax rates and direct tax revenue.

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The correct answer is: tax rates and tax revenue.

Question 13
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If prices are fixed, an increase in aggregate expenditures results in an increase in

equilibrium GDP that

Select one:

a. is greater than the change in aggregate expenditure.

b. has no necessary relationship to the size of the change in aggregate expenditure.

c. is less than the change in aggregate expenditure.

d. is equal to the change in aggregate expenditure.

e. none of the above are true.

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Your answer is correct.
The correct answer is: is greater than the change in aggregate expenditure.

Question 14
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In the short-run, reducing the cash rate will shift the ________ and ________ real GDP.

Select one:

a. aggregate demand curve leftward; increase

b. aggregate demand curve rightward; increase

c. aggregate supply curve leftward; decrease

d. aggregate demand curve leftward; decrease

e. aggregate supply curve rightward; increase

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The correct answer is: aggregate demand curve rightward; increase

Question 15
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The Reserve Bank fights inflation via open market operations, the supply of loanable funds
curve shifts ________ and the aggregate demand curve shifts ________.

Select one:

a. leftward; rightward

b. leftward; leftward
c. rightward;leftward

d. rightward; rightward

e. rightward; leftward

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Your answer is correct.

The correct answer is: leftward; leftward