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    Term 2 Possible Multiple Choice Questions 2

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    kurbonovshohjahon07
    A supply-side policy measure would be a reduction in the government's fiscal deficit (B). Country Y has the lower opportunity cost in producing rice (B). A combination of expansionary fiscal policy and contractionary monetary policy would be most successful at countering deflation (C). Country X has a comparative advantage in the production of rice over country Y when X has lower opportunity costs in producing rice than Y (A). Increasing government spending and reducing interest rates are expansionary economic policies (D). Country M should specialize in machine production and country N should specialize in textile production according to comparative advantage (B). Raising the minimum income level tax threshold is a supply-side policy (A). Managing changes in the

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    Term 2 Possible Multiple Choice Questions 2

    Uploaded by

    kurbonovshohjahon07
    39 views6 pages
    A supply-side policy measure would be a reduction in the government's fiscal deficit (B). Country Y has the lower opportunity cost in producing rice (B). A combination of expansionary fiscal policy and contractionary monetary policy would be most successful at countering deflation (C). Country X has a comparative advantage in the production of rice over country Y when X has lower opportunity costs in producing rice than Y (A). Increasing government spending and reducing interest rates are expansionary economic policies (D). Country M should specialize in machine production and country N should specialize in textile production according to comparative advantage (B). Raising the minimum income level tax threshold is a supply-side policy (A). Managing changes in the

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    TERM 2 POSSIBLE MULTIPLE CHOICE QUESTIONS 2

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    A supply-side policy measure would be a reduction in the government's fiscal deficit (B). Country Y has the lower opportunity cost in producing rice (B). A combination of expansionary fiscal policy and contractionary monetary policy would be most successful at countering deflation (C). Country X has a comparative advantage in the production of rice over country Y when X has lower opportunity costs in producing rice than Y (A). Increasing government spending and reducing interest rates are expansionary economic policies (D). Country M should specialize in machine production and country N should specialize in textile production according to comparative advantage (B). Raising the minimum income level tax threshold is a supply-side policy (A). Managing changes in the

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    39 views6 pages

    Term 2 Possible Multiple Choice Questions 2

    Uploaded by

    kurbonovshohjahon07
    A supply-side policy measure would be a reduction in the government's fiscal deficit (B). Country Y has the lower opportunity cost in producing rice (B). A combination of expansionary fiscal policy and contractionary monetary policy would be most successful at countering deflation (C). Country X has a comparative advantage in the production of rice over country Y when X has lower opportunity costs in producing rice than Y (A). Increasing government spending and reducing interest rates are expansionary economic policies (D). Country M should specialize in machine production and country N should specialize in textile production according to comparative advantage (B). Raising the minimum income level tax threshold is a supply-side policy (A). Managing changes in the

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    © All Rights Reserved
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    of 6

    1 What would be classified as a supply-side policy measure?

    A a law to reduce the power of trade unions

    B a reduction in the government’s fiscal deficit

    C an open market sale of securities

    D the imposition of a tariff on imported goods

    2 The table shows the output of rice and cotton for countries X and Y.

    Each country divides its resources equally between the


    production of rice and cotton.

    Based upon the law of comparative advantage, which statement is correct?

    A Country X has the higher opportunity cost in producing cotton.

    B Country Y has the lower opportunity cost in producing rice.

    C Country X should produce both goods as the opportunity cost is the same.

    D Country Y should produce both goods as it has an absolute advantage in both.

    3 A government uses monetary policy and fiscal policy to solve a problem of deflation.

    Which policy combination is likely to be the most successful?

    D
    4 The diagram shows the production possibility curves for two economies using all resources.
    Country X can produce 10 million cars or 20 million bicycles and country Y can produce 20 million
    cars or 40 million bicycles.

    Which statement is correct about country X and country Y according to the theory of comparative advantage?

    A Country X and country Y would not gain from free trade.

    B Country X has a lower opportunity cost ratio in producing cars and bicycles than country Y.

    C Country X has an absolute advantage over country Y in the production of both goods.

    D Country Y will have a faster rate of economic growth than country X.

    5 A government reduces the benefits that it pays to unemployed workers to increase the incentive to work.

    Which types of macroeconomic policies are being used?

    6 To counter deflation a central bank uses expansionary monetary policy. What is likely to result?

    A a higher cost of borrowing

    B a higher rate of inflation

    C an appreciation of the exchange rate

    D an increase in government debt


    7 In which circumstances will country X have a comparative advantage in the production of rice over country Y?

    A when X has lower opportunity costs in producing rice than Y

    B when X is in a customs union and Y is outside that union

    C when X uses dollars for trading and Y uses a different currency

    D when X uses more units of labour than Y to produce rice

    8 Which action might be part of an expansionary economic policy?

    A reducing the budget deficit

    B reducing the level of government spending

    C reducing the money supply

    D reducing the rate of interest

    9 Countries M and N produce the world supply of machines and textiles. The table shows what each country
    produces when it divides its resources equally between the two products.

    What should happen according to the principle of comparative advantage?

    A Country M should produce both machines and textiles.

    B Country M should specialise in the production of machines, country N should specialise in production of textiles.

    C Country M should specialise in the production of textiles, country N should specialise in production of machines.

    D Country N should produce both machines and textiles.


    10 To encourage people to work, a government increases the minimum income level at which people start to pay
    income tax.

    Which types of macroeconomic policy are being followed here?

    11 Monetary policy does not usually work immediately.


    Which time lag is likely to be the least concern to a government whose priority is a rapid domestic impact?

    A the time it takes for policymakers to recognise the cause of a problem

    B the time it takes for the economy to respond to the introduction of the policy

    C the time it takes for the foreign exchange rate to respond to the effect of the policy

    D the time it takes to put the chosen policy measure into place

    12 What is the best example of an expansionary supply-side policy?

    A the Argentinian central bank’s decision to cut the interest rate in 2018

    B the US president’s plan to cut income tax rates in 2017

    C the UK government’s plan to build 500 new schools by 2020

    D the Chinese government’s decision to devalue their currency by almost 7% in 2016


    13 The table shows the amount of good X or the amount of good Y that can be produced by country R and
    country T if each uses all of their resources.

    What can be concluded from the table?

    A Country R has an absolute advantage in producing good Y and a comparative advantage in producing good X.

    B Country R has an absolute advantage in producing good X and a comparative advantage in producing good Y.

    C Country T has an absolute advantage in producing good X and a comparative advantage in producing good Y.

    D Country T has an absolute advantage in producing good Y and a comparative advantage in producing good X.

    14 What would be increased by an expansionary fiscal policy?

    A budget deficit

    B exchange rate

    C money supply

    D rate of direct taxation

    15 The table indicates the factor inputs required to produce wheat and cars in countries X and Y

    What makes it possible for both countries to benefit from trade?

    A Country X has an absolute advantage in wheat and car production.

    B Country Y has an absolute advantage in wheat and car production.

    C Country Y has a comparative advantage in wheat production.

    D Opportunity cost of wheat and car production is the same between countries.
    16 A government adopts a more expansionary fiscal policy and a more deflationary monetary policy.

    Which combination of changes in policy instruments is consistent with this?

    17 Which action is classified as a fiscal policy measure?

    A fixing a currency to another country’s currency

    B managing changes in the level of government debt

    C providing guidance to industry and the public

    D tightening reserve asset requirements for financial institutions

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