ECO403 Quiz

Final goods and services" are those that are:


Select correct option:
Double counted in the calculation of GDP.
Sold to ultimate or final purchasers.
Produced outside the country.
Used in the production of other goods and services.



Flexible exchange rates have the benefit of:

Select correct option:
Changing as the price levels and interest rates between countries change.
Being under the full control of the government.
Making international transactions easier and cheaper.
None of the given options.



A government wishing to reduce the level of unemployment through the use of fiscal policy would be most likely to:

Select correct option:
Boost the money supply by relaxing credit controls.
Cut interest rates.
Increase the size of the budget deficit.
Encourage a depreciation of the exchange rate.



The short run consumption function has:

Select correct option:
Rising Average Propensity to Consume.
Falling Average Propensity to Consume.
Constant Average Propensity to Consume.
First rising then falling Average Propensity to Consume.



All models of aggregate supply predict:

Select correct option:

An upward-sloping SRAS curve.
A vertical LRAS curve.
That the actual level of output is equal to its natural rate in the long run.
All of the given options.


Okun’s law states a relationship between the GDP gap and the:

Select correct option:
Trade deficit.
Government budget deficit.
Actual and expected inflation rate.
Actual unemployment rate and the natural rate of unemployment.



A common misperception about inflation is that it reduces real wages; this is:

Select correct option:
True only in the short run.
True only in the Long run.
True only in Command economies.
None of the given options.



Which of the following is TRUE regarding Constant returns to scale?

Select correct option:

Output doubles when the amounts of all factor inputs double
Output remains constant over time
The marginal productivity of labor equals the marginal productivity of capital
The marginal products of capital and labor do not change


In a poor country:

Select correct option:


The supply of capital is low.
The demand for capital is low.
Both the supply of and demand for capital are low.
None of the given options.


Trade restrictions have no effect on income under floating exchange rates because:

Select correct option:

Net exports increase but investment decreases.
The exchange rate rises to offset the initial increase in net exports.
The fall in imports equals the rise in exports.
All of the given optio