1, An decrease in the cash rate target by the Reserve Bank of Australia will:

Select one:

a.lead to a decline in investment as firms are discouraged to borrow

b.lead to an increase in other interest rates in the economy

c.lead to an increase in consumer spending as opportunity cost of spending is lower

d.slow down the economy

2, The demand of loanable funds curve is downward sloping as:

Select one:

a.a fall in interest rates encourages people to borrow more

b.a rise in interest rates encourages people to borrow more

c.a fall in interest rates encourages people to save less

d.a rise in interest rates encourages people to save more

3, If a country has negative net exports, then you can conclude that:

Select one:

a.

the country's trade balance is neither in surplus nor in deficit.

b.

None of the other options are correct

c.

the country's tariffs are too high.

d.

the country's citizens prefer domestic goods to foreign goods.

4, The long run aggregate supply curve

a.implies zero unemployment.

b.depends on technology and the resources available in the economy.

c.responds to changes in the inflation rate.

d.can be shifted through government spending.

5, Assume that the wage in the labour market is at the equilibrium level, and then for some reason it decreases below the equilibrium level. We can expect:

Select one:

a.

the labour force participation rate to rise.

b.

there will be a shortage of workers

c.

None of the other options are correct

d.

the unemployment rate to fall.

6, In times of recession, policymakers can:

Select one:

a.increase government spending, raise taxes and reduce the money supply

b.decrease government spending, raise taxes and expand the money supply

c.increase government spending, reduce taxes and reduce the money supply

d.increase government spending, reduce taxes and/or expand the money supply

7, Assume that Australia and the US only produce and consume wheat. The nominal exchange rate is US$0.80 per Australian dollar, the price of wheat in Australia is AUD800 per tonne and the price of wheat in the US is USD400 per tonne. This implies that the Australian real exchange rate:

Select one:

a.does not deviate from the law of one price

b.is in line with the Purchasing Power Parity theory

c.less than 1

d.all of the other options are correct

8, An economy is described by the following labour market data: the adult population is 1000, there are 80 people unemployed and 720 employed. What is the rate of unemployment?

Select one:

a.8%

b.20%

c.10%

d.None of the other options are correct