1.One goal of monetary policy (according to the Reserve Bank Act (1959)) is:

Select one:

a.maintaining a strong exchange rate for the dollar relative to other currencies.

b.a high rate of unemployment.

c.price stability.

d.a high rate of employment.

2.If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?

Select one:

a.Inventories will decline and GDP and employment will decline.

b.Inventories will rise and GDP and employment will decline.

c.Inventories will decline and GDP and employment will rise.

d.Inventories will rise and GDP and employment will rise.

3.If banks do not loan out all their excess reserves, then the real world multiplier is:

Select one:

a.smaller than 1/RR.

b.larger than 1/RR.

c.equal to 1/RR.

d.not related to 1/RR.

4.In the dynamic aggregate demand and aggregate supply model, the rate of inflation will decrease if:

Select one:

a.AD shifts faster than AS.

b.AS shifts slower than AD.

c.AS shifts faster than AD.

d.the price level falls.

5.Which of the following is considered a 'supply shock'?

Select one:

a.the increasing investment in the economy causing the capital stock to rise

b.an unexpected large increase in the price of natural gas

c.a decline in wages

d.an improvement in technology

6.Which of the following leads to an increase in real GDP?

Select one:

a.A decrease in government spending.

b.An increase in the inflation rate in other countries, relative to the inflation in Australia.

c.An increase in interest rates.

d.Households have increasingly pessimistic expectations about future income.

7.The wealth effect occurs when the price level falls, causing the:

Select one:

a.real value of household wealth to fall.

b.nominal value of household wealth to fall.

c.nominal value of household wealth to rise.

d.real value of household wealth to rise.

8.Which of the following is an 'asset' of a bank?

Select one:

a.deposits

b.short-term borrowing

c.long-term debt

d.loans

9.In the dynamic aggregate demand and aggregate supply model, the rate of inflation will increase if:

Select one:

a.AD shifts faster than AS.

b.AD shifts slower than AS.

c.AS shifts faster than AD.

d.the price level rises.

10.'Monetary policy' targets the:

Select one:

a.long-term real rate of interest.

b.long-term nominal rate of interest.

c.short-term real rate of interest.

d.short-term nominal rate of interest.