1:Which of the following about inflation is NOT true?

With an unexpectedly high inflation rate, retirees get lower pensions.

A low inflation rate band helps reduce volatility.

Governments gain from higher inflation rate.

With an unexpectedly low inflation rate, lenders lose and borrowers win.

2Suppose the economy is currently in the expansionary stage of the business cycle. Which policy could the Government adopt to bring the economy back towards long run equilibrium?

Decrease income tax rates for all workers.

Increase the cash rate by 25 basis points.

Delay planned construction projects.

Decrease taxes on cigarettes.

3Consider in a work contract employers promise that nominal wages of employees are going to increase by 2% - 3% per year. What does this imply?

Real wages of employees are expected to increase by 2% - 3% per year.

The inflation rate is expected to increase by 2% - 3% per year.

Employees' purchasing power is expected to increase by 2% - 3% per year.

It means nothing.

4Which of the disadvantages of fiscal policy is NOT true?

Fiscal policy could take significant processing time to get approved.

Fiscal policy sometimes over-corrects the economy.

Fiscal policy could create a government budget deficit.

Fiscal policy has an economy-wide impact and does not account for the fact that economic situations differ from states.

5If nominal GDP rises we can conclude that

prices have risen and production remains constant.

production has risen and prices remain constant.

production has risen or prices have risen, or both have risen.

prices have fallen and production has risen.

6In 2009, in response to the global financial crisis, the Labor Government handed out $900 cheques to almost all Australian tax-payers. This was an example of

Keynesian policy in action, aimed at speeding recovery through boosting demand.

Keynesian policy in action, aimed at speeding recovery through boosting supply.

Hayekian policy in action, aimed at speeding recovery through boosting demand.

Hayekian policy in action, aimed at speeding recovery through boosting supply.