A shortage occurs if the market price of a good is below the market equilibrium price.

Select one:

False

True

2. The income elasticity of demand for Coles Instant Coffee is most likely negative.

Select one:

False

True

3.Because a monopolist is a price maker they can control both the market price and market quantity.

Select one:

False

True

4. The investment (I) component of gross domestic product (GDP) includes the investment of purchasing Telstra shares in the stock market.

Select one:

True

False

5. Lower tax rates and lower interest rates are both examples of expansionary economic policy.

Select one:

True

False

Multiple choices:

1. Say an economy is producing on its production possibilities frontier (PPF) with a combination of 0 units of clothing and 100 units of food. This combination is an example of

Select one:

A. Allocative efficiency but probably not productive efficiency

B. Productive efficiency but probably not allocative efficiency

C. Neither productive efficiency or allocative efficiency

D. Both productive efficiency and allocative efficiency

2. Consider a perfectly competitive firm with an average total cost (ATC) of $26 and an average variable cost (AVC) of $18. If the market price is $16, then in the short run this firm should

Select one:

A. Shut down

B. Increase its market price to at least $26

C. Produce where price is equal to average total cost

D. Produce where marginal revenue is equal to marginal cost

3. An inflationary gap is consistent with

Select one:

A. High GDP growth, low unemployment and low inflation

B. High GDP growth, low unemployment and high inflation

C. Low GDP growth, low unemployment and low inflation

D. Low GDP growth, high unemployment and low inflation

4. Consider the aggregate demand/aggregate supply (AD/AS) model in the diagram below where AD₁and AS₁are the original curves, and AD₂and AS₂are the new curves. These changes would most likely be caused by a(n)

Select one:

A. Increase in consumption spending and a decrease in energy costs

B. Increase in consumption spending and an increase in energy costs

C. Decrease in government spending and an increase in wages

D. Decrease in net exports and an increase in business taxes

5. Consider an economy that is operating below full employment and with low inflation. Which of the following measures might the central bank take to restore full employment?

Select one:

A. Decrease the cash rate by buying government bonds

B. Increase the cash rate by selling government bonds

C. Increase the cash rate by buying government bonds

D. Decrease the cash rate by selling government bonds