MACROECONOMICS (MULTIPLE CHOICE)

1. Study the diagram below and answer the question. A = C+1 C C+i Yo Y1 Which one of the following statements is false? A Y1 represents the equilibrium level of income. B The curve labelled A = C + I shows the total of consumption and investment spending. C The curve labelled C shows the total of autonomous and induced consumption spending. The point labelled D shows where savings equal investment. 2. In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregate production of income by Y. Which one of the following statements is incorrect? A When A is greater than Y, there is disequilibrium and Y will tend to increase. When A is equal to Y, there is equilibrium and Y will remain unchanged. When A is less than Y, there is disequilibrium and Y will decrease. D When A is greater than Y, there is disequilibrium and A will decrease. 3. Simon borrowed R10 000 from the bank at the end of 2011 at a fixed interest rate of 20%. At the end of 2012, the inflation rate was 25%. Inflation has been to Simon; the real value of his loan plus interest payments changed to A Beneficial; R9 600 Beneficial; R4 800 Beneficial; R8 000 D Costly; R12 500 4. Which one of the following statements is INCORRECT? A Keynesian economists believe that the business cycle is caused by external factors, such as government interference in the economy. B Classical economists believe that market economies are inherently stable and fluctuations are ascribed to exogenous factors. C Classical economists believe that government should not intervene in the economy to try to smooth out the business cycle. D Structuralist economists believe that the market system is neither inherently stable nor systematically unstable.5. Consider the case of two countries, Afghanistan and the US, both producing carpets and fighter aircraft. The table below shows output rates per day in the two countries if all resources are fully and efficiently employed. Use this information to answer the question. Carpets Fighter aircraft Afghanistan 100 4 US 500 25 An appropriate international exchange ratio that would allow mutually advantageous trade to take place would be: A 1 aircraft = 25 carpets. B 1 aircraft = 20 carpets. C 1 carpet = 4 aircrafts 1 aircraft = 22 carpets. 6. The demand for money arises out of the need to hold money as a medium of exchange. This demand for money is a function of A Precautionary; interest rates B Transactions; national income C Speculative; interest rates D Precautionary; national income 7. As the interest rate the opportunity cost of holding money and individuals choose to hold money. A increases, increases, more B decreases, decreases, more C increases, decreases, less D decreases, increases, more 9. Use the information given in the table below to answer the question United States South Africa Computers 3 Shoes 6 pairs 3 pairs Which country or countries have an absolute advantage and comparative advantage in shoes? A South Africa has an absolute and comparative advantage in shoes. B The United States has an absolute and comparative advantage in shoes. C The United States has a comparative advantage and South Africa has an absolute advantage in shoes. D South Africa has a comparative advantage and the United States has an absolute advantage in shoes. 10. When aggregate planned expenditure is less than GDP, there is an unintended In inventories, firm's. production and GDP begins to A Decrease, increase, increase B Increase, decrease, decrease C Increase, decrease, increase D Decrease, increase, decrease