Q1

Nominal values are measured in ________ and real values take account of ________.

a.inflation current prices b.banks exchange rates c.current prices inflation d.cash utility

Q2

When unanticipated inflation occurs regularly, the degree of risk associated with investments in the economy

a.remains stable.

b.increases.

c.falls to zero.

d.decreases.

Q3

The record of a country's transactions in goods, services, and assets with the rest of the world is its

Select one:

a. a balance of trade

b.capital account.

c.current account.

d.balance of payments.

Q4Under a system of floating exchange rates, if the quantity of pounds demanded is less than the quantity of pounds supplied

a.the price of a pound will increase.

b.the government will always decrease the supply of money to eliminate the excess supply.

c.the price of a pound will not change.

d.the price of a pound will decrease.

Q5

The major lesson of the circular flow diagram is that

a.taxes must equal government expenditures.

b.saving must always equal investment.

c.one person's expenditure is someone else's receipt.

d.all of the above.

Q6.

Gross domestic product is

a. a nation's total product minus what is required to maintain the value of its capital stock.

b. the total market value of all final goods and services produced within a given period by factors of production owned by a country's citizens regardless of where output is produced. c. the total amount of income earned by the factors of production in the economy. d. the total market value of all final goods and services produced within a given period by factors of production located within a country.

Q7

Which of the following statements is false?

a.During a recession, output and employment are falling.

b.Short-term ups and downs in the economy are known as business cycles.

c. The rate of change in economic activity is used to assess whether an economy is expanding or contracting.

d. Business cycles are always symmetric - the length of an expansion is the same as the length of a contraction.

Q8

You want to make a 4% real return on a loan that you are planning to make, and the expected inflation rate during the period of the loan is 5%. You should charge an interest rate of

a.1%

b.4.5%

c.5%

d. 9%

Q9

When a country's exports of goods are less than its imports of goods in a given period, it has a

a.trade deficit.

b.positive trade balance.

c.zero balance of trade.

d.trade surplus.

Q10

Actual output cannot grow faster than ________ over the ________.

a.cyclically adjustedover thelonger term

b.potential outputover theshort term

c.potential outputover thelonger term

d.target outputover thelonger term