What is the benefit to maintaining price stability within a country? Select one: a. Consumers and businesses can safely pursue long-term consumption and production plans. b. Expansion in national output over a given period of time c. Decision making for the economy as a whole d. Optimize the available resources efficiently Question 2 Which of the following would NOT influence the rate of inflation? Select one: a. Whether the rate was expected. b. The number of people affected by inflation. c. The rate at which prices are rising. d. How the rate compares with other countries and in particular our main trading partners. Question 3 If the consumer price index is equal to 100 in 2014 and is equal to 103.2 in 2015, we can conclude that Select one: a. 2015 is the base year b. there was no inflation from 2014 to 2015 c. the inflation rate from 2014 to 2015 is 103.2% d. the inflation rate from 2014 to 2015 is 3.2% Question 4 Which of the following is the best policy to be implemented by the government during the economic recession? Select one: a. Investment Policy b. Goods and Services Tax c. Contractionary Fiscal Policy d. Expansionary Fiscal Policy Question 5 If the total expenditures of a typical family equaled RM40,000 per year in 2016 and the exact same basket of goods and services cost RM45,000 in the year 2019, the family's cost of living: Select one: a. increased by 12.5% b. decreased by 12.5% c. decreased by 11.1% d. increased by 11.1% Question 6 We can enjoy more goods and services when each country specializes in the production of what it does best is the principle of __________. Select one: a. diminishing opportunity costs b. competitive advantage c. marginal utility d. specialization Question 7 According to Keynesian theory, an expansion in money supply tends to _______ the interest rate, and ________ investment, aggregate demand, prices, real GDP and employment. Select one: a. decrease; decrease b. decrease; increase c. increase; decrease d. increase; increase Question 8 The table below shows the production possibilities schedule for beans and milk of countries S and P: Country Beans Milk S 1,200 600 P 900 300 If the two countries decide to specialize according to comparative advantage, what would be the term of trade between the two countries for 1 unit of beans? Select one: a. cannot be determined. b. 0.415 units of milk c. 2.5 units of milk d. 1.665 units of milk Question 9 The following are the factors affecting Muslim consumer's behavior EXCEPT: Select one: a. The belief in the hereafter life. b. The Al-Falah principle c. The principle of wealth d. Autonomous investment Question 10 The equation for GDP using the expenditure approach is Select one: a. GDP = C + I + G + EX + IM b. GDP = C + I + G - EX - IM c. GDP = C + I + G + (IM - EX) d. GDP = C + I + G + EX - IM Question 11 According to business cycle theory, what should government do in response to a recession? Select one: a. Cut government spending. b. increase interest rates c. increase government spending d. all of the above Question 12 Which of the following factors might cause cost-push inflation? I. Higher wage levels in domestic industries. II. Higher consumer spending. III. Higher import prices. IV. Higher salary. Select one: a. I, III & IV b. I, II & III c. All of the above d. I only Question 13 Gross National Product (GNP) measures the total amount of income earned by resident regardless of ________________. Select one: a. factor cost b. where they are c. the citizenship d. income level Question 14 Government expenditure is often divided into operating and ________________ expenditure. Select one: a. investment b. tax c. development d. saving Question 15 What is most likely to increase as a result of a rise in interest rates in a country? Select one: a. The inflow of short-term foreign capital. b. The level of private investment. c. The return on capital investment. d. The level of house prices. Question 16 Which of the following is NOT a cost of unemployment? Select one: a. Loss of tax revenue b. Loss of import flows. c. Loss of output within the economy d. Loss of profits Question 17 The table shows the value of nominal GNP and the price index for a country. 2010 2015 2020 Consumer Price Index 100 106 112 National GNP (RM million) 38,000 41,000 42,100 Population 30 32 35 Between 2015 and 2020, the real GNP has changed by _____? Select one: a. -2.82% b. +10.79% c. -1.98% d. +2.68% Question 18 Select the advantages of international trade. I. Increase in world output. II. Enjoy varieties of goods. III. Depletions in country's reserves. IV. Increase in efficiency. Select one: a. I, II and IV b. All of the above c. I, II and III d. II, III and IV Question 19 If a retail price index changed from 250 to 260 over a period of twelve months, this would indicate that ____. Select one: a. wages will need to rise by 4% if incomes are to keep pace with price rises. b. the standard of living has fallen. c. the value of money has fallen. d. the pattern of consumer expenditure has probably changed during the year. Question 20 Which one of the following is a measure of inflation within a country? Select one: a. Consumer Price Index (CPI) b. Purchase Index (PI) c. Consumer Purchase Index (CPI) d. Price Index (PI) Question 21 ________________ is one of the limitations of credit creation process. Select one: a. Automated Teller Machine (ATM) b. Cash reserve ratio c. Safe deposit boxes d. Credit card facilities Question 22 If a government wants to improve employment level in the country, government spending should be ________. Select one: a. decreased b. financed by higher tax revenue c. increased d. constant Question 23 Which of the following is/are possible effect(s) of inflation? Select one: a. Inflation will shift income from one group to another, cause greater disparity in wealth distribution. b. Inflation may distort the behaviour of firms and makes long term planning difficult. c. Inflation will negatively impact the employment in industries involved in exports as the products become relatively more expensive due to high rate of inflation. d. All of the above. Question 24 A country is said to have an absolute advantage in the production of a good when it can produce _________________ of that good than another country, using the same amount of resources. Select one: a. none b. more c. less d. equal Question 25 Budget surplus is the condition where ________________. Select one: a. government do not spend the budget b. government expenditure exceeds its revenue c. government expenditure is equal to its revenue d. tax revenues exceed government expenditure Question 26 Which of the following statements is NOT true about consumption from Islamic perspective? Select one: a. Muslims should avoid consuming goods that are bad, harmful and worthless. b. Consumption for satisfaction is the most vital objective. c. Caring for animals is considered good ethics of consumption. d. It's vital to receive Allah's blessings during spending to achieve success and happiness. Question 27 If initial deposit is RM50,000, and the cash reserve ratio is 5%. Calculate the total amount of credit created. Select one: a. RM 950,000 b. RM 1,000,000 c. RM 20 d. RM 100,000 Question 28 Which of the following are the advantages of floating exchange rates? I. Respond and adjust to slow changes in demand and comparative advantage. II. Governments can simply allow market forces to look after the balance of payments while they concentrate on domestic economic policy. III. Insulates the country from 'importing inflation' from the rest of the world. IV. Country's monetary policy and fiscal policy are independent of external conditions and influences. Select one: a. I, II & III b. I, III & IV c. All of the above. d. II, III & IV Question 29 If there is a reduction in government spending, there will not necessarily be a fall in National Income if there is an increase in. I. Exports. II. Taxation. III. Investment. IV. Innovation. Select one: a. I & II b. I & III c. II & IV d. All of the above. Question 30 A combination of a decrease in income tax with an increase in government expenditure will Select one: a. leave aggregate demand unchanged b. increase aggregate demand c. have an ambiguous effect on aggregate demand d. decrease aggregate demand Question 31 Government revenue is money collected from sources such as _______________ and wealth accumulation of individuals. Select one: a. taxes b. export c. import d. all of the above Question 32 Which of the following comparison between Microeconomics and Macroeconomics is FALSE? Microeconomics Macroeconomics i Production output in individual industries and businesses Production National production or output ii Price of individual goods and services Price Aggregate price level iii Wages or income of labour and distribution of income and wealth Income National income iv Employment and unemployment in the economy Employment Employment by individual businesses and industries Select one: a. iii b. i c. iv d. ii Question 33 Which of the following government aims might be achieved by means of fiscal policy? I. A redistribution of income between firms and households. II. A reduction in aggregate monetary demand. III. A change in the pattern of consumer demand. IV. A change in income level. Select one: a. II & IV b. I & IV c. I & III d. I, II & III Question 34 In a three-sector economy where C = 150 + 0.9Y I = 160 G = 300 T = 40 What is the total saving in this economy? Select one: a. 420 b. 424 c. 460 d. 574 Question 35 Public finance is the study of ________________. Select one: a. the government actions and the various ways of financing government expenditure b. the economy of a country is affected by economic fluctuations c. the effective tax rate increases as the amount to which the rate is applied increases d. fiscal policy is a policy that is used as a macroeconomic instrument by the country's central bank Question 36 Al-Wadiah can be defined as ________________. Select one: a. contract made between two parties to finance a business venture b. contract on sale and purchase transaction for the financing of assets on deferred and instalment basis at a pre-agreed payment period c. goods or deposits which have been deposited with another person or bank as custodian for safekeeping d. leasing contract whereby a lessor or owner leases out an asset or equipment to his client at an agreed rental fee for a predetermined lease period Question 37 When there are vacancies in the job-market, but also high levels of unemployment, then we could say that this unemployment is ________________. Select one: a. structural b. regional c. seasonal d. cyclical Question 38 What would result from a devaluation of a country's exchange rate? Select one: a. A reduction in the domestic currency price of exports. b. An increase in the foreign currency price of imports. c. A reduction in the domestic currency price of imports. d. A reduction in the foreign currency price of exports. Question 39 Which of the following statement accurately represent Fiat Money? Select one: a. Credit cards or debit cards which are not money. b. Legal tender approved by the government to circulate as a mean of payment, such as dollar bills. c. Any item issued by the central bank and declared by government as money. It consists of paper money and coins. d. Money deposited in a current account or demand deposits. Question 40 Which of the following may cause the function of consumption to shift? Select one: a. Consumers' expectation of the future inflation rate. b. Changes in the stock prices in KL stock exchange. c. A decrease in the interest rate set by the central bank. d. All of the above. Question 41 After European Union (EU) introduced a quota on the imports of palm oil into the EU, the price of palm oil in the world will _______________. Select one: a. the effect can not be determined based on info given b. remain unchanged c. increase d. decrease Question 42 The crucial consequences of unemployment to the economy are wastage of available resources and ________________. Select one: a. social problems b. aggregate price level c. income d. motivation Question 43 What are the two types of consumption according to Keynes? Select one: a. Autonomous and induced consumption. b. Intermediate fixed consumption c. Average and marginal consumption d. Maximum and minimum consumption Question 44 When resources in a country's economy are fully employed, which of the following changes would have an inflationary effect? I. A decline in the liquidity preference of households. II. Wage increases in most industries. III. The issue and sale of new gilt-edged securities by the Bank Negara. IV. Government spending. Select one: a. I & II b. II & III c. I & IV d. All of the above Question 45 The Gross Domestic Product (GDP) can be computed through these methods EXCEPT: Select one: a. Expenditure approach b. Product or Output Approach c. Income approach d. Income statement Question 46 To fight recession, central bank may reduce the required reserve ratio in order to: Select one: a. encourage an expansion in lending and thus credit creation. b. encourage saving by the public. c. encourage everyday spending using liquid assets. d. all of the above. Question 47 Comparative advantage refers to a country's ability to produce a particular good with a lower _________________ than another country. Select one: a. investment b. import c. opportunity cost d. export Question 48 Market price refers to the current price in the market through the forces of ________________. Select one: a. demand and supply b. economic growth and recession c. inflation and deflation d. export and import Question 49 A central bank manages the money market to ensure low inflation and high employment by: Select one: a. managing interest rates b. setting reserve requirement c. fixing margin requirements d. all of the above Question 50 One major issue with a floating exchange rate system is that it is vulnerable to speculative activities, and thus will fail to reflect correctly the trading competitiveness of a country's inductries. Select one: True False Question 51 What is likely to be one of the consequences of inflation? Select one: a. A redistribution of wealth in favour of lenders. b. A faster long-term growth rate. c. A reduction in the real value of the national debt. d. Negative real rates of interest. Question 52 Which of the following are the measures to control inflation? I. Contractionary Fiscal Policy. II. Expansionary Fiscal Policy. III. Contractionary Monetary Policy. IV. Expansionary Monetary Policy Select one: a. I and II only b. II and IV only c. All of the above d. I and III only Question 53 Circular flow of income can be defined as ________________. Select one: a. current price in the market through the forces of demand and supply b. actual price earned by producers or sellers c. an economic model depicting how money flows through the economy d. price of output that is valued based on the cost of factors of production price of output that is valued based on the cost of factors of production Question 54 International trade refers to _________________. Select one: a. barter system between organization A and organization B b. government and individual activities on the exchange of capital, goods and services across international borders or territories c. government and individual activities on the exchange of capital, goods and services in a country d. diplomatic relationship between country A and country B Question 55 Which of the following are the assumptions of Absolute Advantage Theory? I. Only two countries in the world that are involved in international trade. II. Only two goods are produced by two countries. III. Free trade exists between these two countries. IV. Production is under constant cost. Select one: a. I, II and III b. I, II and IV c. II, III and IV d. All of the above. Question 56 Question text A fall in the rate of interest may directly result in. I. A switch to more capital-intensive methods of production. II. A decline in the marginal efficiency of capital. III. Higher levels of investment. IV. Depletion of factor of production. Select one: a. I & II b. II & IV c. All of the above. d. I & III Question 57 Macroeconomics is the branch of studies that ______________. Select one: A. studies decision making by a single individual, household, firm, industry or level of government B. studies on how to achieve full employment C. studies decision making for the economy as a whole D. studies on how to achieve economic growth Question 58 The following are the sources of revenue for an Islamic government EXCEPT. Select one: a. Jizyah b. Al-Bay c. Zakat d. Al-Fai Question 59 Following is the economic data of a selected country in Year 2020 in four sector economy (in RM million): Consumption Function (C) C=110 + 0.83Yd Investment (I) 120 Govt. spending (G) 250 Import (M) 70 Export (X) 100 Tax (T) 0.19Y Calculate the national income equilibrium using the aggregate demand approach. Select one: a. RM2,448.57 million b. RM1,917.24 million c. RM975.00 million d. RM1,556.30 million Question 60 There is an/a _______________ relationship between inflation and the value of money. Select one: a. direct b. straight c. emerged d. inverse Question 61 Which of the following might be used by government to lower unemployment? Select one: a. Increase interest rates b. Lower taxation c. Reduce government spending d. Increase taxation Question 62 What is most likely to be increased by a policy of increased direct taxes and lower government spending? Select one: a. The budget deficit b. The level of unemployment c. The balance of payments deficit. d. The rate of inflation Question 63 How do commercial banks create money? Select one: a. By cashing cheques for their customers. b. By making loans to customers c. By charging customers for banking services. d. By increasing their reserves at the central bank Question 64 The multiplier effect of government investment is likely to be greater where __________. Select one: a. there is a high level of stocks in firms b. the increased spending is financed by higher taxation c. there is excess production capacity in the private sector of industry. d. there is a high marginal propensity to consume Question 65 The saving function in a closed economy with no government is given by the equation S= -RM1 billion + 0.3Y. If the level of national income is RM10 billion, what is the average propensity to consume? Select one: a. 0.9 b. 0.6 c. 0.8 d. 0.7