Economics – Microeconomics Multiple Choice Question Answers

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microeconomics quiz helpQ1. Stiglitz and Walsh identify four fundamental ideas to help understand short-term fluctuations. Which of the following is not one of them?

  • sticky prices
  • inflation/unemployment trade-offs
  • sticky wages
  • inflation, monetary policy, and spending
  • inflation, fiscal policy, and spending

Q2. The real exchange rate:

  • is the nominal exchange rate adjusted for differences in GDP growth between countries.
  • is the nominal exchange rate adjusted for differences in the trade deficit between countries.
  • is the nominal exchange rate adjusted for differences in unemployment between countries.
  • is the nominal exchange rate adjusted for differences in inflation between countries.

Q3. When a country’s net capital inflows equal zero:

  • the country’s imports exceed its exports.
  • the country’s exports equal its imports.
  • the country’s exports exceed its imports.
  • the country has a trade deficit.
  • the country has a trade surplus.

Q4. If the exchange rate between the dollar and yen changes from 100 yen per dollar to 125 yen per dollar:

  • this represents a depreciation of the yen.
  • this represents a depreciation of the dollar.
  • the yen is now worth more than before.
  • the dollar is now worth less than before.
  • this represents an appreciation of the yen.

Q5. Australia’s federal budget deficit was largest during:

  • 2009, just after the global financial crisis.
  • 2010, well after the global financial crisis had passed.
  • 1994, just after the recession of the early 1990s.
  • 1997, during the Asian financial crisis.
  • 2008, during the height of the global financial crisis.

Q6. In general, reducing inflation in the short run requires:

  • a decrease in wages.
  • a rise in structural unemployment.
  • a rise in frictional unemployment.
  • a decrease in the price level.
  • a rise in cyclical unemployment.

Q7. Immediately following John Howard’s Coalition government of the late 1990s and most of the 2000s, Australia:

  • had a negative federal net debt.
  • had a positive federal net debt.
  • had the same federal net debt as the United States.
  • had zero federal net debt.

Q8. In income expenditure analysis, if total inventories equal planned inventories:

  • aggregate expenditures equal national output.
  • aggregate expenditures are less than national output.
  • the economy is below its equilibrium output.
  • the economy is above its equilibrium output.
  • aggregate expenditures exceed national output.

Q9. In income expenditure analysis, equilibrium occurs when:

  • a gross national product = net national product.
  • aggregates expenditures = consumption + investment + government spending + net exports.
  • gross domestic product = gross national product.
  • gross domestic product = national income.
  • aggregates expenditures =national output = national income.

Q10. Suppose inflation was 3 per cent last year. By how much must wages increase in order for real wages to remain constant?

  • $2.40
  • 3 per cent
  • $3
  • 2.4 per cent
  • 5 per cent

Q11. A decrease in the level of saving in the United States:

  • raises world interest rates.
  • reduces investment in other open economies.
  • reduces investment in the United States.
  • all of the listed options.

Q12. When the capital market in an open economy is in equilibrium:

  • national saving plus net foreign investment is less than private investment.
  • national saving minus net foreign investment equals private investment.
  • national saving minus net foreign investment is greater than private investment.
  • national saving plus net foreign investment equals private investment.
  • national saving plus net foreign investment is greater than private investment.

Q13. If the exchange rate between the Australian dollar and the yen changes from 100 yen per dollar to 125 yen per dollar:

  • Australian goods become relatively cheaper in Japan, increasing the quantity supplied of Japanese yen.
  • Japanese goods become relatively more expensive in Australia, increasing the quantity supplied of Australian dollars.
  • Australian goods become relatively cheaper in Japan, reducing the quantity supplied of Japanese yen.
  • Australian goods become relatively more expensive in Japan, increasing the quantity supplied of Japanese yen.
  • Australian goods become relatively more expensive in Japan, reducing the quantity supplied of Japanese yen.

Q14. In income expenditure analysis, if total inventories are less than planned inventories:

  • aggregate expenditures equal national output.
  • aggregate expenditures exceed national output.
  • the economy is above its equilibrium output.
  • aggregates expenditures are less than national output.
  • the economy is at its equilibrium output.

Q15. In order for the real wage to remain constant:

  • nominal wages must remain unchanged.
  • both nominal wages and prices must change by the same amount.
  • the price level must remain unchanged.
  • both the percentage wage and price level changes must be equal.
  • both the nominal wage and the price level must remain unchanged.

Q16. Firms often pay efficiency wages in order to:

  • all of the options listed.
  • lower long-term labour costs.
  • earn higher profits.
  • increase worker productivity.

Q17. Large current account imbalances between countries:

  • may be a problem if they come about as a result of distortions in capital markets.
  • are never a problem.
  • are always a problem.
  • may be a problem for China but not for any other country.

Q18. A country with a ________ will experience a net capital _______.

  • budget surplus; inflow
  • trade deficit; outflow
  • budget deficit; outflow
  • trade surplus; outflow
  • trade surplus; inflow

Q19. Sticky price models help explain

  • temporary periods of unemployment.
  • the observation that firms do not adjust production and employment in response to demand.
  • None of the listed options.
  • short-run economic behaviour.

Q20. Aggregate expenditures are the total spending by all of the following except:

  • firms
  • households
  • importers
  • exporters
  • government

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