Question 1

If a central bank wished to increase the supply of money and credit in the economy it would:

Options :

A : sell bonds and raise interest rates

B : buy bonds and reduce interest rates

C : sell bonds and reduce interest rates

D : buy bonds and raise interest rates

Answer: B

Question 2

A rise in interest rates in an economy would lead to all of the following except which one ?

Options :

A : A rise in the exchange rate for the currency

B : A rise in personal saving

C : An increase in business investment

D : A rise in public expenditure

Answer: C

Question 3

A market for a normal good is in equilibrium. What will happen in this market if there was an increase in consumer incomes?

Options :

A : The demand curve would shift to the right, the equilibrium price would rise and there would be an increase in supply

B : The demand curve would shift to the left, the equilibrium price would fall and there would be a contraction in supply

C : The demand curve would shift to the right, the equilibrium price would rise and there would be an extension in supply

D : The demand curve would shift to the left, the price would fall and there would be a decrease in supply

Answer: C

Question 4

A research business compiles the following data for Country D over 8 years:

* Household expenditure, y (in millions of constant 20X6 dollars);

* The number of fixed broadband internet subscribers, x (in thousands).

Based on this information the following regression model is developed:

y = 332668 * 45.8x - 0 003x2

Which of the following statements is correct?

Options :

A : The model is based on historical data, so it is of little use in making forecasts

B : 1 percent increase in the number of fixed broadband internet subscribers will lead to 0 3 percent increase in household final consumption expenditure.

C : A non-linear relationship is suggested by the model between household final consumption expenditure and the number of fixed broadband internet subscribers.

D : The model makes accurate forecasts on household final consumption expenditure in Country and therefore it should be widely applied to most countries and regions.

Answer: D

Question 5

Which of the following influences explains why the average costs of a firm will rise in the short run?

Options :

A : Diseconomies of scale

B : Rising unit costs

C : Diminishing marginal returns

D : Diminishing returns to scale

Answer: C

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