Economic Policy Analysis
Practice Questions
Course Introduction
Economic Policy Analysis introduces students to the tools and methods used to evaluate and design public policies affecting economic performance and social welfare. The course explores how governments intervene in markets, the rationale and consequences of various policy instruments, and the trade-offs involved in addressing issues such as taxation, regulation, income distribution, market failures, and economic growth. Students will learn to critically assess real-world policy proposals using microeconomic and macroeconomic frameworks, apply cost-benefit analysis, and interpret econometric evidence, equipping them with the analytical skills required for effective policy evaluation and formulation.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn Hubbard
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15 Chapters
2116 Verified Questions
2116 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Which of the following questions or statements regarding medical school is normative?
A)How do changes in expected future incomes affect the decisions of medical students about which specialty to choose?
B)Medical students who enter specialised fields make a larger contribution to society than do students who enter primary care.
C)What role does tuition play in a student's decision about whether to attend medical school?
D)Have tuition increases had a large effect or a small effect on the number of applications to medical school?
Answer: B
Q2) All centrally planned economies:
A)have been political dictatorships.
B)started out as market economies.
C)began as mixed economies.
D)have become mixed economies.
Answer: A
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Page 3
Chapter 2: Choices and Trade Offs in the Market
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) Refer to Table 2.6. China has a comparative advantage in the production of:
A)wheat
B)digital cameras
C)both products
D)neither product
Answer: B
Q2) Refer to Table 2-4. What is Holly's opportunity cost of making a necklace?
A)½ of a bracelet
B)3 bracelets
C)1 1/3 necklaces
D)2 necklaces
Answer: A
Q3) If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be bowed outward (concave).
A)True
B)False
Answer: False
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) Last week, the local pay TV company lowered the monthly pay TV price because the city council has granted approval for three new pay TV companies to service the area. How is the market for pay TV services affected by this?
A)There is an increase in the supply of pay TV service.
B)There is a decrease in the demand for pay TV service.
C)There is a decrease in the quantity of pay TV service supplied.
D)There is a decrease in the supply of pay TV service.
Answer: A
Q2) An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
A)True
B)False
Answer: False
Q3) An increase in the price of inputs will cause the supply curve for a product to shift to the right.
A)True
B)False
Answer: False
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Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) Refer to Table 4.2. What can we say has happened in the economy from 2017 and 2018?
A)The price level has fallen.
B)The price level has risen.
C)The price level has remained constant.
D)Not enough information is available to determine what has happened to prices.
Q2) Refer to Table 4.1. What is nominal GDP in 2017?
A)$3 320
B)$3 690
C)$6 360
D)$7 035
Q3) Which of the following would increase gross private domestic investment in an economy?
A)An increase in the shares of Apple stock households own.
B)An increase in the number of workers Apple hires.
C)An increase in the level of Apple's inventory.
D)An increase in the number of highway construction projects the government is funding.
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Chapter 5: Economic Growth, the Financial System and Business Cycles
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) A 'recession' is often defined as:
A)two consecutive quarters experiencing a decline in the economic growth rate.
B)two consecutive quarters of declining nominal GDP.
C)a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months.
D)a significant decline in inflation and unemployment lasting more than a few months.
Q2) What is 'human capital'?
A)A term used to describe the underground labour market.
B)Manufactured goods that are used to produce other goods.
C)Accumulated knowledge and skills acquired by a worker.
D)The manager or owner of a business.
Q3) Total motor vehicle sales in Australia:
A)have slowly decreased over time.
B)decline by a greater percentage than does GDP during an economic contraction.
C)decline by a smaller percentage than does GDP during an economic contraction.
D)remain constant during business cycles.
Q4) A period of economic expansion ends with a business cycle trough.
A)True
B)False
Page 7
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Chapter 6: Long-Run Economic Growth: Sources and Policies
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) Which of the following is a reason why low income countries might experience economic growth?
A)The country has endured extended periods of war.
B)The country fails to enforce a rule of law.
C)The country suffers from poor health infrastructures.
D)The country has a high rate of saving and investment.
Q2) During which of the following periods was global growth in GDP per capita the strongest?
A)Prior to 500 AD.
B)500 AD to 1800 AD.
C)1800-1900 AD.
D)1900-2000 AD.
Q3) What reasons does Paul Romer give to support his claim that firms 'free ride' on 'knowledge capital'?
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Chapter 7: Unemployment
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) During periods of rising unemployment, the government receives less tax revenue from individuals and from businesses.
A)True
B)False
Q2) Jill lost her job six months ago and she's been actively looking for a new job ever since. How would the Australian Bureau of Statistics classify Jill?
A)a discouraged worker
B)out of the labour force
C)unemployed
D)None of these options are correct.
Q3) If a part-time worker becomes a full-time worker, the:
A)official unemployment rate will fall.
B)official unemployment rate will not change.
C)economy will move closer toward full employment.
D)economy will move closer toward the natural rate of unemployment.
Q4) The labour force participation rates of men in Australia have gradually increased since 1978.
A)True
B)False
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Chapter 8: Inflation
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Inflation that is ________ than what is expected benefits ________ and hurts
A)less; creditors; debtors
B)less; debtors; creditors
C)greater; creditors; debtors
D)greater; creditors; no-one
Q2) What is the broadest measure of the price level which includes all final goods and services?
A)producer price index
B)consumer price index
C)wholesale price index
D)GDP deflator
Q3) With 'cost-push inflation', initially:
A)the price level and real GDP both increase.
B)only real GDP changes while the price level remains constant.
C)the price level rises and real GDP declines.
D)All of these options are correct.
Q4) There are no costs to inflation if it is fully anticipated.
A)True
B)False
Page 10
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Chapter 9: Aggregate Expenditure and Output in the Short Run
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) The larger the marginal propensity to save, the smaller the multiplier is.
A)True
B)False
Q2) The resulting economic contractions and recessions in many countries during 2008 and 2009 following the global financial crisis affected the sales of personal computer manufacturers such as Dell, whose fiscal first-quarter profit fell 63% in 2009. Decreases in consumer purchases of computers would be counted as a decline in ________, and decreases in business purchases of computers would be counted as a decline in
A)consumption spending; planned investment spending
B)consumer wealth; unplanned investment spending
C)the consumption function; unplanned inventories
D)planned investment spending; unplanned investment spending
Q3) High interest rates cause spending by all households to fall, which reduces aggregate expenditure in the economy.
A)True
B)False
Q4) If economists forecast an increase in aggregate expenditure, real GDP will rise.
A)True
B)False
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Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) If potential GDP is equal to $1 800 billion, what does the long-run aggregate supply curve look like?
A)It is a horizontal line at $1 800 billion of GDP.
B)It is a vertical line at $1 800 billion of GDP.
C)It is a vertical line at a level of GDP below $1 800 billion GDP.
D)It is a vertical line at a level of GDP above $1 800 billion.
Q2) When does 'stagflation' occur?
A)when inflation rises and GDP falls
B)when inflation falls and GDP rises
C)when inflation rises and GDP rises
D)when inflation falls and GDP falls
Q3) Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?
A)Contracts make prices and wages 'sticky'.
B)Firms are often slow to adjust wages.
C)Menu costs make some prices sticky.
D)Unions are successful in pushing up wages.
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Page 12
Chapter 11: Money, Banks and the Reserve Bank of Australia
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) A bank holds its reserves as ________ and ________.
A)securities; loans
B)securities; deposits at the Reserve Bank of Australia
C)vault cash; deposits at the Reserve Bank of Australia
D)vault cash; loans
Q2) Which of the following is an 'asset' of a bank?
A)deposits
B)short-term borrowing
C)long-term debt
D)loans
Q3) A cash withdrawal from the banking system:
A)lowers demand deposits to zero.
B)decreases demand deposits.
C)increases the money supply.
D)increases excess reserves.
Q4) A person's 'wealth':
A)is a measure of how much money the person has.
B)equals the value of the person's assets minus his or her liabilities.
C)is measured independently of his or her current and expected future income.
D)All of these options are correct.
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Chapter 12: Monetary Policy
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) When the Reserve Bank of Australia raises the cash rate, this normally leads to:
A)other interest rates rising, which stimulates consumption spending.
B)people spending less because they have less money.
C)other interest rates falling, which stimulates investment spending.
D)other interest rates rising, which reduces investment spending.
Q2) If the Reserve Bank of Australia sells financial instruments in the open market, net exports are likely to decrease.
A)True
B)False
Q3) How do economists generally rate the Reserve Bank of Australia's performance in the 1980s, 1990s and 2000s?
Q4) The Reserve Bank of Australia is able to use monetary policy to keep real GDP exactly at its potential level.
A)True B)False
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Chapter 13: Fiscal Policy
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Crowding out results in:
A)higher interest rates, a lower exchange rate and lower net exports.
B)higher interest rates, a higher exchange rate and lower net exports.
C)lower interest rates, a lower exchange rate and lower net exports.
D)lower interest rates, a higher exchange rate and lower net exports.
Q2) If a(n)________________ in government purchases leads to a(n)____________ in interest rates, the effect is called crowding out.
A)increase; decrease
B)decrease; decrease
C)increase; increase D)decrease; increase
Q3) A contractionary fiscal policy would cause the:
A)aggregate demand curve to the right.
B)aggregate demand curve to the left.
C)short-run aggregate supply curve to the right.
D)short-run aggregate supply curve to the left.
Q4) Government purchases and transfer payments are included in the measure of government expenditures.
A)True
B)False
Page 15
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Chapter 14: Macroeconomics in an Open Economy
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Suppose that Australia's price level is 200, the British price level is 100, and the nominal exchange rate of pounds to the dollar is £0.40 = $1, then the real exchange rate of pounds to the dollar is:
A)1.60.
B)0.80.
C)0.50.
D)020.
Q2) Which of the following would decrease the size of the deficit in the current account of Australia?
A)an increase in imports
B)a decrease in exports
C)a decrease in the amount of income Australian companies pay to foreigners who own investments in Australia
D)an increase in the amount of money the Australian government sends in foreign aid to other countries
Q3) Australia's net foreign debt rose from less than 5 per cent of GDP in the mid-1970s to over 50 per cent in 2013.
A)True
B)False
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Page 16
Chapter 15: The International Financial System
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Under the Bretton Woods System, central banks were committed to selling ________ in exchange for their own currencies.
A)gold
B)British pounds
C)US dollars
D)German marks
Q2) Assume that the Thai government wants to maintain an exchange rate of 0.04 baht per United States (US)dollar, as shown in Figure 15.3. If the Thai economy falls into recession, how will that affect the number of baht the central bank must buy or sell to maintain the peg at 0.04 baht per dollar?
A)They must purchase more than 100 million baht per day with US dollars.
B)They must purchase less than 100 million baht per day with US dollars.
C)They must purchase exactly 100 million baht per day with US dollars.
D)They do not have to do anything.
Q3) If the rate of inflation in Australia exceeds the rate of inflation in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.
A)True
B)False
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