SCHOOL OF ACCOUNTING, ECONOMICS & FINANCE
ECONOMICS 102/106
TEST 2: 09 SEPTEMBER 2014
Duration: 45 minutes
Total Marks: 100
INSTRUCTIONS TO STUDENTS
The test consists of 20 multiple choice questions ONLY
1.
2.
3.
4.
5.
Answer as many questions as possible.
Choose the most correct answer in each case.
Negative marks (-1) will be scored for incorrect answers.
Enter your answers on the MCQ answer sheet.
Complete the student number and seat number blocks. Remember to fill in the squares
corresponding to your student number.
6. ALL entries on the MCQ answer sheet MUST BE IN HB PENCILS. Entries in pen will not be
recorded by the scanner and marks will thus be lost.
7. Read each question fully before attempting to answer it.
1
1. Of the following, structural unemployment can be best associated with
A) short-term unemployment.
B) the general downturns in the economy.
C) the general decline of specific industries.
D) the normal changing of jobs in a dynamic economy.
E) a recession.
2. Suppose the natural rate of unemployment equals 6 percent and the current
unemployment rate is 8 percent. We can conclude that
A) full employment is not occurring.
B) there is no cyclical unemployment.
C) there is no frictional unemployment.
D) there is no structural unemployment.
E) the economy is in an expansion phase.
3. An increase in labour hours leads to
A) neither a movement along nor a shift in the production function.
B) both a movement along and a shift in the production function.
C) a shift of the production function but no movement along it.
D) a movement along the production function but no shift in it.
E) a movement downwards along the production function.
4. The real wage rate falls if the money wage rate ________.
A) rises more slowly than the price level
B) rises more rapidly than the price level
C) and the price level change by the same proportion
D) is constant and the price level falls
E) None of the above
2
5. Suppose there is an increase in the price level and no change in the money wage rate.
As a result,
A) the labour supply curve shifts rightward as people demand higher wages.
B) the labour supply curve shifts leftward as people demand higher wages.
C) there is a downward movement along the labour supply curve.
D) there is an upward movement along the labour supply curve.
E) there is an upward movement along the labour demand curve.
6. In the above figure, at the real wage rate of £40
A) there is a shortage of 100 billion hours per year.
B) there is shortage of 20 billion hours per year.
C) there is a surplus of 60 billion hours per year.
D) there is a surplus of 100 billion hours per year.
E) there is a shortage of 40 billion hours per year.
7. An increase in the population and hence the supply of labour results in a ________ at
the original real wage rate so that the real wage rate ________ to restore equilibrium.
A) shortage; falls
B) shortage; rises
C) surplus; rises
D) surplus; falls
E) unemployment; rises
3
8. An increase in physical capital or a technological advance
A) shifts the production function downward.
B) decreases the quantity of labour employed.
C) decreases demand for labour.
D) decreases the quantity of labour supplied.
E) shifts the production function upward
9. Which of the following is NOT included in the M3 definition of money?
A) Long term deposits at banks.
B) Currency held by the public.
C) Currency held by banks.
D) Sight deposits.
E) Cheque account deposits
10. A bank's asset category that caries the lowest risk is
A) loans made to the government.
B) cash in the bank vault.
C) loans made to business firms.
D) time deposits.
E) Short-term government bonds
11. When the interest rate rises, the quantity of money demanded decreases because
A) people move funds from interest-bearing assets into money.
B) people will buy fewer goods and hold less money.
C) the price level also rises and people decrease their demand for money.
D) people must pay more for debts incurred.
E) people shift funds from money holdings to interest-bearing assets.
4
12. Use the figure above to answer this question. Starting at point a, a move to ________
could be the result of ________.
A) point d; an increase in real GDP
B) point b; an increase in real GDP
C) point c; an increase in the interest rate
D) point e; a decrease in the interest rate
E) point d; a decrease in real GDP
13. Which one of these actions by the Central Bank would increase the supply of money?
A) An increase in the required reserve ratio
B) An open market purchase
C) An open market sale
D) An increase in the repo rate
E) The sale of gold reserves
14. If the nominal GDP is R2000 billion, the velocity of circulation is 10, the quantity of
money is R200 billion, real GDP is R400 billion, the price level is
A) 10
B) 2
C) 5
D) 100
E) 0.5
5
15. Other things remaining the same, the
A) lower the exchange rate, the cheaper are foreign-produced goods and services.
B) higher the exchange rate, the smaller is the expected profit from selling rands.
C) larger the value of SA imports, the greater is the quantity of SA pounds supplied to
the foreign exchange market.
D) larger the value of SA imports, the smaller is the quantity of foreign currency
demanded.
E) the larger the South African interest rate differential the lower the demand for
rands.
16. The supply of South African rand decreases if?
A) The interest rate differential falls.
B) The world demand for exports decreases.
C) The interest rate differential rises.
D) South Africa's import demand increases.
E) The expected future exchange rate depreciates.
17. The rand will appreciate if?
A) The supply of South African rand increases and the demand does not change.
B) The demand for South African Rand decreases and the supply does not change.
C) The supply of South African rand increases and the demand decreases.
D) The supply for South African Rand decreases and the demand does not change.
E) None of the above.
18. Which one of the following is NOT a possible exchange rate policy
A) the creeping peg
B) the flexible exchange rate
C) the crawling peg
D) the fixed exchange rate
E) both option (B) and option (C)
6
19. If foreign investment in South Africa exceeds South Africa’s investment abroad, there is
a ________; and when South African investment abroad exceeds foreign investment in
South Africa, there is a ________.
A) current account surplus; current account deficit
B) capital account deficit; capital account surplus
C) financial account surplus; financial account deficit
D) current account surplus; change in reserves account surplus
E) capital account deficit; current account surplus
20. The current account records
A) net transfers abroad.
B) net interest income paid abroad.
C) receipts from exports and payment for imports.
D) All the above.
E) C and B only.
END OF TEST 2!
7