ECON6001 S2 2022 2023 Final Summer

A1. Which of the following is true about the natural rate of unemployment:

  • (a) It reflects both the structural and frictional unemployment rate. ✅

  • (b) It is one percent or less of the population.

  • (c) It is equal to the structural unemployment rate.

  • (d) It reflects only frictional unemployment.

A2. Real GDP is nominal GDP adjusted for:

  • (a) Changes in Prices. ✅

  • (b) Double Counting.

  • (c) Population.

  • (d) Exports.

A3. Fiscal Policy influences:

  • (a) Interest rates and exchange rates.

  • (b) Production in the short run.

  • (c) Taxation and government expenditure measures. ✅

  • (d) Inflation in the short run.

A4. The thrust of government fiscal policy is countercyclical when:

  • (a) Government expenditure and taxation are increased in an economic expansion.

  • (b) Government expenditure is reduced and taxation is increased in an economic downturn.

  • (c) Government expenditure is increased and taxation is reduced in an economic downturn. ✅

  • (d) None of the above.

A5. If the CPI was 109.2 in Year 1 and was 103.2 for Year 2, then the rate of inflation between Year 1 and Year 2 was: (y2-y1/y1 *100)

  • (a) -5.8%

  • (b) -5.49% ✅

  • (c) 6%

  • (d) 5.49%

 

A6. Inflation can be measured by:

  • (a) CPI & Stagflation.

  • (b) GDP & CPI.

  • (c) CPI. ✅

  • (d) GDP Deflator & GDP.

A7. If Real GDP has decreased:

  • (a) Prices have decreased.

  • (b) The quantity of output has stayed the same.

  • (c) Both the quantity of output and prices have decreased.

  • (d) None of the above are true. ✅

A8. If policymakers wanted to tackle inflation using monetary policy, which of the following would be most applicable:

  • (a) Increase taxes & increase the interest rate.

  • (b) Increase the reserve ratio & increase expenditure.

  • (c) Lower the interest rate & lower the reserve ratio.

  • (d) Increase the reserve ratio & increase interest rates. ✅

A9. Which of the following statements is false?

  • (a) Automatic stabilisers reduce the impact of economic shocks that arise from cyclical fluctuations.

  • (b) Automatic stabilisers are deliberately put in place by government e.g. increase in jobseekers allowance. ✅

  • (c) Automatic stabilisers “kick in” when required and do not require deliberate action by government at the time of the economic shock.

  • (d) All of the above are false.

A10. Which of the following is a function of money?

  • (a) It is divisible into units of small value.

  • (b) It is Durable and long lasting.

  • (c) It is a store of value.

  • (d) All of the above. ✅

A11. A managed floating exchange rate system is characterised by which of the following:

  • (a) The value of the currencies are set in relation to other participating currencies.

  • (b) The exchange rate finds its equilibrium in line with demand and supply conditions. Intervention by Central Banks occurs when the currency is either very strong or very weak. ✅

  • (c) The system does not involve interventions by the monetary authorities. Imbalances will be corrected automatically.

  • (d) None of the above.

A12. If a Central Bank wished to increase the supply of money, it should:

  • (a) Buy government bonds and securities in the money market. ✅

  • (b) Sell government bonds and securities in the money market.

  • (c) Increase the rate of discount (Bank rate).

  • (d) Increase the reserve ratio.

A13. The narrow definition of money (M1) in the Irish economy is:

  • (a) Coins, notes and current accounts. ✅

  • (b) Coins, notes, deposit accounts and current accounts.

  • (c) Coins, notes and all deposit accounts.

  • (d) Notes and coins issued by the Irish Central Bank.

A14. If the current €/Stg£ exchange rate is at parity, then the Euro price of a handbag costing Stg£145 is:

  • (a) Increased.

  • (b) €145. ✅

  • (c) €290.

  • (d) We need more information to calculate the Euro price.

A15. If Ireland experiences inflation, these rising prices will:

  • (a) Have no effect on International Trade.

  • (b) Encourage imports and discourage exports in Ireland. ✅

  • (c) Lead to more expensive imports.

  • (d) Improve the Balance of Payments.

A16. A domestic currency devaluation would generally lead to:

  • (a) Increased exports in the domestic economy. ✅

  • (b) Increased imports from a foreign economy.

  • (c) Increase in government spending.

  • (d) None of the above.

A17. Firm A buys €3200 worth of timber from Firm B to manufacture restaurant tables. If the sales of the restaurant tables are €7800, Firm A’s value added on furniture is:

  • (a) €3,200.

  • (b) €11,000.

  • (c) €7,800.

  • (d) €4,600. ✅

A18. The total wealth produced by a country in a particular year can be measured using:

  • (a) The General Government Debt (GGD) Method.

  • (b) The Balance of Payments Method.

  • (c) The Output method, the Income Method, & the Expenditure Method. ✅

  • (d) None of the above.

A19. The Circular Flow of Income for an open economy is:

  • (a) The relationship of resources and incomes between firms and households.

  • (b) The relationship of resources and incomes between firms and governments.

  • (c) The flow of injections and leakages between firms, households, government, and financial institutions.

  • (d) The flow of all transactions (flow of receipts and expenditure) in an economy plus the foreign market (international trade). ✅

A20. Assume that the population of Broland is 159 million, total number employed is 105 million, and 9 million are unemployed. Then the unemployment rate is approximately:

  • (a) 6.9

  • (b) 8.6

  • (c) 7.9 ✅

  • (d) 5.6

A21. Government policies that focus on increasing production rather than demand are called:

  • (a) De-regulation policies.

  • (b) Supply-side policies. ✅

  • (c) Production policies.

  • (d) Privatisation policies.

A22. If the exchange rate of Euros to American dollars was €1.00 = $1.05 yesterday and today is €1.00 = $0.95, then:

  • (a) The euro appreciated in value relative to the American dollar.

  • (b) The euro depreciated relative in value to the American dollar. ✅

  • (c) All things being equal, imports from the Eurozone to America are cheaper today than they were yesterday.

  • (d) Both (b) & (c) are correct.

A23. Which of the following is not a function of the Central Bank?

  • (a) Regulation of Financial Institutions.

  • (b) Monitor the solvency of Irish Banks.

  • (c) Protection of consumers of Irish Financial Services.

  • (d) Accepting deposits from Irish consumers. ✅

A24. The value of Nominal GDP in the base year equals:

  • (a) The value of current year output in prices of the base year.

  • (b) The value of current year output in prices of the current year. ✅

  • (c) The value of base year output in prices of the base year.

  • (d) The value of base year output in prices of the current year.

A25. If the Required Reserve Ratio (RRR) was 4%, how much money could a bank create from an initial deposit of €1,550?

  • (a) €3,875.

  • (b) €62.00.

  • (c) €38,750. ✅

  • (d) €1,488.