KwameNkrumahUniversityofScienceandTechnology

InstituteofDistanceLearning
CEMBA552:EconomicEnvironmentofBusiness
TakeHomeQuiz2-Macroeconomics

INDEXNO:_________________________________ Name________________________________

DeadlineForSubmission:9thApril(HO,Sunyani,Tamale,Koforidua,Central)and16thApril(KumasiandAccra)
MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementoranswersthequestion.

1) Ofthefollowing,modernmacroeconomicsisLEAST concernedwith 1)
A) inflation. B) populationgrowth.
C) long-termeconomicgrowth. D) theunemploymentrate.

2) Economicgrowthismeasuredby 2)
A) changesinrealGDP.
B) changesintheemploymentrate.
C) changesinemployment.
D) Alloftheaboveareusedtomeasureeconomicgrowth.

3) Intheabovefigure,economicgrowthcanberepresentedasthemovementfrom 3)
A) pointatopointb. B) pointc topointd.
C) pointbtopointc. D) pointd topointa.

4) RealGDPisdefinedas 4)
A) thevalueoftotalproductionwhentheunemploymentrateis6percent.
B) thevalueoftotalproductionofallthenationsfarms,factories,shopsandofficesmeasuredat
thepricesoftheyearitwasproduced.
C) thevalueoftotalproductionofallthenationsfarms,factories,shopsandofficesmeasuredin
thepricesofasingleyear.
D) anincreaseintheaveragelevelofprices.

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5) PotentialGDPis 5)
A) themaximumGDPthataneconomyactuallyachievesthroughoutitsentirehistory.
B) thevalueofproductionwhenallthenationslabour,land,capital,andentrepreneurialability
arefullyemployed.
C) thelevelofGDPachievedduringperiodswhen100percentofthelabourforceisemployed.
D) agoalthatcanneverbeachievedbytheeconomy.

6) Abusinesscycleisthe 6)
A) patternofshort-runupwardanddownwardmovementsintotaloutput.
B) cyclicalmovementintheinterestrates.
C) increaseinconsumerspendingthataccompaniesanincreaseindisposableincome.
D) cyclicalchangeinthenationsbalanceoftrade.

7) Arecessionis 7)
A) aperiodduringwhichrealGDPincreasesforatleasttwosuccessivequarters.
B) aperiodduringwhichrealGDPdecreasesforatleasttwosuccessivequarters.
C) theupperturningpointofabusinesscycle.
D) thelowerturningpointofabusinesscycle.

8) Intheabovefigure,arecessionbeginsatpoint________andanexpansionbeginsatpoint 8)
________.
A) b;a B) d;c C) a;b D) b;c

9) OneofthecostsofmorerapidgrowthinGDPisthat 9)
A) toomanygoodseventuallyareavailableforconsumption.
B) itdoesnotincreasethewealthavailableforall.
C) peoplemustgiveupcurrentconsumption.
D) moremoneyisavailableforresearchanddevelopment.

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10) Intheabovefigure,atroughisatpoint________andapeakisatpoint________. 10)
A) b;c B) b;a C) a;b D) d;c

11) Theunemploymentrategenerally________duringrecessionsand________duringexpansions. 11)

A) falls;falls B) falls;rises C) rises;falls D) rises;rises

12) Whichofthefollowingpointsislikelytobeassociatedwiththehighestunemploymentrate? 12)

A) a. B) b. C) c. D) d.

13) Inflationisa 13)

A) processoffallingprices. B) minorchangeinthepricelevel.
C) processofrisingprices. D) large,one-time fallinthepricelevel.

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14) TheCPIcanbeusedtomeasure 14)
A) changesinaveragepriceofthegoodsandservicesboughtbyatypicalhousehold.
B) expectationsofthefuturerateofinflation.
C) theunemploymentratesofdiscouragedworkers.
D) howretailunemploymenthaschanged.

15) Iftheinflationrateisnegative,the________isfallingandthereis________. 15)

A) pricelevel;inflation B) pricelevel;deflation
C) unemploymentrate;inflation D) unemploymentrate;deflation

16) In2003theCPIwas108;in2004itwas112.Theinflationratebetween2003and2004was 16)

A) 4.0percent. B) 108percent. C) 112percent. D) 3.7percent.

17) Thepricelevellastyearwas120andthisyearis150.Whatistheinflationratebetweenthesetwo 17)

years?
A) 2.5percent. B) 30percent. C) 25percent. D) 20percent.

18) IntheGhana,theinflationrate 18)

A) isalwaysrising.
B) isalwaysfalling.
C) risesandfallsovertheyears.
D) remainsastable3percentovertheyears.

19) Inflationisaproblemwhenit 19)

A) divertsresourcesfromproductiveuses.
B) causesthevalueofmoneytovaryunpredictably.
C) isunpredictable.
D) Alloftheaboveanswersarecorrect.

20) Themostserioustypeofinflationiscalled________,whichisdefinedasoccurringwhenthe 20)

inflationrateexceeds50percenta________.
A) hyperinflation;year B) superinflation;month
C) superinflation;year D) hyperinflation;month

21) Whenthegovernmentspendslessthanitcollectsintaxrevenue, 21)

A) ithasagovernmentbudgetsurplus. B) ithasagovernmentbudgetdeficit.
C) itmustenactmonetarypolicy. D) itmustenactfiscalpolicy.

22) Thegovernmenthasabudgetdeficitwhengovernmentspending 22)

A) exceedstaxreceipts. B) islessthantaxreceipts.
C) iszero. D) equalstaxreceipts.

23) IfthegovernmentbudgetdeficitstaysthesameandGDPincreases,then 23)

A) theratioofthedeficittoGDPstaysthesame.
B) theratioofthedeficittoGDPdecreases.
C) theratioofthedeficittoGDPincreases.
D) withoutmoreinformation,itisimpossibletodetermineiftheratioofthedeficittoGDP
increases,decreases,orstaysthesame.

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24) Whenweexportgoodstoforeigncountries,we 24)
A) increaseourinflationrate.
B) makepaymentstotherestoftheworld.
C) receivepaymentsfromtherestoftheworld.
D) decreaseourinflationrate.

25) Thecurrentaccount 25)

A) ispartofGDP.
B) doesnotaccountforinterestpaymentspaidtoandreceivedfromtherestoftheworld.
C) measuresourexportsminusourimportstakingintoaccountinterestpaymentspaidtoand
receivedfromtherestoftheworld.
D) measuresourimportsminusourexports.

26) AllofthefollowingarepolicygoalstargetedbymacroeconomicpolicyEXCEPT 26)

A) increasethecurrentaccountdeficit. B) reduceunemployment.
C) keepinflationlow. D) stabilizethebusinesscycle.

27) AllofthefollowingarepartoffiscalpolicyEXCEPT 27)

A) settinggovernmentspending.
B) choosingthesizeofthegovernmentdeficit.
C) settingtaxrates.
D) controllingthequantityofmoney.

28) MonetarypolicyinGhanaiscontrolledby 28)

A) Parliament. B) theGovernment.
C) theBankofGhana. D) thefinanceminister.

29) WhichofthefollowingisapolicytooloftheBankofGhana? 29)

A) Changesininterestrates. B) Changesintaxes.
C) Changesinthegovernmentdeficit. D) Changesingovernmentspending.

30) Theprincipalaimofmonetarypolicyisto 30)

A) keepthebudgetdeficitsmalland/orthebudgetsurpluslarge.
B) maintainlowinflation.
C) reversetheproductivitygrowthslowdown.
D) lowertaxes.

31) Iftheeconomyisinarecession,themonetarypolicycommittee(MPC)might 31)

A) increasegovernmentspending.
B) cuttaxestostimulatetheeconomy.
C) increaseinterestrates.
D) reduceinterestratestostimulatetheeconomy.

32) Grossdomesticproductisthetotal________producedwithinacountryinagiventimeperiod. 32)

A) amountoffinalandintermediategoodsandservices
B) marketvalueofallfinalandintermediategoodsandservicesplusinvestmentand
depreciation
C) marketvalueofallfinalandintermediategoodsandservices
D) marketvalueofallfinalgoodsandservices

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33) Inthecircularflowmodelofaneconomywithnogovernmentsectorandnointernationaltrade, 33)
households
A) receiveincomefromproducersfortheuseoffactorsinthefactormarkets.
B) receiveincomefrombuyersofgoodsandservices.
C) payfirmsfortheuseoftheirfactors.
D) receiveincomefromthesaleoffactorsinthegoodsmarkets.

34) IfGhanaimportsarelessthanexports,the 34)

A) restoftheworldborrowsfromGhana.
B) Ghanaborrowsfromtherestoftheworld.
C) Ghanagovernmenthasabudgetdeficit.
D) Ghanagovernmenthasabudgetsurplus.

35) Whichofthefollowingareequaltooneanother? 35)

I. aggregateproduction
II. aggregateexpenditure
III. aggregateincome
A) IIequalsIII,butnotI. B) IequalsIII,butnotII.
C) IequalsIIequalsIII. D) IequalsII,butnotIII.

36) Ifthegovernmentrunsabudgetdeficit,then 36)

A) householdbutnotbusinesssavingmustpayforthedeficit.
B) nationalsavingisnegative.
C) nationalsavingcannotfundinvestment.
D) partofprivatesavingfinancesthedeficit.

37) Afeatureofastockvariableandaflowvariableisthat 37)

A) anexampleofastockvariableisrealGDPandanexampleofaflowvariableisconsumption
expenditure.
B) astockonlymeasuresthevalueofgoodsandservicesproducedinacountryduringagiven
timeperiod.
C) astockisaquantityperunitoftimeandaflowisaquantitythatexistsatapointintime.
D) astockisaquantitythatexistsatapointintimeandaflowisaquantityperunitoftime.

38) Whichofthefollowingisastockvariable? 38)

A) Income. B) Saving. C) Investment. D) Wealth.

39) Whichofthefollowingisaflowvariable? 39)

A) Investment.
B) Theamountofmoneyinyoursavingsaccount.
C) Capital.
D) ThenumberofCDsyouown.

40) WhichofthefollowingisFALSEaboutsaving? 40)

A) Savingisaflowvariable.
B) Incomeleftafterpayingtaxescaneitherbeconsumedorsaved.
C) Savingaddstowealth.
D) Savingequalswealthminusconsumptionexpenditures.

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41) Atthebeginningoftheyear,yourwealthis10,000.Duringtheyear,youhaveanincomeof 41)
40,000andyouspend30,000onconsumption.Youpaynotaxes.Yourwealthattheendofthe
yearis
A) 0. B) 80,000.00. C) 40,000.00. D) 20,000.00.

42) Depreciation 42)

A) doesnotchangethelevelofcapitalintheeconomy.
B) isastockvariable.
C) isthedecreaseinthecapitalstockbecauseofwearandtear.
D) BothanswersBandCarecorrect.

43) WhichofthefollowingisnotincludedintheinvestmentcomponentofGDP? 43)

A) Abusinessfailstosellallofitsoutputandthereforeexperiencesanincreaseininventories.
B) Ahouseholdinvestsinanexpensivedinner.
C) Purchaseofnewequipmentbyabusiness.
D) Afirmbuildsanewwarehouse.

44) Thetotalamountspentonaddingtothestockofcapitalandonreplacingdepreciatedcapitalis 44)

A) capitalconsumption. B) thenetstockofinvestment.
C) grossinvestment. D) depreciation.

45) GDPcanbecomputedasthesumof 45)

A) thetotalexpendituresofconsumption,investment,andgovernmentexpendituresongoods
andservicesoveraperiodoftime.
B) thetotalexpendituresofconsumption,investment,governmentexpendituresongoodsand
services,andnetexportsoveraperiodoftime.
C) thetotalexpendituresofconsumersandbusinessoveraperiodoftime.
D) allsalesthathavetakenplaceinaneconomyoveraperiodoftime.

46) LetCrepresentconsumptionexpenditure,S saving,I grossinvestment,G government 46)

expendituresongoodsandservices,andNXnetexportsofgoodsandservices.ThenGDPequals
A) C+I+G-NX. B) C+ S+ G+ NX.
C) C+I+G+NX. D) C+ S+ G- NX.

47) ThelargestcomponentofGDPis 47)

A) investment.
B) netexportsofgoodsandservices.
C) consumptionexpenditures.
D) governmentpurchasesofgoodsandservices.

48) Goodsthatareproducedthisyear,storedininventories,andthensoldtoconsumersnextyear 48)

A) countinnextyearsGDP.
B) arenotcountedasapartofGDP.
C) countinboththisyearsandnextyearsGDP.
D) countinthisyearsGDP.

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49) Allofthefollowingareincludedingrossinvestmentexpenditure EXCEPT a 49)
A) businessspurchaseofanothercompanysstock.
B) aretailstorespurchaseofshoestoaddtoitsinventory.
C) businessspurchaseofafleetofcars.
D) householdspurchaseofanewhouse.

50) Inthenationalaccounts,governmentexpendituresongoodsandservicesexclude 50)

A) citygovernmentpurchases.
B) transferpayments.
C) spendingonnationaldefence.
D) citygovernmentpurchasesbutincludenationalgovernmentpurchases.

Amount
Component (billionsof
pounds)
Grossinvestment 1300
Personalconsumptionexpenditure 1475
Depreciation 25
Governmentexpendituresongoodsand
services 1315
UKimports 260
UKexports 249
Compensationofemployees 65

51) Theabovetablegivesdataforahypotheticalnation.Grossdomesticproductis 51)

A) 4,079billion. B) 4,049billion. C) 4,054billion. D) 4,339billion.

52) Whichofthefollowingrelationshipsiscorrect? 52)

A) RealGDP=NominalGDP100
B) NominalGDP=(GDPDeflator RealGDP) 100
C) GDPDeflator=(NominalGDP RealGDP) 100
D) RealGDP=(NominalGDPGDPDeflator) 100

53) TocalculaterealGDP,theGDPdeflatorcanusedtoadjustnominalGDPforchangesin 53)

A) thecostofthetypicalworkersmarketbasket.
B) theunemploymentrate.
C) thegeneralpricelevel.
D) nationalincome.

54) Inyearswithinflation,nominalGDPincreases________realGDP. 54)

A) atthesamerateas
B) slowerthan
C) fasterthan
D) sometimesfaster,sometimesslower,andsometimesatthesamerateas

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55) Theworking-agepopulationisdefinedasthenumberof 55)
A) peopleworkingfull-timejobswhoareovertheageof16.
B) peoplelookingforwork.
C) peoplebetweentheageof16andretirementwhoarenotinjail,hospital,orotherinstitution.
D) peoplewhohaveajob.

56) Theworking-agepopulationcanbedividedintotwogroups, 56)

A) peopleintheworkforceandpeoplewhoarenotintheworkforce.
B) peoplelookingforworkandthoseinthearmedforces.
C) peopleintheworkforceandpeoplelookingforwork.
D) peopleintheworkforceandpeoplewithajob.

57) Theworkforceisthesumof 57)

A) theworking-agepopulationandthenumberofunemployedpeople.
B) thenumberofemployedpeopleandthenumberofunemployedpeople.
C) thenumberofemployedpeopleandtheworking-agepopulation.
D) thetotalpopulationandthenumberofunemployedpeople.

58) Unemploymentasmeasuredincludesthetotalnumberofpeoplewho 58)

A) wouldliketohaveafull-timejobbutareworkingpart-time.
B) havejobsorarecurrentlylookingforjobs.
C) wouldliketohaveajobbuthavestoppedseekingwork.
D) areavailableandlookingforworkbutunabletofindemployment.

59) WhichofthefollowingisNOTconsideredtobeintheworkforce? 59)

A) Apersonwhoiswaitingtostartanewjobinthenext30days.
B) Astudentwhoworkspart-time.
C) Apersonwhoisnotworkingandwhohasnottriedtofindajob.
D) Apersonwhoisnotworkingbutwhohastriedtofindajobinthepastweek.

60) Theunemploymentrateiscalculatedas 60)

A) [(numberofpeopleunemployed) (working-agepopulation)] 100.
B) [(workforce)(numberofpeopleunemployed)] 100.
C) [(numberofpeopleunemployed) (workforce)] 100.
D) [(workforce)(population)]100.

Numberofpeople
Component (millions)
Totalpopulation 246
Working-agepopulation 207
Workforce 139
Employed 133
Unemployed 6

61) Usingtheinformationintheabovetable,theunemploymentrateis 61)

A) 4.5percent. B) 6.0percent. C) 2.8percent. D) 4.3percent.

62) Theeconomicactivityrateis 62)

A) 95.7percent. B) 67.1percent. C) 64.0percent. D) 56percent.

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63) Theemploymentrateis 63)
A) 64percent. B) 67percent. C) 50percent. D) 62percent.

64) Thedurationofunemploymentisthelengthoftimeaperson 64)

A) isunemployedeventhoughthatpersonisnotlookingforwork.
B) isunemployedwhilelookingforwork.
C) spendsworkinginajob.
D) isemployedwhilelookingforwork.

65) Frictionalunemployment 65)

A) isunemploymentassociatedwithdecliningindustries.
B) isvoluntarypart-timeunemployment.
C) isunemploymentassociatedwiththechangingofjobsinachangingeconomy.
D) includesdiscouragedworkers.

66) Whenastudentfinishescollegeandbeginslookingforwork, 66)

A) cyclicalunemploymentincreases.
B) frictionalandcyclicalunemploymentincrease.
C) frictionalunemploymentincreases.
D) structuralunemploymentincreases.

67) Structuralunemploymentistheresultof 67)

A) irresponsibleworkerswithpoorworkhabits.
B) aslowdownintherateofeconomicexpansion.
C) normallabourmarketturnover.
D) technologicalchangeorforeigncompetition.

68) Whentheeconomyswitchesproductiontowardservicesandawayfrommanufacturingand 68)

workersinthemanufacturingindustryarepermanentlymaderedundant,
A) frictionalandcyclicalunemploymentincrease.
B) frictionalunemploymentdecreases.
C) cyclicalunemploymentincreases.
D) structuralunemploymentincreases.

69) SupposethecountryofTinyTowndecidedtoopenitsborderstofreetrade.Asaresult,anumber 69)

ofitsworkerslosttheirjobstointernationalcompetitionandcantfindnewjobsbecausetheir
skillsdontmatchwhatisrequiredforjobopenings.Theworkerswholosttheirjobswouldbestbe
consideredpartof
A) cyclicalunemployment. B) frictionalunemployment.
C) structuralunemployment D) discouragedworkers.

70) Cyclicalunemployment 70)

A) occurswhentechnologyimprovementschangejobrequirements.
B) fluctuatesoverthebusinesscycle.
C) isduemainlytojobleavers.
D) mayincreaseordecreaseduringanexpansion.

71) Cyclicalunemployment________duringexpansionsand________duringrecessions. 71)

A) decreases;decreases B) decreases;increases
C) increases;decreases D) increases;increases

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72) Fullemploymentoccurswhen 72)
A) cyclicalunemploymentiszero.
B) frictionalunemploymentiszero.
C) structuralunemploymentiszero.
D) cyclicalandfrictionalunemploymentarezero.

73) Thenaturalrateofunemployment 73)

A) istheunemploymentratewhentheeconomyisatpotentialGDP.
B) isnotafixedpercentageoftheworkforce.
C) occurswhenonlythereisnocyclicalunemploymentpresent.
D) Alloftheaboveanswersarecorrect.

74) Fullemploymentmeans 74)

A) zerounemployment.
B) onlyfrictionalandstructuralunemployment.
C) onlycyclicalunemployment.
D) Noneoftheaboveanswersarecorrect.

75) Priceindexescanoverstateinflationbecausethey 75)

A) donotcontainthepricesofforeigngoods.
B) donotcontainthecorrectcollectionofgoodspurchasedbyconsumers.
C) donotcontainthepricesofservices.
D) omitsomequalityimprovements.

76) Aggregatesupplydescribesthebehaviourof 76)

A) producers. B) households. C) foreignbuyers. D) government.

77) Anaggregatesupplycurvedepictstherelationshipbetween 77)

A) thepricelevelandtheaggregatequantitysupplied.
B) householdexpendituresandhouseholdincome.
C) thepricelevelandnominalGDP.
D) thepricelevelandtheaggregatequantitydemanded.

78) Thelong-runaggregatesupply(LAS)curve 78)

A) hasapositiveslope. B) hasanegativeslope.
C) ishorizontal. D) isvertical.

79) Inthemacroeconomiclongrun, 79)

A) regardlessofthepricelevel,theeconomyisproducingatpotentialGDP.
B) theeconomyisatfullemployment.
C) realGDP=potentialGDP.
D) Alloftheaboveanswersarecorrect.

80) Theshort-runaggregatesupplycurve 80)

A) isvertical. B) hasanegativeslope.
C) ishorizontal. D) hasapositiveslope.

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81) Theshort-runaggregatesupplycurve 81)
A) illustratesthelevelofpotentialrealGDP.
B) isvertical.
C) shiftsbecauseofchangesinthepricelevel.
D) showstheimpactchangesinthepricelevelhaveonthequantityofrealGDPwhenfactor
pricesareconstant.

82) Yourrealwealthismeasuredasthe 82)

A) amountofgoodsandservicesyourwealthwillbuy.
B) amountofgoodsyouhavedividedbythepricelevel.
C) amountofmoneyyouhave.
D) amountofassetsyouhaveindollarterms.

83) Onereasonthattheaggregatedemandcurvehasanegativeslopeisbecause 83)

A) peoplebuyfewergoodsandsavemorewhenthepricelevelrisesbecausetheirrealwealth
decreases.
B) peopleearnmoremoneywhenoutputrises.
C) firmsproducemorewhenthepricerises.
D) Thepremiseofthequestioniswrongbecausetheaggregatedemandcurvehasapositive
slope.

84) Accordingtothewealtheffect,anincreaseinthepricelevel________realwealthand________ 84)

consumptionexpenditure.
A) increases;decreases B) increases;increases
C) decreases;increases D) decreases;decreases

85) Intheabovefigure,whenthepricelevelis130,thequantityofrealGDPdemandedis 85)

A) 1,000billion. B) 1,050billion. C) 950billion. D) 900billion.

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86) IntheKeynesianmodelofaggregateexpenditure,realGDPisdeterminedbythe 86)
A) levelofaggregatedemand. B) pricelevel.
C) leveloftaxes. D) levelofaggregatesupply.

87) Aconsumptionfunctionshowsa 87)

A) positive(direct)relationshipbetweenconsumptionexpenditureanddisposableincome.
B) positive(direct)relationshipbetweenconsumptionexpenditureandthepricelevel.
C) negative(inverse)relationshipbetweenconsumptionexpenditureandsaving.
D) negative(inverse)relationshipbetweenconsumptionexpenditureandthepricelevel.

88) Thegraphoftheconsumptionfunctionhasconsumptionexpenditureontheverticalaxisand 88)

A) theinterestrateonthehorizontalaxis.
B) thepricelevelonthehorizontalaxis.
C) disposableincomeonthehorizontalaxis.
D) timeonthehorizontalaxis.

89) Disposableincomeis 89)

A) incomeplustransferpaymentsminusconsumptionexpenditure.
B) incomeminusnettaxes.
C) totalincomedividedbythepricelevel.
D) incomeminussaving.

90) Fullemploymentoccurswhenthe 90)

A) structuralunemploymentrateequalsthefrictionalunemploymentrate.
B) cyclicalunemploymentrateequalsthenaturalrateofunemployment.
C) naturalrateofunemploymentequalsthefrictionalunemploymentrate.
D) unemploymentrateequalsthenaturalrateofunemployment.

91) WhichofthefollowingvariablesdoesNOT haveadirecteffectofchangingconsumption 91)

expenditure?
A) Disposableincome. B) Wealth.
C) Expectedfutureprofits. D) Expectedfutureincome.

92) Autonomousconsumptionisthatportionofconsumptionexpenditurethatisnotinfluencedby 92)

A) thelegalauthorities. B) income.
C) prices. D) preferences.

93) Dissavingoccurswhenahousehold 93)

A) spendslessthanitreceivesindisposableincome.
B) spendsmorethanitsaves.
C) consumesmorethanitreceivesindisposableincome.
D) savesmorethanitspends.

94) Whendisposableincomeis0,consumptionis2000.Then 94)

A) saving=2000. B) saving= 0.
C) saving=-2000. D) theMPC= 0.2.

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 95) Themarginalpropensitytoconsumeis 95)
A) thefractionofachangeindisposableincomethatisconsumed.
B) oneminusthefractionoftotaldisposableincomethatissaved.
C) thepercentageofagivenincomethatisconsumed.
D) thepercentageofinterestincomeconsumed.

96) Themarginalpropensitytoconsume 96)

A) exceeds1. B) equals1.
C) isnegativeifdissavingispresent. D) isbetween0and1.

97) Ifconsumptionexpendituresforahouseholdincreasefrom1000to1800whendisposable 97)

incomerisesfrom1000to2000,themarginalpropensitytoconsumeis
A) 0.5. B) 0.2. C) 0.3. D) 0.8.

98) Themarginalpropensitytoconsumemeasureshowmuch 98)

A) consumptionexpenditureoccursattheequilibriumincome.
B) disposableincomeisconsumed.
C) ofachangeindisposableincomewillbeconsumed.
D) disposableincomegoestosaving.

99) ThelargertheMPC,the 99)

A) morelikelythatthemultiplierwillbeinconsequential.
B) largerthevalueofthemultiplier.
C) lesslikelythatthemultiplierwillbeaffected.
D) smallerthevalueofthemultiplier.

100) Intheabovefigure,autonomousexpenditurealongAE1 equals 100)

A) 300billion.
B) 600billion.
C) 0.
D) anamountnotgivenintheaboveanswers.

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101) Intheabovefigure,equilibriumexpenditurealongAE2 is 101)
A) 1,200billion.
B) 600billion.
C) 300billion.
D) anamountnotgivenintheaboveanswers.

Consumptionexpenditure: C= 8+ 0.7Y
Investment: I=5
Governmentexpenditures: G=7
Exports: X=10
Imports: M=0.2Y

102) TheequationsabovedescribetheeconomyofLaLaLand.Whatistheequationfortheaggregate 102)

expenditurecurve?
A) AE=30+0.5Y. B) AE=30+ 0.9Y. C) AE = 13+ 0.5Y. D) AE=30-0.5Y.

103) TheequationsabovedescribetheeconomyofLaLaLand.Whatistheequilibriumlevelof 103)

expenditure?
A) 90. B) 29. C) 60. D) 30.

104) TheequationsabovedescribetheeconomyofLaLaLand.Whatistheequilibriumlevelof 104)

consumptionexpenditure?
A) 60. B) 40.
C) 50. D) Noneoftheaboveanswersarecorrect.

105) Whichofthefollowingisapurposeofthegovernmentsbudget? 105)

I. Tohelptheeconomyachievefullemployment.
II. Tofinancetheactivitiesofthegovernment.
III. Topromotesustainedeconomicgrowth.
A) IIandIII. B) I,IIandIII. C) IandII. D) IandIII.

106) Fiscalpolicyincludes 106)

A) decisionsrelatedtothepurchaseofgovernmentgoodsandservices,thevalueoftransfer
payments,andtaxrevenue.
B) onlydecisionsrelatedtothevalueoftransferpaymentsandtaxrevenue.
C) onlydecisionsrelatedtothepurchaseofgovernmentgoodsandservicesandthevalueof
transferpayments.
D) onlydecisionsrelatedtothepurchaseofgovernmentgoodsandservices.

107) WhichofthefollowingisNOTasourceofrevenueforGhanagovernment? 107)

A) Nationalinsurancecontributions.
B) Transferpayments.
C) Taxesonincome.
D) Noneoftheaboveanswersiscorrectbecausetheyalllistsourcesofrevenue.

108) Abalancedbudgetoccurswhengovernment 108)

A) outlaysexceedsrevenue. B) revenueiscountedasanoutlay.
C) revenueexceedsexpenditures. D) revenueequalsoutlays.

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109) Ifthegovernmentrunsadeficit,thetotalamountofgovernmentdebtis 109)
A) constant. B) zero. C) increasing. D) decreasing.

110) Whenthegovernmentsexpendituresexceeditsrevenues,thegovernment 110)

A) incursabudgetdeficit. B) needstoborrow.
C) debtincreases. D) Alloftheaboveanswersarecorrect.

111) Thedifferencebetweenthegovernmentdebtandthebudgetdeficitis 111)

A) thegovernmentdebtshowstheannualdiscrepancybetweengovernmentoutlaysandtax
revenueandthebudgetdeficitshowstheaccumulatedbalanceofpastgovernmentdebts.
B) thebudgetdeficitshowstheannualdiscrepancybetweengovernmentoutlaysandtax
revenueandthegovernmentdebtshowstheaccumulatedbalanceofpastgovernmentdebts.
C) notsignificantbecausebothmoveinthesamedirection.
D) none.

112) Iftaxrevenueequal1.5billionandgovernmentoutlaysequal 1.6billion,then 112)

A) thegovernmentbudgethasadeficitof0.1billion.
B) thegovernmentbudgethasasurplusof0.1billion.
C) thegovernmentdebtdeclinesby0.1billion.
D) thegovernmentdebtisequalto0.1billion.

113) Adiscretionaryfiscalpolicyisafiscalpolicythat 113)

A) involvesachangeintaxrates.
B) involvesachangeingovernmentdefencespending.
C) requiresactionbytheChancelloroftheExchequer.
D) istriggeredbythestateoftheeconomy.

114) ThetaxincreasespassedtohelpmovetheeconomymorerapidlytowardpotentialGDParean 114)

exampleof
A) lump-sumtaxes. B) automaticfiscalpolicy.
C) discretionaryfiscalpolicy. D) contractionaryfiscalpolicy.

115) Anexampleofadiscretionaryfiscalpolicyiswhen 115)

A) lawsarepassedthatraisetaxes.
B) unemploymentpaymentsrisewithunemploymentrates.
C) autonomoustaxesareconstant.
D) taxrevenuesfallasincomesfall.

116) Theeffectsofachangeingovernmentexpendituresismultipliedthroughoutaneconomy 116)

A) onlywhenthereisanincreaseinexpenditures.
B) becausetaxesareleftunchanged.
C) onlywhenthereisadecreaseinexpenditures.
D) becausethesepurchasesgeneratechangesinconsumptionexpenditure.

117) Theterminducedtaxesrefersto 117)

A) salestaxesthatwepaybutcouldavoidifwechoosenottopurchasetheitem.
B) theriseintaxesthataretheresultofanincreaseinrealGDP.
C) thetaxesthatweareforcedtopay.
D) localpropertytaxesthatwepayinadditiontotheincometax.

16
118) Anautomaticstabilizer 118)
A) requiresactionbyParliamentforittotakeeffect.
B) involvesachangeintaxrates.
C) involvesachangeingovernmentexpenditures.
D) istriggeredbythestateoftheeconomy.

119) Becauseofautomaticstabilizers,whenrealGDPdecreases 119)

A) governmentexpendituresequaltaxrevenues.
B) theeconomyautomaticallygoestofullemployment.
C) governmentexpendituresdecreaseandtaxrevenuesincrease.
D) governmentexpendituresincreaseandtaxrevenuesdecrease.

120) Anexampleofanexpansionaryfiscalpolicyis 120)

A) adecreaseingovernmentexpenditures.
B) acutintaxes.
C) anincreaseintaxes.
D) Noneoftheaboveisanexpansionaryfiscalpolicy.

121) Anexampleofacontractionaryfiscalpolicyis 121)

A) acutintaxes.
B) anincreaseingovernmentexpenditures.
C) anincreaseintaxes.
D) Noneoftheaboveisacontractionaryfiscalpolicy.

122) IfthegovernmentwantstoengageinfiscalpolicytoincreaserealGDP,itcould________ 122)

governmentexpendituresinorderto________.
A) decreaseincreaseaggregatesupply B) decrease;decreaseaggregatedemand
C) increase;increaseaggregatesupply D) increase;increaseaggregatedemand

123) AnincreaseingovernmentexpendituresshiftstheAD curve________andanincreaseintaxes 123)

shiftstheADcurve________.
A) rightward;rightward B) leftward;rightward
C) leftward;leftward D) rightward;leftward

124) Thefunctionsofmoneyare 124)

A) mediumofexchange,unitofaccount,andstoreofvalue.
B) pricing,contracts,andmeansofpayment.
C) mediumofexchangeandtheabilitytobuygoodsandservices.
D) mediumofexchange,unitofaccount,andmeansofpayment.

125) Incometaxesandtransferpayments 125)

A) increasetheeffectsofinvestmentandimports.
B) preventtheeconomyfrommovingtowardequilibrium.
C) increasethelong-runincomegrowthrate.
D) actlikeeconomicshockabsorbersandstabilizefluctuationsinincome.

17
126) Anexampleofanautomaticfiscalpolicystabilizeriswhen 126)
A) thegovernmentpassesalawthatraisestaxrates.
B) taxrevenuesdecreaseasrealGDPdecreases.
C) thebudgetdeficitmovesintoasurplusduringarecession.
D) thegovernmentdecidestocutgovernmentexpenditures.

127) WhichofthefollowingdoesNOTdescribeafunctionofmoney? 127)

A) Ahedgeagainstinflation. B) Aunitofaccount.
C) Astoreofvalue. D) Amediumofexchange.

128) Barteris 128)

A) theexchangeofgoodsandservicesforanytypeofmoney.
B) anothertypeofmoney.
C) theexchangeofgoodsandservicesdirectlyforothergoodsandservices.
D) printingtoomuchmoney.

129) Themostdirectwayinwhichmoneyeliminatestheneedforadoublecoincidenceofwantsis 129)

throughitsuseasa
A) mediumofexchange. B) storeofvalue.
C) unitofaccount. D) standardofdeferredpayment.

130) Theunitofaccountfunctionoccurswhenmoneyservesas 130)

A) ameansofpayment. B) amediumofexchange.
C) adoublecoincidenceofwants. D) thewayinwhichpricesarequoted.

131) Whichofthefollowingisanexampleofusingmoneyasastoreofvalue? 131)

A) Keeping200onhandforanemergency.
B) Payingrentwithachequeonademanddeposit.
C) Payingforanewdresswithacreditcard.
D) Payingcashforanewautomobile.

132) IntheGhanatoday,moneyconsistsof 132)

A) onlydepositsatbanksandotherfinancialinstitutions.
B) onlycurrency.
C) onlycoins.
D) currencyanddepositsatbanksandotherfinancialinstitutions.

133) InGhanaM2+isameasureof 133)

A) liquidityandinwhichthemostliquidassetismoney.
B) moneyandincludesbothcurrencyandalldeposits.
C) moneyandincludessightdepositsbutnottimedeposits.
D) moneyandincludesonlycurrency.

134) Chequesare 134)

A) money,asarecreditcards. B) notmoney,andneitherarecreditcards.
C) notmoney,butcreditcardsare. D) money,butcreditcardsarenot.

18
135) Usingacreditcardcanbestbelikenedto 135)
A) abarterexchange.
B) takingoutaloan.
C) usinganyotherformofmoneybecauseyouimmediatelygettotakethegoodshome.
D) writingachequeonyourdemanddepositaccount.

136) WhichofthefollowinginstitutionsisNOT afinancialintermediary? 136)

A) Aruralbank.
B) Acommercialbank.
C) ThebankofGhana.
D) Noneoftheaboveanswersiscorrectbecausealltheanswerslistedarefinancial
intermediaries.

137) Afinancialintermediaryisbestdefinedas 137)

A) agovernmentagency,suchastheBankofEngland.
B) themostpowerfulbodywithintheBankofEngland.
C) asafirmthatacceptsdepositsfromhouseholdsandmakesloanstootherhouseholds.
D) asthelenderoflastresort.

138) Themajorroleofacommercialbankisto 138)

A) makemortgageloans.
B) restrainthegrowthofthequantityofmoney.
C) receivedepositsandmakeloans.
D) sellsharesandusetheproceedstobuystocks.

139) Whichofthefollowingbalancesheetitemsisaliabilityofacommercialbank? 139)

A) Thepublicsdepositswiththebank.
B) ThebanksholdingsofGhanagovernmentbonds.
C) ThebanksholdingsofBraziliangovernmentbonds.
D) ReservesofthebankattheBankofGhana.

140) Foracommercialbank,thetermreservesrefersto 140)

A) abankersconcern(reservation)inmakingloanstoanindividualwithoutajob.
B) thecashinitsvaultsanddepositsattheBankofGhana.
C) theprofitthatthebankretainsattheendoftheyear.
D) thenetinterestthatitearnsonloans.

141) Ofthefollowing,theriskiestassetsheldbycommercialbanksare 141)

A) reserves. B) GhanagovernmentTreasurybills.
C) loansmadetobusinessfirms. D) Ghanagovernmentbonds.

142) Liquidityisthe 142)

A) easewithwhichanassetcanbeconvertedintoameansofpaymentwithlittlelossofvalue.
B) degreetowhichanassetactsasmoneywithoutalossofvalue.
C) easewithwhichcreditcardsareacceptedasameansofpayment.
D) degreetowhichmoneycanbeconvertedintoanassetwithlittlelossofvalue.

143) Financialintermediariescreateliquiditywhenthey 143)

A) buyassetsthatareliquid. B) borrowlongandlendshort.
C) haveliabilitiesthatareilliquid. D) borrowshortandlendlong.

19
144) Poolingofriskoccurswhenfinancialintermediaries 144)
A) lendtoavarietyofdifferentborrowers.
B) specializeinloaningonlytogoodborrowers.
C) bringlenderstogether.
D) makeassetsmoreliquid.

145) ThebankingsysteminGhanacreatesmoneythroughthecombinationofexcessreservesand 145)

A) stringentBankofGhanaregulations.
B) banksloaningexcessreserves.
C) banksassetsbeingmorethantheirliabilities.
D) commoditymoney.

146) Youmakeadepositof2,000incurrencyatyourbank.Yourbankhasadesiredreserveratioof25 146)

percent.Asaresultofyourdeposit,yourbankwillbeabletoloan
A) 500. B) 2,000.
C) 1,500. D) Noneoftheaboveanswersiscorrect.

147) Theformulaforthedepositmultiplieris 147)

A) 1/(desiredreserveratio). B) 1/(1- desiredreserveratio).
C) 1/(1-actualreserves). D) 1/(1- desiredreserves).

148) Thelargerthedesiredreserveratio,the 148)

A) loweristheinterestratethatbankschargeborrowers.
B) smalleristhedepositmultiplier.
C) largeristheratioofloanstodeposits.
D) higheristheinterestratesthatbankspaydepositors.

149) Adesiredreserveratioof5percentyieldsadepositmultiplierof 149)

A) 5.0. B) 10. C) 1.25. D) 20.

150) Thequantityofmoneythatpeoplechoosetoholddependsonwhichofthefollowing? 150)

I. Thepricelevel.
II. Financialinnovation.
III. Theexchangerate.
A) IandII. B) I. C) I,II,andIII. D) IandIII.

151) Thenominaldemandformoneyis 151)

A) measuredinconstantpounds. B) proportionaltothepricelevel.
C) inverselyrelatedtoGDP. D) inverselyrelatedtothepricelevel.

152) Supposeyouhold50tobuygroceriesweeklyandthenthepriceofgroceriesincreasesby5per 152)

cent.Tobeabletobuythesameamountofgroceries,yournominalmoneyholdings
A) mustincreaseby5.
B) mustincreaseby2.50.
C) candecreaseby5.
D) mustincrease,buttheamountoftheincreaseisdifferentthantheaboveanswers.

20
153) Theopportunitycostofholdingmoneyisthe 153)
A) easewithwhichanassetcanbecomemoney.
B) priceofgoodsandservices.
C) interestrate.
D) levelofwageandrentalincome.

154) Theopportunitycostofholdingmoneyincreaseswhen 154)

A) thepriceofgoodsandservicesfalls. B) theinterestraterises.
C) consumersincomesincrease. D) thepurchasingpowerofmoneyrises.

155) Whentheinterestraterises,thequantityofmoneydemandeddecreasesbecause 155)

A) thepricelevelalsorisesandpeopledecreasetheirdemandformoney.
B) peoplewillbuyfewergoodsandholdlessmoney.
C) peopleshiftfundsfrommoneyholdingstointerest-bearingassets.
D) peoplemovefundsfrominterest-bearingassetsintomoney.

156) ________inrealGDPincreasethedemandformoneyand________intheinterestratedecrease 156)

thequantityofmoneydemanded.
A) Decreases;increases B) Increases;increases
C) Increases;decreases D) Decreases;decreases

157) Thedemandformoneycurve 157)

A) hasanegativeslope. B) isvertical.
C) hasapositiveslope. D) ishorizontal.

158) Thesupplyofmoneycurve 158)

A) ishorizontal. B) hasanegativeslope.
C) hasapositiveslope. D) isvertical.

159) Bondpricesandinterestratesare 159)

A) unrelated.
B) independentofanyactionbytheBankofEngland.
C) inverselyrelated.
D) positivelyrelated.

160) Ifbondpricesfall, 160)

A) interestratesrise. B) bankreservesgrow.
C) householdsincreasecashholdings. D) interestratesfall.

161) Supposethattheinterestrateisgreaterthantheequilibriuminterestrate.Whichofthefollowing 161)

occurs?
I. Thereisanexcessquantityofmoney.
II. Thequantityofmoneyautomaticallyincreases.
III. Peoplestartbuyingbonds.
A) I. B) IandII. C) IandIII. D) I,IIandIII.

21
162) TheBankofGhana 162)
A) regulatesthenationsfinancialinstitutions.
B) conductsthenationsmonetarypolicy.
C) BothanswersAandBarecorrect.
D) NeitheranswerAnorBiscorrect.

163) WhichofthefollowingisNOTafunctionofacentralbank? 163)

A) Regulatingbanks.
B) Operatingasabankforthegovernment.
C) Operatingasaborroweroffirstresort.
D) Operatingasabankforcommercialbanks.

164) Controllingthequantityofmoneyandinterestratestoinfluenceaggregateeconomicactivityis 164)

called
A) fiscalpolicy. B) bankpolicy.
C) monetarypolicy. D) foreignpolicy.

165) Themonetarybase(high-poweredmoney)isthesumof 165)

A) banksreservesattheBankofGhanaandrepoloanstobanks.
B) governmentdepositsattheBankofGhana,notesheldbythepublic,coins,andbanks
reservesattheBankofEngland.
C) Treasurybillsandothergovernmentsecurities.
D) notesheldbythepublic,coins,andbanksreservesattheBankofGhana.

166) WhichofthefollowingisatoolthatisusedbytheBankof Ghana tocontrolthesupplyofmoney? 166)

A) Excessreserves. B) Governmentexpendituremultiplier.
C) Realinterestrates. D) Openmarketoperations.

167) TheBankofGhanaspurchaseorsaleofGhana governmentsecuritiesis 167)

A) donelessfrequentlythananyoftheBankofGhanasothermonetarypolicytools.
B) anexampleoftheBankofGhanausingitsreporate.
C) calledanopenmarketoperation.
D) anexampleoftheBankofGhanaactingasalenderoflastresort.

168) Themoneymultiplierdetermineshowmuch 168)

A) themonetarybasewillexpandgivenachangeinthequantityofmoney.
B) thequantityofmoneywillexpandgivenachangeinthemonetarybase.
C) moneydemandwillexpandgivenachangeinthequantityofmoney.
D) realGDPwillexpandgivenanincreaseinautonomousinvestment.

169) Whentherealinterestratefalls, 169)

A) netexportsdecrease. B) investmentexpendituresincrease.
C) consumptionexpendituresdecrease. D) thepoundexchangeraterises.

170) IftheBankofGhanadecreasesthesupplyofmoney,then 170)

A) aggregatedemanddecreases. B) long-runaggregatesupplyincreases.
C) long-runaggregatesupplydecreases. D) aggregatedemandincreases.

22
171) TheBankofEnglandsactionstofightinflationshiftthe 171)
A) long-runaggregatesupplycurverightward.
B) long-runaggregatesupplycurveleftward.
C) aggregatedemandcurveleftward.
D) aggregatedemandcurverightward.

172) Thesupplyofanddemandformoneydeterminetheequilibrium 172)

A) interestrate. B) pricelevel.
C) realwagerate. D) levelofrealGDP.

173) Anexpansionaryfiscalpolicy________theinterestrate. 173)

A) lowers
B) raises
C) doesnotchange
D) Noneoftheaboveanswersiscorrectbecausetheeffectontheinterestratedependson
whethertheexpansionaryfiscalpolicywasanincreaseingovernmentexpendituresoracut
intaxes.

174) AtaxcutincreasesrealGDP.TheincreaseinrealGDP________thedemandformoney. 174)

A) increases
B) decreases
C) doesnotchange
D) probablychangesbutmoreinformationisneededtodetermineifitincreasesordecreases

175) Theideathatanexpansionaryfiscalpolicydecreasesinvestmentiscalledthe 175)

A) capitalinvestmenteffect. B) crowding-outeffect.
C) government-investmenteffect. D) offseteffect.

176) Fiscalpolicyismosteffectiveif 176)

A) achangeintheinterestratehasalargeeffectonthequantityofmoneydemanded.
B) achangeintheinterestratehasasmalleffectonthequantityofmoneydemanded.
C) achangeintheinterestratehasnoeffectonthequantityofmoneydemanded.
D) thereisalotofcrowdingout.

177) Monetarypolicyismosteffectivewhen 177)

A) agivenchangeinthemoneysupplyhasalargeeffectontheinterestrate.
B) agivenchangeinthemoneysupplyhasalargeeffectoninflation.
C) theinterestratedoesnotinfluenceaggregateexpenditures.
D) agivenchangeinthemoneysupplyhasnoeffectontheinterestrate.

178) Thegoodsandservicesthatacountrybuysfromothercountriesarecalledits 178)

A) imports. B) exports. C) tariffs. D) quotas.

179) Netexportsis 179)

A) thevolumeofexportsminusthevolumeofimports.
B) thevolumeoftrademinusthevalueoftrade.
C) totalUKtrademinusthetotaltradeoftherestoftheworld.
D) thevalueofexportsminusthevalueofimports.

23
180) Acountryhasacomparativeadvantageinproducingagoodifincomparisontoanyother 180)
country,itcanproducethatgood
A) withasmallerweightedaverageofinputs.
B) withlesslabour.
C) ataloweropportunitycost.
D) atloweraveragecost.

181) Whentradebetweentwocountriesoccurs,theresultisthat 181)

A) bothcountriesgainbecausetheyeachproducemorethanbefore.
B) onecountrygainsbecauseitcanconsumemorethanbeforeandtheothercountryloses.
C) bothcountrieslosebecausetheincreaseindemandforeachcountrysoutputcausespricesto
rise.
D) bothcountriesgainbecausebothcanconsumemorethanbefore.

182) Atariffisa 182)

A) subsidyonanexportedgood. B) taxonanimportedgoodorservice.
C) subsidyonanimportedgood. D) taxonanexportedgoodorservice.

183) Amajorpurposeoftariffsisto 183)

A) discourageimports. B) discourageexports.
C) encourageexports. D) encourageimports.

184) Anyactionotherthanatariffthatrestrictsinternationaltradeiscalleda 184)

A) subsidy. B) non-tariffbarrier.
C) quota. D) surcharge.

185) Anon-tariffbarrieris 185)

A) alicensefeethatmustbepaidtogetanexportlicenseintheUnitedKingdom.
B) anamountofmoneypaidfortheprivilegeofsellingagoodexportedfromthecountry.
C) anyactionotherthanatariffthatlimitstheimportsofgoodsandservices.
D) anyactionotherthanatariffthatlimitstheproductionofgoodsandservices.

186) Toolsusedtoprotectdomesticindustriesfromforeigncompetitionincludewhichofthe 186)

following?
I. tariffs.
II. membershipintheWTO.
III. participationinGATT.
A) I. B) IandII. C) IIandIII. D) I,II,andIII.

187) UKtradebarriersonbeef 187)

A) reduceUKbeefpricesanddecreaseUKjobsraisingcattle.
B) raiseUKbeefpricesanddecreaseUKjobsraisingcattle.
C) reduceUKbeefpricesandincreaseUKjobsraisingcattle.
D) raiseUKbeefpricesandincreaseUKjobsraisingcattle.

188) Tariffs 188)

A) encourageproducerstoproduceless.
B) earnrevenueforconsumers.
C) encourageconsumerstobuymoreimports.
D) earnrevenueforthegovernment.

24
189) Quotas 189)
A) arenotusedbytheUnitedKingdom.
B) arethesameastariffs.
C) settheminimumpercentageofthevalueofaproductthatmustconsistofimported
components.
D) setthenumberofunitsofagoodthatcanbeimported.

190) Aquotadirectlyrestricts________andsoitprotectsdomestic________. 190)

A) exports;producers B) imports;producers
C) imports;consumers D) exports;consumers

191) AllofthefollowingareargumentsforprotectionfrominternationalfreetradeEXCEPT 191)

A) protectionstrengthenstheefficiencygainsfromacomparativeadvantage.
B) protectionpenalizeslaxenvironmentalstandards.
C) protectionpromotesdiversityandstability.
D) protectionpreservesdomesticculture.

192) Themostefficientwaytoencouragethegrowthofaninfant-industryisthrougha 192)

A) tariff. B) quota.
C) voluntaryexportrestraint. D) subsidy.

193) Thebalanceofpaymentsaccountusedtorecordpaymentsforimportedgoodsandservicesisthe 193)

A) currentaccount. B) capitalaccount.
C) importaccount. D) eximaccount.

194) TheUKcapitalaccountmeasures 194)

A) receiptsfromgoodsandservicessoldandtransferstoandfromforeigners.
B) nettransferpaymentsbetweenUKresidentsandforeigners.
C) netincreasesanddecreasesintheUKholdingsofforeigncurrency.
D) foreigninvestmentintheUnitedKingdomminusUKinvestmentabroad.

195) Acreditornationmeansanationwhose 195)

A) lendingtotherestoftheworldexceedsitsborrowingfromtherestoftheworld.
B) exportsexceeditsimports.
C) currentaccountislargerthanitscapitalaccount.
D) totalinvestmentsintherestoftheworldexceedstherestoftheworldsinvestmentsinthat
country.

196) Adebtornationmeansanationwhose 196)

A) currentaccountislessthanitscapitalaccount.
B) importsexceedsitsexports.
C) totalinvestmentsintherestoftheworldarelessthantherestoftheworldsinvestmentsin
thatcountry.
D) lendingtotherestoftheworldexceedsitsborrowingfromtherestoftheworld.

25
197) Whichofthefollowingapplytoexchangerates? 197)
I. Theexchangerateisaprice.
II. Theexchangerateforacurrencydependsonwhichforeignexchangemarketyouuse.
III. TheforeignexchangerateisdifferentfromotherpricesbecauseitisNOTdeterminedby
supplyanddemand.
A) IIandIII. B) I. C) I,II,andIII. D) IandII.

198) Bydefinition,currencydepreciationoccurswhenthevalueof 198)

A) thecurrencyrisesrelativetoanothercurrency.
B) thecurrencyfallsrelativetoanothercurrency.
C) allcurrenciesfallrelativetogold.
D) goldfallsrelativetothevalueofcurrencies.

199) Thelawofdemandforcedismeansthatthe 199)

A) lowertheexchangerate,thegreaterthequantityofcedisdemanded.
B) highertheexchangerate,thesmallerthequantityofcedisdemanded.
C) lowertheexchangerate,thesmallerthequantityofGhanaexportsdemanded.
D) BothanswersAandBarecorrect.

200) ThegreaterthedemandforGhanaexports,the 200)

A) largeristhecurrentaccountdeficit.
B) largeristhequantityofGhanapoundsdemanded.
C) largeristhedemandfornon-Ghanacurrencies.
D) smalleristhequantityofGhanapoundsdemanded.

26