Question 1

When central banks adopt a policy of 'quantitative easing' this means that they:

Options :

A : Lift quantitative restrictions on bank lending

B : Lower the capital adequacy requirements for banks

C : Buy government bonds from the banks

D : Ease the liquidity ratios banks need to hold

Answer: C

Question 2

If the government imposed a legal minimum wage that was above the market equilibrium wage, the resulting unemployment would be the greatest when:

Options :

A : the demand for labor and the supply of labor are both price inelastic

B : the demand for labor and the supply of labor are both price elastic

C : the demand for labor is price inelastic and the supply of labor is price elastic

D : the demand for labor is price elastic and the supply of labor is price inelastic

Answer: B

Question 3

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 4

Which ONE of the following circumstances is essential if producer incomes are to rise following the imposition of a price floor (minimum price) in a market?

Options :

A : Market supply is price inelastic

B : Market demand is price inelastic

C : Market supply is price elastic

D : Market demand is price elastic

Answer: B

Question 5

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

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