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Supplementary objective test questions

CHAPTER 4 – MACROECONOMICS I – THE DOMESTIC ECONOMY

4.1 Governments wish to control inflation because

A it redistributes from rich to poor people

B it damages international competitiveness

C it reduces government tax revenue

D it reduces unemployment

4.2 The expenditure method of measuring national income:

A Measures economic activity by summing the value of expenditure on
consumer goods

B Measures economic activity by summing of expenditure on final goods

C Measures economic activity by summing the value of expenditure on all
goods

D Is determined by the income method

4.3 If in a closed economy, consumption expenditure increases from $18,000m
to $19,500m when national income increases from $20,000m to $26,000m,
then the marginal propensity to consume out of national income is:

A 0.25 and the multiplier is 1.33

B 0.75 and the multiplier is 1.33

C 0.25 and the multiplier is 2

D 0.75 and the multiplier is 2

4.4 The accelerator principle states that:

A Investment is increased when interest rates fall.

B An increase in consumer demand leads to a more than proportionate
increase in the level of investment

C An increase in investment will lead to a more than proportionate increase in
output

D The rate of change of investment affects the rate of change of output

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