亚澳经济期末复习EXAM REVISION GUIDE EXAMPLE QUESTIONS SEC 1-5

Section 1:

Multiple choice questions

1. Scarcity is: a) b) c) d)

2. On the PPF, production can occur a) b) c) d)

Outside the PPF Inside the PPF

At the bottom of the PPF At any point along the PPF

There are not enough resources to satisfy everyone’s needs The study of inflation and deflation

How everyone makes choices and how the government wants them to make choices The GDP of the economy

3. The Law of Demand states that when prices increase a) b) c) d)

Demand increases

Demand stays the same Demand decreases All of the above

4. What is the correct answer a) b) c) d)

Market equilibrium occurs when the price of a good is the same as its production cost Market equilibrium occurs when the demand decreases but supply increases Market equilibrium occurs when supply exceeds demand

Market equilibrium occurs when Demand and Supply are equal

5. Calculate price elasticity of demand, if the price increases by 30% and the quantity demanded decreases by

60% a) b) c) d)

0 (inelastic) 2 (inelastic) 1 (elastic) 2 (elastic)

6. An increase population causes a) b) c) d)

A increase of supply at any given price Downward movement on the supply curve An upward movement on the supply curve A leftward shift on the supply curve

7. A business in perfect competition a) b) c) d)

Has to undertake extensive advertising to stay in business Is a price taker

Is unable to diversify its products Has no competition

8. If there is an increase in the price of cigarettes for cigarette companies, this is evidence that demand is: a) b) c) d)

9. Demand Pull Inflation results in a) b) c) d)

10. Calculate real interest, if inflation is 5% and nominal interest is 15% a) b) c) d)

Real interest is 5% Real interest is 10% Real interest is 20% Real interest is 75%

Section 2:

Short Answer Questions

Rising prices and lower supply Left shift in the demand curve Increase in interest rates

Rising prices and increasing supply Price elastic Price inelastic Unitary elastic Perfectly elastic

1. There is a new machine to make Chinese dumplings which decreases the cost of producing them by 50%.

Using diagrams explain what would happen to:

a) b) c) d)

the supply of Chinese dumplings Demand for Chinese dumplings

Equilibrium price and quantity of dumplings

Demand for soya sauce which you must have with dumplings

2. In the business cycle, what would happen to inflation, unemployment and GDP at each stage. Include a

diagram 3. Define Nominal and Real GDP and the GDP deflator effect

4. Using diagrams explain the difference between price elasticity and demand elasticity Section 3:

Essay Questions

Discuss the relationship between GDP and inflation by explaining the difference between demand-pull and cost-push inflation. Use diagrams to illustrate your answer.