1. Which statement about unemployment is correct?
A Cyclical unemployment is caused by the occupational immobility of labour.
B Frictional unemployment is caused by a lack of information on jobs in the labour market.
C Structural unemployment is caused by a deficiency in aggregate demand.
D Voluntary unemployment is caused by variations in the demand for labour in the year.

2. The graph shows the percentage unemployed in a country for the period 2017–2021.

What is the most likely cause of the change in unemployment?
A a reduction in government expenditure
B a reduction in interest rates
C a reduction in investment by firms
D a slowdown in growth in the global economy

3. What is the definition of liquidity?
A the ability of the foreign exchange market to buy foreign currency
B the support a central bank provides for commercial banks
C the ease with which an asset can be converted into cash
D the reaction of governments to a global financial crisis

4. What will decrease if an open economy experiences a positive output gap?
A general price level
B import spending
C spare capacity
D wage rates

5. Which statement does not correctly characterise the Monetarist view of the way in which the
economy operates?
A Inflation is always caused by increases in the money supply in the long run.
B The long-run aggregate supply curve is vertical in shape.
C The velocity of circulation of money is highly unstable.
D Wages are flexible both upwards and downwards.

Answers