1. Which combination of changes over time in an economy would definitely represent increased
economic growth per capita?

	Average Price Level	Total Output	Total Population	Gini Coefficient
A	Falls	Rises	Falls	Rises
B	Falls	Rises	No change	Falls
C	Rises	Falls	Falls	Rises
D	Rises	Rises	Rises	Rises

2. Under which circumstances will the future burden of the national debt on a country increase the
most?

	Increase in the budget deficit	Change in GDP	Price of government bonds
A	+ 2% of GDP	+4%	Decreasing
B	+ 2% of GDP	+4%	Increasing
C	+ 4% of GDP	+2%	Decreasing
D	+ 4% of GDP	+2%	Increasing

3. Country X has a low rate of inflation and a stable currency and unemployed resources. It attracts
$25 billion of direct foreign investment.
What is most likely to be a positive benefit of the inflow of this foreign direct investment for
country X?
A Aggregate demand will be boosted through the investment multiplier.
B Country X will have to use its foreign reserves to eliminate any trade deficit.
C The balance of payments will be affected with the outflow of profits to foreigners.
D The rate of inflation will increase if country X tries to increase capacity.

4. A country with an income tax rate X decides to increase its tax rate.
The diagram shows tax revenue will fall.

Why would this happen?
A Fewer goods will be produced.
B People will work fewer hours to maintain incomes.
C Prices will rise.
D There will be an increase in tax avoidance.

5. What are the labels on the axes of a Phillips curve diagram?

	Vertical Axis	Horizontal Axis
A	Inflation rate	Unemployment level
B	Inflation rate	Unemployment rate
C	Price level	Unemployment level
D	Price level	Unemployment rate

Answers