Supply and Demand
Which of the following statements is not true:
1. Potential output is the level of output that is consistent with normal capacity utilization, a “natural rate” of unemployment, and low and stable inflation.
2. Potential output always grows
3. Actual output above Potential output means that inflationary pressures may develop
3. Fiscal and Monetary policies can reduce the output gap, whether it is negative or positive
2. Potential output always grows
Inflation matters to a country’s citizens because:
A. High rates of inflation signal better economic management
B. High rates of inflation can indicate erosion of the purchasing power of wages and assets.
C. High rates of inflation mean that people are more confident in the government
D. None of the above
B. High rates of inflation can indicate erosion of the purchasing power of wages and assets.
Which of the following statements is not true:
1. Fiscal multipliers are likely to be always positive
2. Fiscal multipliers are likely to be higher under fixed exchange rates
3. Fiscal multipliers are likely to be higher when the economy is in recession
4. Fiscal multipliers are likely to be higher when measures are financed externally
2. Fiscal multipliers are likely to be higher under fixed exchange rates
Which of the following elements is not part of the external current account:
1. Trade Balance in goods and services
2. Primary income, or net factor receipt and payments from abroad
3. Receipts and payments for the sale of land
4. Secondary income, or net transfers
3. Receipts and payments for the sale of land
If the macroeconomic environment becomes more volatile
A. There is likely no impact on the financial system
B. There will be a higher probability that the value of financial assets will exceed liabilities
C. There will be a higher probability that the value of liabilities will exceed that of financial assets
D. None of the above
C. There will be a higher probability that the value of liabilities will exceed that of financial assets
Three factors of production are:
1. Investment, Money, Natural Resources
2. Investment, Capital, Productivity
3. Labor, Money, Capital
4. Productivity, Capital, Labor
4. Productivity, Capital, Labor
In a certain economy, apparel comprises 5 percent of the consumer’s basket of goods and the rate of growth of apparel prices was 20 percent. The contribution of apparel to overall inflation is:
A. 20 percent
B. 10 percent
C. 1 percent
D. 0.1 percent
C. 1 percent
Which of following is true about primary balance:
1. Primary balance is difference between revenue and current expenditure
2. Primary balance is the difference between revenue and non-interest expenditure
3. Primary balance is the difference between tax revenue and interest expenditure
4. Rhinoceros
2. Primary balance is the difference between revenue and non-interest expenditure
Which of the following statements about the Real Exchange Rate is not true:
1. The RER represents the ratio between domestic and external prices in a common currency
2. The RER is measured considering a common basket of prices (consumer goods) or alternative indices like unit labor costs
3. A RER appreciation means the country is less competitive in export markets
4. The RER is independent of the economic fundamentals (business cycle, external conditions)
4. The RER is independent of the economic fundamentals (business cycle, external conditions)
An economy is said to have “external balance”
1. When the external current account is zero or positive
2. When the external current account can be financed by capital flows in a manner consistent with growth prospects and without restrictions on trade and external payments over time
3. When the external current account is financed by FDI flows
4. When central bank international reserves increase over time
2. When the external current account can be financed by capital flows in a manner consistent with growth prospects and without restrictions on trade and external payments over time
When actual output exceeds potential level
1. Economy is overheating indicating the demand side pressure on inflation
2. That’s is a good sign, government policies pay back
3. Unemployment soon reach zero level
4. Actual output can never exceed potential level
1. Economy is overheating indicating the demand side pressure on inflation
Which of the following is not a goal of monetary policy
A. Maximizing nominal GDP
B. Stabilizing prices / inflation
C. Keeping real output close to potential
D. None of the above
Maximizing nominal GDP
Fiscal balances are affected by:
1. Discretionary Measures
2. Cyclical factors affecting automatic stabilizers
3. Factors that go beyond the domestic economic cycle, like commodity prices
4. All of the above
4. All of the above
Which of the following statements is true:
1. If the external current account is close to equilibrium, the RER is likely to be close to equilibrium
2. If there is a ‘gap’ in the external current account with respect to its equilibrium level or ‘norm’, that is only the result of external factors
3. Macroeconomic policies are unlikely to affect the external current account ‘norm’
4. Estimates of the external current account ‘norm’ are unlikely to be controversial
1. If the external current account is close to equilibrium, the RER is likely to be close to equilibrium
Which of the following is not an example of macroeconomic vulnerability:
1. Persistent low growth
2. High Public debt
3. Increasing maturity mismatches in banks’ balance sheets
4. Tightening of external financial conditions
4. Tightening of external financial conditions
Which of the following statements is true:
1. The use of time-series techniques is the best way to calculate potential output
2. The HP filter suffers from end-of-sample bias
3. Real GDP estimates are independent of the price indices used for calculation, regardless of the base year of the index
4. The linear trend approach provides an economic rationale for the calculation of potential output
2. The HP filter suffers from end-of-sample bias
If the central bank raises interest rates by less than the increase in the rate of inflation, which of the following will happen?
A. The nominal and real interest rates both rise
B. The nominal and real interest rate both fall
C. The nominal interest rate will fall but the real interest rate will rise
D. The nominal interest rate will rise but the real interest rate will fall
D. The nominal interest rate will rise but the real interest rate will fall
Which of the following is true about automatic debt dynamic
1. If the real interest rate exceed real growth rate automatic debt dynamic is positive
2. If the real interest rate is below real growth rate automatic debt dynamic is positive
3. If the real interest rate exceed real growth rate automatic debt dynamic is negative
4. If the real interest rate is below real growth rate automatic debt dynamic is positive
1. If the real interest rate exceed real growth rate automatic debt dynamic is positive
Which of the following statements about the External Current Account is not true:
1. The external current account can always be negative
2. The external current account is likely to deteriorate under RER appreciation
3. External current account deficits above 4 percent of GDP reflects RER misalignment
4. External account surpluses mean that residents are saving in external assets
1. The external current account can always be negative
Which of the following is not an example of risk:
1. Volatility of commodity prices
2. Political conflict
3. Declining capital ratios in the banking sector
4. Natural disasters
3. Declining capital ratios in the banking sector
Consider the aggregate demand/aggregate supply diagram. A shift to the left in the aggregate demand (AD) curve can potentially arise from:
1. An increase in the money supply
2. An increase in imports
3. An increase in government consumption
4. A decrease in oil prices in the case of an oil importer
2. An increase in imports
Which of the following is NOT a reason why we should be concerned about the soundness of the financial system?
A. A sound financial system can better provide credit to both private and public sectors
B. A bankruptcy in the financial system can bring about adverse ‘knock on’ effects in the economy.
C. It is important that we bail out failing banks – no matter what
D. None of the above
C. It is important that we bail out failing banks – no matter what
A Discretionary Fiscal Contraction (more taxes or less spending):
1. Improves the overall fiscal balance
2. Improves the cyclically-adjusted fiscal balance
3. Improves the primary balance
4. All of the above
4. All of the above
Which of the following statements is true:
1. If errors and omissions are zero, the sum of the current, capital, and financial accounts (BPM6) is zero
2. If there is a domestic negative output gap combined with a positive output gap in the rest of the world, the current account is likely to deteriorate.
3. High commodity prices deteriorate the current account
4. FDI inflows are the preferred form of external financing because they are short-term
1. If errors and omissions are zero, the sum of the current, capital, and financial accounts (BPM6) is zero
When making an assessment of risks facing an economy, which of the following considerations is not relevant:
1. Understanding the channel of transmission of risks to the macroeconomy
2. Knowing the exact probability of materialization of risks
3. Understanding the vulnerabilities that may worsen the impact of the materialization of risks
4. Understanding what policy options are available to face or mitigate the materialization of risks
2. Knowing the exact probability of materialization of risks