1. This test consists of 10 questions designed to test your understanding of Macro Economics The links provide you with a choice of answer, along with explanations.

2. Which of the following is a Fiscal Policy? a. Increasing Interest Rates b. Increasing direct taxes c. Introducing Trade Union legislation

3. Correct - Fiscal policy relates to Government taxation and expenditure

4. An example of monetary policy.

5. An example of Supply Side policies

6. Which of the following is a direct tax? A. VAT B. Customs and excise duties C. Higher rate income tax

7. Value added tax is an indirect tax - a tax on income.

8. Customs and excise duties are indirect taxes - a tax on expenditure.

9. Correct, direct taxes are taxes on income

10. Which of the following policies is likely to increase the value of the £ against the €? A. A reduction in income tax levels B. An increase in interest rates C. Switch from direct to indirect taxation

11. This would probably increase imports therefore reducing the value of the £

12. Correct. Demand for £’s would increase ( hot money flows), therefore increasing value of £

13. Likely to have no effect on value of £

14. Which type of unemployment varies with fluctuations in economic activity? A. Cyclical B. Frictional C. Structural

15. Frictional unemployment is job search unemployment.

16. Structural unemployment relates to changes in technology or patterns of demand

17. Well done! Cyclical unemployment results from fluctuations in the economic cycle

18. Which of the following cause inflation? A. An increase in imports because of the increasing value of the £ on Forex markets. B. An increase in demand levels above the capacity of UK industry

19. This is likely to lower the cost of imports and therefore reduce inflationary pressure.

20. Correct! In these circumstances firms can increase prices, and maintain demand levels

21. A Which of the following is a cause of inflation? A. Fall in consumer confidence B. Increase in investment by firms C. Increase in firms costs

22. Correct.

23. Wrong.

25. Which of the following defines supply side policies? A. The MPC’s policy of controlling inflation through interest rates. B. Attempts to make the operation of the economy more efficient.

26. Wrong, Monetary policy

27. Correct. Supply side policies attempt to increase aggregate supply in the economy, by making labour, and all other markets operated more efficiently

28. Which of the following is a government Macro economic objective? A. maintaining a stable exchange rate B. maintaining a low rate of crime C. maintaining stable and sustainable growth of GDP

29. Wrong.The £ is allowed to float freely on the Forex markets.

30. Correct. This is one of the main macro economic objectives along with, low rates of unemployment and inflation, as well as balance on the Current Account of Balance of Payments

31. Wrong. A social objective

32. Which of the following are examples of monetary policy? 1. Controls on Bank lending 2. Changes in National Insurance rates 3. Controls on consumer credit A. 1 onlyB. all 3 C. 1 and 3

33. Wrong This is an example of monetary policy, but not the only one given.

34. Wrong. B is an example of Fiscal Policy.

35. Correct. Both of these are examples of monetary policy, but rarely now used.

36. For which of the following can fiscal policy be used? 1. Controlling demand in the economy 2. Controlling the budget deficit 3. Adjusting distribution of income and wealth A. 2 only B. 2 and 3 C. All of the above

37. . True, but it is not the only one listed

38. True, but look again

39. Correct. Fiscal policy can and has been be used for all three purposes.

40. You have now completed the test. For further more detailed revision please use the case studies on the web site To exit the test just use the back button on your browser toolbar