aSection 1: Multiple Choice
CIRCLE the answer you believe to be the most appropriate

1. A budget surplus is created when the government:
a) Spends more that it receives in tax revenue
b) Receives more tax revenue than it spends
c) Buys back more bonds than it issues
d) Raises interest rates

2. Which of the following is the most liquid asset?
a) A bank deposit
b) BHP shares
c) Rare coins
d) Investment property

3. Which of the following statements about the role of the Reserve bank of Australia is correct?
a) The RBA acts as a lender of last resort
b) The RBA has an obligation to protect bank depositors
c) The RBA supervises individual financial institutions
d) The RBA ensures the overall stability of the financial system

4. Exports are:
a) A limit placed on the quantity of goods brought into a country
b) Goods produced domestically and sold overseas
c) A country’s ability to produce a good
d) Goods produced overseas and sold domestically

5. In a recession, real GDP falls and:
a) Unemployment rises
b) Unemployment falls
c) Unemployment may rise or fall
d) Unemployment is unaffected

6. If the exchange rate changes from 100 yen per dollar to 80 yen per dollar, then the dollar has:
a) Depreciated
b) Appreciated
c) Devalued
d) Revalued

7. Positive net exports indicate that the:
a) Country sells more goods overseas than it buys from other countries
b) Country buys more goods from overseas than it sell to other countries
c) Country has a closed economy
d) Country’s tariffs are too low

8. The shoe leather cost of inflation refers to:
a) The fact that inflation increases the prices of goods, including shoe leather
b) The waste of resources that occurs as people attempt to minimize their holding of money
c) The fall in real income associated with inflation
d) The fall in...