1.The economy is currently operating at its normalcapacity level of output. It is estimated that the long-run trend rate ofgrowth of the economy is around 2.5% per annum. In the coming year, it isexpected that inflation will be 4% per annum and money national income willgrow by 5%. Which one of the following is most likely?

A. Unemployment will fall and the economy will grow below its trend rate

B. Employmentwill be stable and the economy will grow at its trend rate

C. Employmentwill rise and the economy will grow above its trend rate

D. Unemployment will increase and the growth ofthe economy will be below its trend rate  

2.Which one of these is most likely to be reduced bya long-term improvement in UK labour productivity?

A. UK incomes

B. UK exports

C. UK inflation

D. UK output   

3.The table below shows the index of Gross DomesticProduct (GDP) measured at current prices and the associated price index for aneconomy.


The table shows that between 2001 and 2011

A. real GDP rose by 50%.

B. nominal GDP rose by 50%.

C. real GDP rose by less than 50%.

D. nominal GDP rose by less than 50%.  

4.Which one of the following is most likely to resultin an increase in the long-run trend rate of economic growth?

A. An increase in aggregate demand leading toinflationary pressures

B. A sustained increase in the value of the pound onthe foreign exchange market

C. A reduction in taxes which increases risk-takingand incentives to work

D. A sustained reduction inboth inflation and labour productivity. 

5.Whichone of the following is not the characteristics of developing countries.

A. Lack of Industries and Enterprises

B. Lack of Capital and Technology

C. General Poverty

D. economic of scale