QCAA Economics External Practice Test

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• The interest rate that banks pay to borrow funds from other banks on overnight loans in the short-term money market is called what?
• Which term describes the central bank's use of market operations to influence liquidity in the short-term money market?
• Which statement best characterize crowding out and crowding in in public finance?
• In a tax on a good, if demand is relatively inelastic and supply is relatively elastic, who bears the larger burden?
• What is comparative advantage and how does it influence trade patterns?
• What happens to AD if there is a tax cut increasing disposable income?
• Distinguish between money, money supply, and monetary policy tool categories.
• The concept that increased saving can reduce the economy's income and wealth.
• Which term describes the intended overall effect of the monetary policy setting on the level of economic activity?
• Which scenario results in a budget surplus?
• A common critique of aid as a development strategy, and conditions that improve its effectiveness.
• Which statement describes the relationship between a current account surplus/deficit and capital flows?
• What is the term for a budget balance when tax receipts exceed government expenditures?
• Which term best describes policy actions designed to influence macroeconomic outcomes such as growth and unemployment?
• A terms of trade improvement tends to raise a country's real income from trade. Which option best reflects this?
• Output per unit of input per unit of time is called what?
• What is the effect of globalization on domestic welfare and the distribution of income?
• To adopt a more expansionary monetary policy stance; this involves lowering the cash rate to stimulate an increase in economic activity.
• An inflow of income into the circular flow from outside sources including government and overseas is called?
• What describes changes in fiscal policy caused by changes in economic activity, not by government action?
• Explain the circular flow model with injections and leakages and name two injections and two leakages.
• What is the relationship between the real interest rate and inflation expectations?
• A price increase leads to a total revenue increase for a good. What is the price elasticity of demand in this case, and what does it imply for revenue under further price changes?
• What does cross price elasticity of demand tell us about the relationship between two goods and how is it interpreted for substitutes and complements?
• What is the term for a budget balance when taxation equals government spending?
• What condition makes a price ceiling binding?
• Which term describes the inflow of income into the circular flow from outside sectors such as government or overseas?
• If foreign income rises, what happens to AD?
• How is the price elasticity of demand interpreted when the value is -1.5?
• What is information asymmetry, and how can it affect efficiency?
• Protectionism is the use of government actions to restrict imports.
• Dynamic efficiency is defined as the economy's ability to
• Which item is not a direct component of aggregate demand?
• A measure of the money supply that includes currency, plus deposits in banks, credit unions and building societies, plus funds held by other authorised deposit taking institutions.
• Inflows of money to a sector from other sectors are known as?
• Which concept states that saving more by everyone can reduce overall income and growth?
• Define market power and describe one microeconomic consequence.
• Which option correctly describes a positive output gap?
• The rate excluding on-off or seasonal factors that cause short-term volatility in prices measured by the headline rate.
• Allocative efficiency is achieved when resources are used to ...
• What is the difference between nominal GDP and real GDP?
• Intergenerational equity is defined as what?
• How do demographic changes affect long-run growth potential?
• Which lag describes the delay between policy implementation and its effects on the economy?
• Optimum population is the ideal population for a nation, judged by characteristics such as population size, structure, education, training and geographic distribution.
• What term describes how changes to monetary policy affect the interest rate households and businesses face, and flow through to economic activity, employment and inflation?
• Outflows of money from one sector to another are referred to as?
• Which policy aims at making markets more competitive and preventing the abuse of market power?
• What term describes fiscal components that automatically adjust to economic conditions without new legislation?
• Dynamic efficiency is the ability of an economy to ...
• What are the criteria such as equity, efficiency, and simplicity used to judge whether a tax is good?
• What is the Human Development Index and what dimensions does it include?
• List three determinants of price elasticity of demand.
• Which term describes the curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology?
• Measures implemented through the Reserve Bank of Australia to bring about changes in aggregate demand by influencing money supply and interest rate, with the main focus on stability in a crisis are known as what?
• How does a monopolist's pricing outcome compare to perfect competition in terms of quantity, price, and welfare?
• In the circular flow framework, which component increases national income when government spending rises?
• Who bears the burden of a tax initially—the seller or the buyer—and how is tax incidence determined?
• Which of the following is included in the current account?
• Which statement is true about flexible vs fixed exchange rate regimes?
• Why is the aggregate demand curve downward sloping?
• A carbon tax is an example of which type of tax?
• Exchange settlements (ES) balances define which monetary term?
• If the cross-price elasticity of demand between two goods is +0.6, the two goods are substitutes; a price rise in one leads to what in demand for the other?
• Which term refers to policy actions that aim to influence economic activity by adjusting the money supply and interest rates?
• How do income elasticity classify luxury goods versus necessities, and what would you expect for each in terms of sign and magnitude?
• Which term describes the study of economic behaviour at the level of the individual units of an economy?
• Which term describes a graph that shows the price and quantity demanded?
• Payments from government to individuals in cash welfare, such as pensions and unemployment benefits, are called?
• Which statement about public goods and government provision is correct?
• What term is used when the budget balance is zero, meaning receipts equal expenditures?
• In the long run, the Phillips Curve is vertical at the natural rate of unemployment, implying what about the unemployment-inflation trade-off?
• What causes a movement along the aggregate demand curve rather than a shift?
• What is information asymmetry, and how can it lead to market failure?
• Explain the effects of a binding price ceiling on a market with a shortage.
• Which term captures the overall stance of fiscal policy regarding its impact on economic activity?
• Explain the concept of the fiscal multiplier and provide a simple example formula.
• Productive efficiency is defined as the ability to ...
• Which of the following is a determinant that can shift the aggregate demand curve to the right?
• Which term is a measure of the money supply including currency and deposits?
• What does the aggregate demand curve illustrate?
• Which economic concept is commonly used to illustrate the inverse relationship between inflation and unemployment in the short run?
• Production of goods and services from land, labour, capital and enterprise; another name for GDP.
• What happens to the demand curve for a normal good when income rises, and how is the shift characterized?
• What is a key trade-off in fixed exchange rate regimes?
• A set of government priorities and objectives used to manage the economy.
• Which two accounts form the main components of the balance of payments?
• What are the defining characteristics of a public good, and why might government provision be warranted?
• Which tax system increases the tax rate as income rises?
• Differentiate expansionary and contractionary fiscal policy and give one typical effect on AD.
• Name three determinants of long-run productivity growth beyond physical capital.
• What is the term for a budget balance when government spending exceeds tax receipts?
• Which term describes automatic features of fiscal policy that counteract economic fluctuations without new legislation?
• Which tax is levied on goods and services and can be passed on to consumers?
• Which policy tool is most directly used to shift aggregate demand to the right in the short run?
• In the expenditure approach to GDP, what do the components C, I, G, and NX represent?
• Which term is the target for the short-term interbank rate?
• What is the government document that outlines planned spending and estimated revenues for the coming financial year called?
• Which statement best describes contractionary fiscal policy?
• Identify three sources of long-run productivity growth beyond simply increasing physical capital.
• Which type of unemployment tends to rise during a recession?
• Which term refers to a graph of the relationship between the price of a good and the quantity demanded?
• In an open economy, which of the following statements about injections and leakages is correct?
• Which concept is defined as the economy's ability to respond to changing consumer demands by reallocating resources to new industries or production processes?
• What are the standard components of aggregate demand?
• Quality of life describes the overall well-being of individuals according to their material living standards and other considerations such as health standards and education levels.
• Which term describes the total value of goods and services produced in an economy?
• An expansionary fiscal policy stance is indicated by which change in the cyclically adjusted budget?
• Which describes the government choosing what to spend and adjusting tax rates?
• The revenue that the government obtains from economic activity and participants in that activity, and that is a leakage from the circular flow, is called what?
• What are automatic stabilizers? Choose the best description.
• Which term describes the time it takes to recognise that the state of the economy indicates the need to use counter-cyclical macroeconomic policy, respond and implement it?
• What is the definition of terms of trade and when does it improve?
• Which of the following best describes the Production Possibilities Frontier (PPF)?
• Net exports (NX) equals exports minus imports. Which of the following statements is true about NX?
• Which term describes a measure of lifestyle standards based on material and quantitative indicators such as possessions, income, education and housing standards?
• In Australia, what is the typical inflation target range?
• Which term is indicated by a decrease in the cyclically adjusted budget deficit or an increase in the cyclically adjusted budget surplus?
• What term describes the market that deals in short-term discount securities such as Treasury notes, bank bills and promissory notes?
• Which term describes deliberate changes in government spending and tax policy?
• If saving exceeds investment, the current account will be in surplus.
• Define negative externality and provide a commonly used policy tool to correct it.
• Which statement best describes a characteristic of the monetary policy transmission mechanism?
• If the government increases spending financed by borrowing, what happens to the aggregate demand curve?
• What effect does a decrease in consumer confidence have on AD in the short run?
• Which statement best describes the aggregate demand curve?
• The percentage change in prices over time, as measured by the consumer price index; also referred to as the consumer inflation rate.
• What is potential output and what is the significance of the output gap?
• If a country runs a current account deficit, what must be true about its capital/financial account?
• Name three types of unemployment.
• What does the Gini coefficient measure?
• A level of the cash rate (interbank overnight rate) that the RBA specifies as the target for short-term money market transactions.
• Which term describes the paths through which a central bank's monetary policy decisions are transmitted to the economy?
• A sustained rise in productive capacity over a period, typically one year.
• If the price elasticity of demand is -2, a 5% price increase leads to what percentage change in quantity demanded?
• Which concept refers to the opinion households and firms have of the future rate of inflation that influences saving, purchasing and investing decisions?
• In a floating (flexible) exchange rate regime, what primarily determines the exchange rate?
• Which scenario would shift the aggregate demand curve to the right?
• Which term describes the general constraint on policy actions resulting from political processes such as elections and international negotiations?
• If the currency appreciates, what happens to net exports and AD?
• What are the typical macroeconomic effects of a binding price floor in the labor market?
• Which term describes government initiatives that aim to improve efficiency and productivity by targeting specific industries?
• If the exchange rate depreciates, what happens to net exports and AD?
• Which tax is levied on aspects of economic activity other than income and can be passed on to others by the firm?
• Which is not a determinant of long-run productivity growth beyond physical capital?
• A binding price floor in the labor market causes unemployment because the floor sets wage above equilibrium, creating excess supply of labor.
• Which term refers to non-discretionary elements that automatically counterbalance changes in economic activity?
• What is crowding out in the context of fiscal expansion?
• Output per unit of input per unit of time is called what?
• Investment in technology to increase the capacity of firms through the development of new products, processes and services is known as what?
• In the context of unemployment, which statement best describes the influence of expectations on the natural rate of unemployment?
• What is the term for the central bank's target range for inflation?
• Which policy uses taxation and government spending to influence the level of macroeconomic activity and may be discretionary or automatic?
• Which of the following are major participants in the short-term money market?
• Which term describes the time it takes for the policy measure to have its effect on the targeted economic variables and the level of economic activity?
• A negative output gap corresponds to which phase?
• The cost of borrowing or reward for lending money, expressed as a percentage of the total amount borrowed or loaned is known as what?
• Which term studies economic behaviour at the level of the individual units of an economy, focusing on decisions by individuals, firms and governments about resource allocation and prices?
• The limitations on government policy actions resulting from the need to tailor policies to win elections, retain popular support, gain passage of the Senate, and maintain productive relationships with other nations are known as what?
• Which policy option requires deliberate legislative action to change spending or tax levels?
• Which statement best characterizes the typical distinction between merit goods and demerit goods?
• An increased output gap is associated with which phase of the business cycle?
• Which term refers to the government's plan to influence macroeconomic activity and promote structural changes through revenue and expenditure decisions?
• In the context of stagflation, what policy approach is typically recommended?
• Buying and selling of second-hand government securities by the RBA in the short-term money market to implement monetary policy decisions.
• In a regressive tax, the tax burden as a share of income tends to do what as income rises?
• Which term refers to the development of a new idea, technology, device or method of production?
• Which policy aims at making markets more competitive and preventing the abuse of market power?
• A Gini coefficient of 0 indicates what?
• In a simple open economy, what is the relationship between saving, investment, and the current account?
• Which statement best describes the balance of payments and its main accounts?
• Which of the following is a determinant of a shift in aggregate demand?
• Which statement best describes the short-run and long-run Phillips Curve and the unemployment-inflation trade-off?
• Which factors drive shifts in the Aggregate Demand curve?
• Which policy tool directly limits total emissions by setting a cap and allowing trading among firms?
• What term refers to the overall effect of a budget on the level of economic activity?
• One basis point equals 1/100th of 1 per cent or 0.01 per cent.
• What term describes the budget balance adjusted for the cyclical position of the economy?
• Which of the following is an automatic stabilizer?
• The model of the economy based on income flows between sectors in a circular motion is called?
• What distinguishes monopolistic competition from perfect competition?
• Industry-wide changes in the pattern of production that result in certain products production processes and even industries disappearing while new ones emerge.
• Which term describes the period from the time a macroeconomic problem is recognised to the time policy action is taken and has effect?
• What is the term for adopting a more contractionary monetary policy stance by raising the cash rate?
• Inflation is defined as a general rise in the price level. Which of the following statements correctly describes how demand-pull and cost-push inflation differ?
• Which tax is borne by the person or firm on whom it is levied and cannot be passed on to others?
• Which policy tool is designed to address environmental costs by raising the cost of pollution?
• Outline the transmission mechanism of monetary policy.
• Investment in technology to increase the capacity of firms through the development of new products, processes and services is known as what?
• A graph of the proposition that there is a trade-off between inflation and the unemployment rate is called what?
• Which term describes government initiatives targeting specific industries to improve competitiveness by boosting efficiency and productivity?
• Which option best describes the incidence of direct taxes?
• Which policy action lowers the cash rate to stimulate economic activity?
• A balanced situation with no tendency to change, such as a stable level of income.
• An outflow of expenditure from the circular flow is called?