Question 1

Which of the following best describes the main advantage of multilateral trade agreements (such as EU, APEC, NAFTA, ASEAN) over bilateral agreements?

Accepted Answer

They facilitate trade liberalization among a larger group of countries, reducing trade barriers more broadly.

Question 2

Suppose the Reserve Bank of Australia raises interest rates. What is the most likely short-term effect on the Australian dollar (AUD) exchange rate, assuming all else is constant?

Accepted Answer

The AUD will appreciate because higher interest rates attract foreign capital inflows.

Question 3

A country implements protectionist policies such as tariffs and quotas. Which of the following is a likely consequence for the domestic economy in the short run?

Accepted Answer

Higher prices for imported goods and potential retaliation from trading partners.

Question 4

If the marginal propensity to consume (MPC) in an economy is 0.8, what is the value of the simple multiplier $$k$$?

Accepted Answer

$$k = \frac{1}{1-0.8} = 5$$

Question 5

During the Global Financial Crisis (GFC), which of the following was a key reason for the sharp decline in global economic activity?

Accepted Answer

Loose bank and mortgage regulations leading to a housing bubble and subsequent collapse.

Question 6

Which of the following best explains the concept of 'terms of trade'?

Accepted Answer

The ratio of export prices to import prices, usually expressed as an index.

Question 7

A country has a Current Account Deficit (CAD) as a percentage of its Gross Domestic Product (GDP). Which of the following is a potential risk associated with a persistent CAD?

Accepted Answer

An increase in the country's foreign debt and vulnerability to external shocks.

Question 8

Which of the following is NOT a likely effect of globalisation on developing economies?

Accepted Answer

A reduction in the need for domestic economic reforms.

Question 9

Suppose the government increases its expenditure by $$\10$ billion, and the marginal propensity to consume (MPC) is 0.75$. By how much will the equilibrium level of national income increase, assuming no crowding out?

Accepted Answer

$$\40$ billion

Question 10

Which of the following best describes the Lorenz curve?

Accepted Answer

A graphical representation of the distribution of income or wealth within a population.

Question 11

If Australia experiences a significant appreciation of its currency, which of the following is the most likely effect on its international competitiveness?

Accepted Answer

Australian exports become more expensive, reducing international competitiveness.

Question 12

Which of the following is a likely effect of a contractionary monetary policy implemented by the Reserve Bank of Australia?

Accepted Answer

An increase in interest rates and a decrease in aggregate demand.

Question 13

Which of the following best describes the purpose of fiscal policy?

Accepted Answer

To influence aggregate demand through government spending and taxation.

Question 14

A country with a high Gini coefficient is most likely to experience which of the following?

Accepted Answer

A high level of income inequality.

Question 15

Which of the following is an example of a negative externality?

Accepted Answer

A factory emitting pollution that affects the health of nearby residents.

Question 16

If the unemployment rate is below the non-accelerating inflation rate of unemployment (NAIRU), what is the most likely consequence?

Accepted Answer

Inflationary pressures will increase.

Question 17

Which of the following is a likely effect of deregulation in product and factor markets?

Accepted Answer

Increased market competition and efficiency.

Question 18

Suppose a country’s balance of payments shows a persistent deficit in the current account. Which of the following must be true?

Accepted Answer

The capital and financial account must show a corresponding surplus.

Question 19

Which of the following is a likely benefit of environmental sustainability policies for an economy?

Accepted Answer

Long-term preservation of natural resources and improved public health.

Question 20

If the government implements a minimum wage above the equilibrium wage, what is the most likely effect in a competitive labor market?

Accepted Answer

A surplus of labor, resulting in higher unemployment.

Comprehensive Study Notes: Macroeconomics – Globalisation, Economic Integration, and the Australian Economy

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