DEMAND FACTORS AFFECTING ECONOMIC ACTIVITY

When interest rates fall, this is likely to cause
1. Discretionary income to rise and economic activity to increase
2. Discretionary income to fall and economic activity to decrease
3. Disposable income to fall and economic activity to decrease
4. Disposable income to rise and economic activity to increase
Which of the following is not one of the ways an increase in Australian interest rates affects economic activity
1. A fall in exports as higher borrowing costs forces buyers delay consumption
2. A fall in the cash flow of households as they must pay more to repay mortgages
3. A fall in the cash flow of businesses as their costs in terms of repaying business loans
4. A fall in investment as businesses delay spending projects in light of higher borrowing costs
Business tax reforms (eg accelerated depreciation) that were announced in the 2006-7 Budget are designed to:
1. to encourage consumption and boost economic activity
2. to encourage investment and boost economic activity
3. to discourage imports and boost economic activity
4. to increase G2 and boost economic activity
A drop in the exchange rate is most likely to
1. Improve international competitiveness, boost net exports, increase AD and increase economic activity
2. Improve international competitiveness, boost net exports, decrease AD and decrease economic activity
3. Decrease international competitiveness, reduce net exports, reduce AD and decrease economic activity
4. Decrease international competitiveness, boost net exports, increase AD and increase economic activity
In the short term, a reduction in tariffs is most likely to
1. Increase consumption, boost AD and lift economic activity
2. Increase imports, reduce AD and decrease economic activity
3. Increase exports, reduce AD and reduce economic activity
4. Increase Investment, boost AD and lift economic activity
An increase in the demand for exports is likely to:
1. boost national spending (GNE) relative to national income (GDP) and increase economic activity
2. boost national spending (GNE) relative to national income (GDP) and decrease economic activity
3. boost national income (GDP) relative to national spending (GNE) and increase economic activity
4. boost national income (GDP) relative to national spending (GNE) and decrease economic activity
An increase in the demand for imports is likely to:
1. boost national spending (GNE) relative to national income (GDP) and increase economic activity
2. boost national spending (GNE) relative to national income (GDP) and decrease economic activity
3. boost national income (GDP) relative to national spending (GNE) and increase economic activity
4. boost national income (GDP) relative to national spending (GNE) and decrease economic activity
Which of the following best describes the possible change in economic activity that occurs following a shift of the AD curve back towards the left.
1. A fall in disposable income, lower AD and a decrease economic activity
2. A fall in labour costs, lower AD and a decrease economic activity
3. A fall in tariffs, lower AD and a decrease economic activity
4. A fall in productivity, lower AD and a decrease economic activity
Higher exchange rates and higher interest rates tend to
1. Have conflicting effects on economic activity such that higher exchange rates reduce real GDP and higher interest rates increase real GDP
2. Have compatible effects on economic activity such that they work together to reduce AD and economic activity
3. Have compatible effects on economic activity such that they work together to increase AD and economic activity
4. Have conflicting effects on economic activity such that higher exchange rates increase real GDP and higher interest rates decrease real GDP
Ignoring any possible J-curve effect, the recent (April 2007) rise in the $A to USD0.83 works to:
1. Increase exports and imports, boosting AD and economic activity
2. Decrease exports and imports, reducing AD and economic activity
3. Increase exports and decrease imports, boosting AD and economic activity
4. Decrease exports and increase imports, reducing AD and economic activity
Which of the following is not a demand factor affecting economic activity
1. interest rates
2. exchange rates
3. terms of trade
4. labour costs
Which of the following is not a demand factor affecting economic activity
1. Tariff rates
2. Levels of Industrial disputes
3. Business confidence
4. Overseas growth
Interest rates can be regarded as a demand factor influencing economic activity What makes interest rates a demand factor is their influence on:
1. The cost of producing goods and services
2. The cost of borrowing money
3. The cost of raw materials
4. The costs of labour
An increase in welfare payments can be considered a demand factor influencing economic activity because
1. It increases G1, boosts AD and increases economic activity
2. It increases G2, boosts AD and increases economic activity
3. It increases Consumption, boosts AD and increases economic activity
4. It increases Investment, boosts AD and increases economic activity
Large increases in the terms of trade in Australia:
1. had a negative impact on net exports (X-M), reducing AD and economic activity
2. had a negative impact on net exports (X-M), boosting AD and economic activity
3. had a positive impact on net exports (X-M), boosting AD and economic activity
4. had a positive impact on net exports (X-M), reducing AD and economic activity
A declining trend in 'consumer sentiment' is likely to have
1. a positive impact on Consumption and AD, and reduce the growth rate in economic activity
2. a negative impact on Investment and AD, and decrease the growth rate in economic activity
3. a negative impact on Consumption and AD, and decrease the growth rate in economic activity
4. a negative impact on G1/G2 and AD, and reduce the growth rate in economic activity
The decline in economic activity experienced by one of Australia's major trading partners is likely to lead to which of the following for the Australian economy
1. Lower rate of growth in economic activity following reduced export growth, higher import growth and reduced AD
2. Lower rate of growth in economic activity following reduced export growth, lower import growth and reduced AD
3. Lower rate of growth in economic activity following higher export growth, lower import growth and reduced AD
4. Lower rate of growth in economic activity following reduced export growth, no change in import growth and reduced AD
A rise in the terms of trade tends to boost economic activity because
1. Exporters receive more for any given volume of exports and/or importers pay more for a given volume of imports, boosting net exports and AD
2. Exporters receive more for any given volume of exports and/or importers pay less for a given volume of imports, boosting net exports and AD
3. Exporters receive less for any given volume of exports and/or importers pay less for a given volume of imports, boosting net exports and AD
4. Exporters receive less for any given volume of exports and/or importers pay more for a given volume of imports, boosting net exports and AD
Interest rates primarily influence economic activity via demand side effects. However, they also have supply side effects via their impact on
1. Business confidence
2. Business Investment
3. The costs to service existing loans
4. The cost of borrowing for new projects
The decrease in personal income tax rates should increase AD and economic activity primarily via the effects on
1. G1 or G2
2. Net Exports
3. Investment
4. Consumption

DEMAND FACTORS AFFECTING ECONOMIC ACTIVITY

Quiz