SUPPLY FACTORS AFFECTING ECONOMIC ACTIVITY

On the supply side, an appreciation of the Australian dollar is likely to
1. increase the cost of imports, raise the costs of production, lift aggregate prices and reduce economic activity
2. reduce the costs of imports, decrease the costs of production, reduce aggregate prices and increase economic activity
3. increase the cost of imports, decrease the costs of production, reduce aggregate prices and increase economic activity
4. reduce the costs of imports, raise the costs of production, lift aggregate prices and reduce economic activity
Which of the following events is unlikely to reduce the level of economic activity over time
1. An increase in the costs of raw materials
2. An increase in productivity
3. An increase in labour costs
4. An increase in the number of industrial disputes
Capacity constraints or bottlenecks experienced by the Australian economy over the most recent past are likely to
1. Reduce cost pressures in the economy and reduce economic activity
2. Add to cost pressures in the economy and reduce economic activity
3. Add to cost pressures in the economy and increase economic activity
4. Reduce cost pressures in the economy and increase economic activity
The drought experienced in Australia is most likely to
1. Contribute to inflationary pressure in the economy, reduce aggregate demand and decrease economic activity
2. Contribute to inflationary pressure in the economy, not affect aggregate demand and decrease economic activity
3. Contribute to deflationary pressure in the economy, not affect aggregate demand and increase economic activity
4. Contribute to deflationary pressure in the economy, increase aggregate demand and increase economic activity
Which of the following should boost aggregate supply and increase production, income and expenditure
1. A decrease in the labour force participation rate
2. A decrease in the rate of growth in technological change
3. A decrease in tariff protection
4. A decrease in productivity
An ageing population is most likely to have the following effects in the future:
1. Have little effect on labour costs, tax rates and economic activity
2. Increase both labour costs and tax rates and have an uncertain effect on economic activity
3. Reduce both labour costs and tax rates and increase economic activity
4. Increase both labour costs and tax rates and reduce economic activity
Which of the following is not a supply factor affecting economic activity?
1. Tariff rates
2. Disposable income
3. Productivity
4. Levels of industrial disputes
A cut in business taxes, like the cuts announced in the 2006-7 Federal Budget, are most likely to impact on economic activity (on the supply side) in the following way:
1. Reduce costs of production, decrease price pressure increase aggregate demand and lift real GDP
2. Reduce costs of production, decrease price pressure, not change aggregate demand, but lift real GDP
3. Increase costs of production, increase price pressure decrease aggregate demand and reduce real GDP
4. Increase costs of production, increase price pressure, not change aggregate demand but reduce real GDP
Which of the following is likely to result in more favourable supply conditions in the economy and a lift in economic activity?
1. An increased exchange rate
2. A lower trade weighted index
3. A lower terms of trade
4. Lower participation rates
Which of the following policies would not be designed to boost supply conditions or productive capacity in the Australian economy?
1. An increase in skilled immigration
2. An increase in superannuation tax concessions
3. An increase in tax concessions on research and development
4. A reduction in interest rates
With respect to the recent reductions in personal tax rates in Australia
1. They can have demand side effects in the economy, but no supply side effects
2. They can have both demand and supply side effects in the economy that both work to stimulate economic activity
3. They can have both demand and supply side effects in the economy that both work to reduce economic activity.
4. They can have both demand and supply side effects in the economy that have a conflicting effect on economic activity.
Which of the following factors below has not exerted a negative supply side influence on the Australian economy during 2006-7?
1. Higher banana prices as a result of Cyclone Larry in north eastern Australia
2. Skilled labour shortages
3. Higher oil prices
4. A higher Trade Weighted Index
Which of the following is likely to impact negatively on aggregate supply and reduce the level of economic activity?
1. A higher Australian dollar
2. Lower labour force participation rates
3. Lower real wages growth
4. Lower oil prices
A reduction in State government land taxes should
1. Increase government infrastructure spending, improve supply conditions and boost economic activity
2. Boost revenue for landlords, increase Investment and boost economics activity
3. Reduce inflationary pressure boost AD and economic activity
4. Have little or no impact on economic activity
When an economy experiences more favourable supply conditions, such as a reduction in raw material costs or a boost in productivity, it is likely to cause:
I. An increase supply of goods and services in markets
II. A reduction in average costs of production
III. A reduction in the general price level
IV. An increase Aggregate Demand
V. An increase in economic activity
1. I, II, III and V are correct
2. I, II, and V are correct
3. I, II, III, IV and V are correct
4. I and V are correct
The continued reduction in tariffs in Australia should cause which of the following to occur in the longer term?
1. Improved efficiency, lower prices, higher AD and lower economic activity
2. Improved efficiency, lower prices, higher AD and higher economic activity
3. Improved efficiency, higher prices, higher AD and lower economic activity
4. Improved efficiency, higher prices, higher AD and higher economic activity
A higher terms of trade that is caused by lower import prices but no change in export prices should
1. have little supply side impact on economic activity in Australia
2. have a favourable impact on economic activity on the supply side as AD increases in response to a lower value of imports purchased
3. have a favourable impact on economic activity on the supply side as average costs of production are likely to fall, placing downward pressure on prices and stimulating AD
4. have a favourable impact on economic activity on the supply side as productivity is likely to fall, placing downward pressure on prices and stimulating AD
Government measures that are designed to combat the effects of climate change or global warming are likely to have the following supply side effects on economic activity
1. Reduce economic activity as the costs of energy (eg electricity) are likely to increase, raising costs pf production and prices and reducing AD and economic activity
2. Reduce economic activity as business confidence is likely to fall, reducing investment, AD and economic activity
3. Reduce economic activity as overseas investment is likely to fall, reducing AD and economic activity
4. Reduce economic activity as productivity is likely to fall, raising costs of production and prices and reducing AD and economic activity
The rate of growth in economic activity is dependent upon productivity growth. Which of the following is least likely to be a factor affecting productivity growth in Australia?
1. Exchange rates
2. Labour force participation rates
3. Personal tax rates
4. Tariff rates
A reduction in interest rates can have favourable effects on economic activity. Which of the following best describes the beneficial supply side impact stemming from a reduction in interest rates?
1. Lower cost to borrow money which increases Investment, AD and economic activity
2. More favourable cash flow for consumers with existing debt, increasing Consumption, AD and economic activity
3. A lower $A which increases international competitiveness, boosting (X-M), AD and economic activity
4. Lower debt servicing costs for businesses, lowering costs of production and boosting economic activity

SUPPLY FACTORS AFFECTING ECONOMIC ACTIVITY

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