Keynesian Economic

Answer the following questions by selecting the appropriate answer from the list below. Question 1 Which one of the following would not necessarily enhance economic growth in South Africa? A. B. C. D. E. Technological improvements. Increased labour productivity through on-the-job training. Higher levels of net investment in the economy. Higher levels of government spending that raise local interest rates. All of the above. Question 2 Investment in human capital: A. can be illustrated by a shift of the aggregate supply curve to the left. B. increases structural unemployment. C. increases labour productivity. D. can be illustrated by a shift of the Phillips curve to the right. Question 3 During a recession, cyclical unemployment will ________ and cyclical inflation will ________. A. decrease; decrease B. decrease; increase C. increase; increase D. increase; decrease Question 4 The phase of the business cycle at which almost all available resources in the economy are in use is referred to as: A. the recovery phase. B. the expansion phase. C. the peak or boom phase. D. the trough phase. Question 5 Keynesians believe that the fluctuations in economic activity (business cycles): A. are caused by external factors such as the inappropriate use of government policy. B. are caused by changes in weather patterns. C. are caused by structural or institutional changes. D. occur naturally in market economies and require government intervention. Question 6 Capital widening refers to: A. a situation where capital replaces labour in the production process. B. a situation where the capital to labour ratio in the economy increases. C. a situation where additional purchases of capital are made in order to match a growing labour force. D. a situation where labour replaces capital in the production process. E. an increase in the current account deficit as more capital is imported. Question 7 Import substitution involves: A. the reduction of import tariffs so that an economy can export goods that were previously imported. B. the use of import tariffs so as to encourage the local production of goods that were previously imported. C. the protection of industries in which an economy would traditionally have enjoyed comparative advantage. D. the substitution of local labour with imported capital so as to reduce the costs of production and ensure the competitiveness of strategic industries. Question 8 According to Keynesian economists, during a boom in economic activity: A. the quantity of money should be increased. B. interest rates should be cut. C. D. E. government should increase its spending. tax rates should be raised. all of the above should be undertaken. Question 9 Which one of the following statements is incorrect? Economic growth: A. may be measured as the annual rate of increase in real GDP. B. may be measured as the annual rate of increase in GDP at constant prices. C. may be measured as the annual rate of increase in GDP at current prices. D. should preferably be measured on a per capita basis. Question 10 Which one of the following is not a problem associated with GDP? A. GDP pertains only to production inside the country. B. The estimation of the value of production that is not sold in a market. C. Many activities are not recorded. D. GDP data are inevitably revised as more and better information become available. E. GDP is not a good measure of economic welfare. Question 11 Which one of the following statements is incorrect? A. Nominal GDP is the appropriate basis for calculating economic growth. B. The impact of inflation first has to be eliminated before economic growth can be calculated. C. All production is included in GDP, irrespective of whether it could be classified as “good” or “bad”. D. The economic growth rate does not reflect the distribution of income and wealth. E. South African GDP includes estimates of the value of informal sector activity. Question 12 Which one of the following is not an element of the business cycle? A. B. C. D. E. Peak Trough Upswing Downswing Long-term trend Question 13 Which one of the following is not an element of the business cycle? A. B. C. D. E. Expansion Boom Real welfare Contraction Recession Question 14 Which one of the following statements is correct? A. Classical economists believe that the business cycle is part and parcel of the way in which a market economy functions. B. Keynesian economists believe that the business cycle is caused by external factors such as government interference in the economy. C. Classical economists believe that government should intervene in the economy to try to smooth out the business cycle. D. Keynesian economists regard the business cycle as an inherent (endogenous) feature of modern market economies. E. Structuralist economists believe that the market system is either inherently stable or systematically unstable. Question 15 Which one of the following statements is incorrect? A. B. C. D. The business cycle is of academic interest only. Economists use business cycle indicators to analyse the economy. Economists use leading indicators to predict what is going to happen in the economy. The number of new motorcars sold is one of the leading indicators used by South African economists to predict where the economy is heading. E. The dates of the turning points of the South African business cycle are estimated by economists at the South African Reserve Bank. Question 16 Which one of the following is not a supply factor in economic growth? A. Money B. Natural resources C. Labour D. Capital E. Entrepreneurship Question 17 Which one of the following is not a demand factor in economic growth? A. Consumption spending B. Investment spending C. Exports D. Technology E. Import substitution Question 18 Which one of the following statements is incorrect? A. The exploitation of natural resources played an important role in the development of the South African economy. B. The quality of the South African labour force leaves a great deal to be desired. C. South Africa is a capital-rich country, which exports large quantities of capital goods to the rest of the world. D. Exports of minerals and metals have played a key role in the growth of the South African economy. E. Import substitution played a significant role in the initial development of the South African manufacturing sector.