QCAA Economics External Practice Test

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