WHAT IS ECONOMICS ABOUT?

Exercise 1: Match the words or phrases from a - j with their definitions from 1 - 10
a. austerity
b. deregulation
c. laissez-faire
d. infrastructure
e. crowd out
f. market failures
g. demand management
h. intervention
i. mixed economy
j. public sectors
1. an economy with both private and public sectors.
2. a word used to describe economic policies and measures designed to reduce inflation, the
quantity of imports, government spending, and so on.
3. all nationalized industries or services, such as education, healthcare, justice, and public
transport.
4. situations in which free competition and the effects of supply and demand do not operate
(e.g.
monopolies, oligopolies, and externalities).
5. the belief that the economy works best when the state does not plan, control or interfere.
6. the ending or relaxing of legal regulations or restrictions in a particular industry (e.g. finance,
television).
7. the Keynesian policy of stimulating an economy in a period of recession, and contracting the
economy if it overheats.
8. the neutral term that describes governmental action in the economy.
9. all the services such as roads, railways, electricity, telephones, etc. that exist in developed
countries.
10. reduce the amount of money available for private investment by increasing government
borrowing

MICROECONOMICS
Exercise 2: Choose the best answer A, B, C or D to each question.
1. Which of the following is an accurate description of the primary theme of microeconomics?
A. Studying how individuals and firms make themselves as well off as possible given
conditions of scarcity.
B. Analyzing tradeoffs.
C. A set of constrained optimization problems.
D. All of these.
2. What is a model?
A. A full description of a particular economic phenomenon.
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B. Any description of the relationship between two or more economic variables.
C. An empirical study that analyzes how a certain part of the economy works.
D. A description of an economic phenomenon that makes no extra assumptions.
3. What is the key assumption in microeconomics?
A. Firms maximize profits.
B. Firms maximize sales.
C. Individuals maximize utility and firms maximize profits.
D. Individuals maximize their income.
4. What is the distinction between empirical and theoretical economics?
A. Theoretical economics analyzes long-term phenomena and empirical economics analyzes
short-term.
B. Theoretical economics builds models, and empirical economics test them.
C. Theoretical economics analyzes individuals and empirical economics analyzes firms.
D. Theoretical economics tests models, and empirical economics builds them.
5. Which of the following statements represents normative, rather than positive analysis?
A. Since the supply of gems is limited, their price is very high.
B. People should not be allowed to purchase bodily organs, because it allows the rich
access to a life-saving procedure that the poor may not have access to.
C. The demand for organ transplants currently far exceeds the supply.
D. Since the supply of water is very large, the price of water is very low.
6. What determines the price and quantity of a good in a perfectly competitive market?
A. The position of the demand curve.
B. The presence or absence of substitute goods.
C. The government.
D. The intersection of the supply and the demand curve.
7. Assume that people enjoy eating either apples or oranges. What happens in the market for
oranges when the price of apples goes up?
A. The demand curve shifts right.
B. The supply curve shifts left.
C. There is no change in the demand curve.
D. The demand curve shifts left.
8. Now, assume there is a frost in Florida that destroys part of the orange crop. What happens
to
the market for oranges in this case?
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A. The supply curve shifts up.
B. The supply curve shifts down.
C. There is no shift in the demand or supply curves.
D. The demand curve shifts right.
9. The government imposes a minimum wage for workers. Which of the following phenomena is
NOT a consequence of this policy change?
A. Decreased demand for labor by employers.
B. Increased supply of labor by workers.
C. Unemployment.
D. A decline in the average wage paid.
10. What is a potential cost of disequilibrium in a market?
A. Cost of determining allocation for goods that are highly demanded.
B. Efficiency loss (trades that don’t get made).
C. Cost of waiting for people queuing for a good that is in demand.
D. All of these.

MACROECONOMICS
Exercise 1: Match the words or phrases from a - j with their definitions from 1 – 10
a. trends
b. raising a large sum of money
c. overnight rate
d. beneficiary
e. treasury department
f. invisible earning
g. floating rate note
h. economic indicators
i. federal authorities
j. trade balance
1. The government department that controls the finances of a country.
2. Organizing the obtaining of a lot of money.
3. Figures dealing with economic activity which give a general idea of changes in the economic
climate.
4. The difference in value of imports and exports of a country.
5. General development or movement.
6. Income from the export of services.
7. Note on which interest rates are fixed periodically, and which can be traded on the market.
8. The rate of interest charged for a loan at call from one day to another.
9. A person named to receive payment.
10. Government organizations.
Exercise 2: Choose the word that best completes the sentence.
1. Increasing ….. has led to a massive increase in the number of foreign exchange
transactions in recent decades.
A. international market B. global C. globalization D. economy
2. The government made serious attempts to raise the ….. of living.
A. standard B. cost C. level D. mode
3. Interest rate swaps often ….. a fixed payment for a floating payment that is linked to an
interest rate.
A. pay B. swap C. change D. exchange
4. National public debts, ….. on a world scale, have almost without exception shown a
tendency to increase.
A. taken B. take C. took D. being taken
5. Inflation is generally defined as the ….. in the average prices of most goods and services in
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one year as compared to the previous year.
A. raise B. rising C. rise D. raising
6. Inflation is a great ….. to long-term investors because it erodes the value of future dollars.
A. advantage B. favour C. threaten D. threat
7. Taxation as a term ….. to all types of taxes, from income to gift to estate taxes.
A. applies B. apply C. applied D. applying
8. GNP is a ….. of a country's economic performance, or what its citizens produced and
whether they produced these items within its borders.
A. ability B. measure C. measurement D. indicator
9. Revenue is calculated by …... the price at which goods or services are sold by the number
of units or amount sold.
A. multiple B. multiplying C. summing D. accounting
10. Any ……. transaction or violations of the policy must be reported to your immediate
supervisor.
A. improper B. reserved C. extinct D. anxious

MACROECONOMIC POLICIES (FISCAL POLICY& MONETARY

POLICY)
Exercise 1: Match the words or phrases from a - j with their definitions from 1 – 10
a. macroeconomic policy
b. trade policy
c. public sector
d. monetary policy
e. fiscal policy
f. interest rate
g. government spending
h. government revenue
i. money supply
j. inflation
1. includes cash, coins and balances held in checking and savings.
2. includes all government consumption and investment but excludes transfer payments made
by a
state.
3. includes all amounts of money (i.e. taxes and/or fees) received from sources outside the
government entity.
4. aimed at the aggregate economy, usually to promote the macro goals of full employment,
stability, and growth.
5. The part of the economy concerned with providing basic government services as the police,
military, public roads, and so on.
6. a progressive increase in the general level of prices brought about by an expansion in demand
or
the money supply or by autonomous increases in costs.
7. a government's policy controlling foreign trade.
8. the percentage of a sum of money charged for its use
9. the process by which the monetary authority of a country controls the supply of money, often
targeting a rate of interest for the purpose of promoting economic growth and stability
10. the use of government expenditure and revenue collection to influence the economy
Exercise 2: Choose the word that best completes the sentence.
1. Monetary policy is one of the tools that a ………………… Government uses to influence its
economy.
a. nation b. national c. nationality d. native
2. Macroeconomic stability means ………………., low inflation, high economic growth and so on.
a. low unemployment b. low competition c. high production d. b & c
3. The job of the Central Bank is to ……………. the amount of money and credit in the economy.
a. examine b. investigate c. provide d. control
4. "Narrow" money supply or …………….. is currency in circulation and the currency in easily
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accessed checking and savings accounts.
a. M1 b. M2 c. M3 d. –
5. All governments intervene through their ……………….. policies in a bid to achieve certain policy
objectives.
a. economy b. microeconomic c. macroeconomic d. economical
6. Monetary policy involves the use of interest rates to control the level and rate of ………….. of
aggregate demand in the economy.
a. grow b. growth c. growing d. grown
7. Fiscal policy involves the use of government spending, taxation and ……………………. to
influence
both the pattern of economic activity and also the level and growth of aggregate demand,
output
and employment.
a. investing b. savings c. borrowing d. depositing
8. It is also a means by which a ……………… of income & wealth can be achieved.
a. distribution b. distributing c. redistributing d. redistribution
9. Government spending can be classified into three main areas: ……………….., current
government
spending and capital spending.
a. transfer payments b. debt payments c. balance of payments d. –
10. Spending on …………. (e.g. improvements to our motorway network) helps provide the
capacity
needed for other businesses to flourish.
a. transport system b. infrastructure c. accommodation d. industry

PUBLIC FINANCE
Exercise 2: Choose the word that best completes the sentence.
1. Government securities with terms of more than one year are called:
A. government bonds. B. bills of exchange.
C. Treasury bills. D. capital bills.
2. Money that a government has required to be accepted in settlement of debts is:
A. currency value. B. legal tender.
C. barter money. D. commodity money.
3. Which of the following activities is one of the responsibilities of the Bank of England to the
banking system?
A. Assisting banks that are in a difficult financial position.
B. Loaning money to other countries that are friendly to the UK.
C. Issuing new bonds to finance the PSBR.
D. Auditing the various agencies and departments of the government.
4. The difference between a bank's actual reserves and its required reserves is its:
A. required reserve ratio. B. net worth.
C. profit margin. D. excess reserves.
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5. If the quantity of money demanded exceeds the quantity of money supplied, then the
interest
rate will:
A. change in an uncertain direction. B. fall. C. rise. D. remain constant.
6. Which of the following events will lead to an increase in the demand for money?
A. An increase in the supply of money.
B. A decrease in the price level.
C. An increase in the level of aggregate output.
D. An increase in the interest rate.
7. Which of the following events will lead to a decrease in the equilibrium interest rate?
A. A decrease in the price level.
B. An increase in the discount rate.
C. A sale of government securities by the central bank
D. An increase in the level of aggregate output.
8. The motive for holding money that encourages investors to hold bonds when interest rates
are
low, with the hope of selling them when interest rates are high, is the:
A. precautionary motive. B. peculation motive.
C. s profit motive. D. transactions motive.
9. The opportunity cost of holding money is determined by:
A. the inflation rate. B. the interest rate.
C. the discount rate. D. the level of aggregate output.
10. The demand for money represents the idea that there is:
A. a positive relationship between the interest rate and the quantity of money demanded.
B. a negative relationship between the price level and the quantity of money demanded.
C. a negative relationship between the level of aggregate output and the quantity of money
demanded.
D. a negative relationship between the interest rate and the quantity of money demanded.