Question 1

If the government imposed a legal minimum wage that was above the market equilibrium wage, the resulting unemployment would be the greatest when:

Options :

A : the demand for labor and the supply of labor are both price inelastic

B : the demand for labor and the supply of labor are both price elastic

C : the demand for labor is price inelastic and the supply of labor is price elastic

D : the demand for labor is price elastic and the supply of labor is price inelastic

Answer: B

Question 2

Which ONE of the following circumstances is essential if producer incomes are to rise following the imposition of a price floor (minimum price) in a market?

Options :

A : Market supply is price inelastic

B : Market demand is price inelastic

C : Market supply is price elastic

D : Market demand is price elastic

Answer: B

Question 3

A typical supply curve of a good shows:

Options :

A : The quantities of the good firms actually sell at different possible prices

B : The quantities of the good firms are prepared to supply at different possible prices

C : Different possible equilibrium prices

D : Quantity supplied varying inversely with price

Answer: B

Question 4

When central banks adopt a policy of 'quantitative easing' this means that they:

Options :

A : Lift quantitative restrictions on bank lending

B : Lower the capital adequacy requirements for banks

C : Buy government bonds from the banks

D : Ease the liquidity ratios banks need to hold

Answer: C

Question 5

In a recession which ONE of the following would be likely to experience the largest fall in demand for its products?

Options :

A : A manufacturer of industrial machine tools

B : A chain of supermarket grocery stores

C : A motor insurance company

D : A toothpaste manufacturer

Answer: A