Business Economics

Business Economics
ECO130 ASSESSMENT NUMBER 3
MULTIPLE CHOICE QUESTIONS
Q1 The dollar value of all final goods and services produced in a nation within a year is
a) GNP
b) gross national income
c) gross domestic product
d) gross national expenditure
Q2 Which of the following types of carbon reduction policies is generally preferred by economists?
a) compulsory use of green energy
b) subsidies for solar and wind power
c) a tax on petrol and diesel fuel
d) a carbon trading scheme
Q3 Which of the following statements is true?
a) Mining industry profits have declined in the last decade.
b) As mineral prices have increased in the mining boom this has resulted in increasing profits for mining firms and decreased revenue for all Australians.
c) Mining profits have roughly kept pace with mining royalties tax.
d) Mining royalties taxes have kept pace with mining profits so the Mineral Resources Rent Tax is unnecessary
Q4 Structural unemployment is caused by
a) structural changes in the business cycle
b) shifts in the economy that make certain job skills obsolete
c) the impact of the business cycle on job opportunities
d) short term changes in the economy
Q5 Unemployment due to a recession is
a) involuntary unemployment
b) cyclical unemployment
c) structural unemployment
d) frictional unemployment
Q6 The term “full employment” means
a) both structural and cyclical unemployment are zero
b) all people who want jobs have them
c) cyclical unemployment is zero
d) all of the above
Q7 In a country with a population of 20 million, there are 10 million employed and 2 million unemployed. The labour force is
a) 20 million
b) 19 million
c) 12 million
d) 10 million
Q8 Using the same numbers as in Q7, what is the unemployment rate?
a) 5.0%
b) 16.7%
c) 10.0%
d) 20.0%
Q9 Year Consumer Price Index
1 100
2 105
3 110
4 115
5 120
The rate of inflation for Year 2 is
a) 10%
b) 5%
c) 20%
d) 25%

Q10 Using the same table as in Q9, the rate of inflation from Year 3 to Year 5 is
a) 10%
b) 20%
c) 8.3%
d) 9.1%

SHORT ANSWER QUESTIONS
Q1What is the “basket of goods” used by the Australian Bureau of Statistics? Why does the “basket of goods” have to change over time? Give two examples of how the “basket of goods” has changed over time. (Word limit 200 words)
Q2 In regards to the mining industry describe i) a royalty tax ii) a super profits tax. Why is it believed by economists that a super profits tax is better/more efficient than a royalty tax?
(Word limit 200words )
Q3 The unemployment rate has recently fallen in the USA. Some economists have stated that this is not a sign of good news! They say that the unemployment rate fell because of the “discouraged worker effect”.
a) Define an “unemployed person”.
b) What is the “discouraged worker effect”?
c) Why does this mean that the drop in unemployment is bad news?
(Word limit 200words )

Q4 Define the term “inflation”. Who are the winners and losers from inflation? Describe both the cause and effect of i) demand pull inflation ii) cost push inflation. (Diagrams may assist your answer). Imagine the economy is operating near full employment. If we adopt the Classical School view of the economy why is inflation a particular problem at this point?
(Word limit 500words )
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