PRACTICE EXERCISES

UNIT 7
I> Make up complete sentences using given words or phrases
1. Fiscal/ monetary/ policy/ be/ frequently/ used/ together/ restore/ economy/ to/ full
employment output.
……………………………………………………………………………………………
……………………………………………………………………………………………
2. When/ economy/ be/ experience/ a severe recession/,/ one possible solution/ would/
be/ engage/ expansionary fiscal policy/ increase aggregate demand.
……………………………………………………………………………………………
……………………………………………………………………………………………
3. Expansionary fiscal policy/ be/ either/ increase/ government spending/ decrease in
taxes/ increase real GDP.
……………………………………………………………………………………………
……………………………………………………………………………………………
4. Expansionary monetary policy/ be/ increasing/ money supply/ increase real GDP.
……………………………………………………………………………………………
……………………………………………………………………………………………
5. Tax cuts/ increase/ household demand/ increase/ workers’ take-home pay.
……………………………………………………………………………………………
……………………………………………………………………………………………
6. Tax cuts/ can/ boost/ business demand/ increase/ firms’ after-tax cash flow/,/ which
can be/ use/ pay/ dividend/ expand activity/,/ making/ hiring/ investing/ more attractive.
……………………………………………………………………………………………
……………………………………………………………………………………………
7. Deficit spending/ mean/ spending/ funds/ obtain/ borrowing/ printing/ instead/
taxation.
……………………………………………………………………………………………
……………………………………………………………………………………………
8. In/ practice/, /most/ government/ choose/ borrow/ more/ money/ spend
……………………………………………………………………………………………
……………………………………………………………………………………………
9. If the government prints money, it is likely to increase inflation/ it is likely that
inflation is unavoidable/ it is difficult to control inflation
……………………………………………………………………………………………
……………………………………………………………………………………………
10. Deficit spending/ can/ helpful/ when/ economic growth/ low because/ it/ help/
bring/ more/ income/ workers
……………………………………………………………………………………………
……………………………………………………………………………………………
11. Deficit spending/ can/ also/ helpful when unemployment rate/ high/ because/ it/
help/ create/ more/ job.
……………………………………………………………………………………………
……………………………………………………………………………………………
12. when/ government/ borrow/ money/ build/ new highway/, / construction/ create/
more/ job/, /so/ unemployment/ will/ reduce
……………………………………………………………………………………………
……………………………………………………………………………………………
13. construction/ new highway/ also/ bring/ more/ income/ individuals/ firms
……………………………………………………………………………………………
……………………………………………………………………………………………
14. If/ government/ reduce/ tax rate/,/ for example/,/ incomes/ both/ individual/ firm/
have more/ income/ spend.
……………………………………………………………………………………………
……………………………………………………………………………………………
15. With/ more/ income/ individual/ tend/ purchase/ more/ good/ service
……………………………………………………………………………………………
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16. With/ more/ income/ firm/ tend/ invest/ machinery/ equipment/ or/ expand/
business/ create/ more/ profit
……………………………………………………………………………………………
……………………………………………………………………………………………
17. Higher/ demand/ good/ service/ lead/ higher/ supply/
……………………………………………………………………………………………
……………………………………………………………………………………………
18. When/ consumer demand/ increase/ , / company/ tend/ produce/ more/ goods and
services/ meet/ that higher demand.
……………………………………………………………………………………………
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19. Consumer theory/ describe/ how/ consumer/ maximize/ well-being/ make/ trade-
offs.
……………………………………………………………………………………………
……………………………………………………………………………………………
20. Worker/ must/ decide/ when/ enter/ workforce/, / how many/ hour/ per week/
they /want/ spend/ working and relaxing.
……………………………………………………………………………………………
……………………………………………………………………………………………
21. Firms/ also/ face/ limit/ terms/ the/ kind/ product/ that/ they/ can/ produce/ , / and/
resource/ available/ produce them.
……………………………………………………………………………………………
……………………………………………………………………………………………
22. All/ trade-off/ made/ consumer/ , / worker/ firm/ be/ base/ the prices.
……………………………………………………………………………………………
……………………………………………………………………………………………
23. Macroeconomics/ look at/ how/ increase/ net exports/ would/ affect/ nation’s/
capital account/ or/ how/ GDP/ would/ affected/ unemployment rate.
……………………………………………………………………………………………
……………………………………………………………………………………………
II. Choose the best answer A, B, C or D to complete the sentences.
1. Increasing ….. has led to a massive increase in the number of foreign exchange
transactions in recent decades.
A. international 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. National public debts, ….. on a world scale, have almost shown a tendency to
increase without exception.
A. taken B. take C. took D. being taken
4. Monetary policy is one of the tools that a ………………… Government uses to
influence its economy.
A. nation B. national C. nationality D. native
5. Macroeconomic stability means ………………., low inflation, high economic
growth and so on.
A. low unemployment B. low competition C. high production D. b & c
6. 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
7. The supply of a good is ……….. related to the price of the inputs used to make the
good.
A. substantially B. positively C. significantly D. negatively
8. The equilibrium price changes when the supply and demand curves …………
A. move B. change C. shift D. stand the same
9. Value-added tax is a typical example of ….
A. direct tax B. indirect tax C. income tax D. sales tax
10. Money accepted in………….for goods and services and debts makes the trading
process simpler and more efficient.
A. supply B. purchase C. payment D. demand
11. Inflation is generally defined as the ….. in the average prices of most goods and
services in one year as compared to the previous year.
A. raise B. rising C. rise D. raising
12. Taxation as a term ….. to all types of taxes, from income to gift to estate taxes.
A. applies B. apply C. applied D. applying
13. 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
14. All governments intervene through their ……………….. policies in a bid to
achieve certain policy objectives.
A. economy B. microeconomic C. macroeconomic D. economical
15. Fiscal policy involves the use of government spending, taxation and
…………………. to influence both the economy.
A. investing B. savings C. borrowing D. depositing
16. The relationship between price and quantity supplied is called the ……………..
A. negative relation B. law of supply C. law of demand D. opposite
relation
17. The advance in technology can create a (an) ……………in the firm’s costs.
A. increase B. rise C. amount D. decrease
18. A …………… market is a market in which there are many buyers and sellers of the
same good or service.
A. competed B. competition C. competitive D. competing
19. The standard…………….for international trade and investment is the US dollar.
A. capital B. currency C. unit D. payment
20. ………. is imposed on the wealth possessed by individuals in a country.
A. wealth tax B. capital gain tax C. value-added tax D. income tax