DP Economics Questionbank

Using an exchange rate diagram, explain why a deficit in the current account may result in downward pressure on the Kenyan shilling (Kenya’s currency) (paragraph 5).

Using an AD/AS diagram, explain how “good economic growth rates in neighbouring countries like Uganda” benefit Kenya’s economy (paragraph 5).

Explain how aggregate demand might be affected by an increase in interest rates.

Explain what effect a reduction in interest rates might have on consumption and investment.

Explain the possible impact of an increase in wealth and consumer confidence on aggregate demand.

Using an AD/AS diagram, explain why the “decrease in the prices of imports, especially oil” might reduce inflationary pressure (paragraph [5]).

Explain how aggregate demand in an economy might be affected by a rise in the exchange rate and a decrease in the income of major trading partners.

Explain how increased investment by the government in education and training can affect both aggregate demand and aggregate supply.

Using an AD/AS diagram, explain the impact of the trade agreement between Japan and the EU (JEEPA) on Japan’s economic growth (paragraph [1]).

Using Figure 5, state two likely causes for the change in Mexico’s spending on imports of goods and services in 2009.

Using an AD/AS diagram, explain how the peso’s weakness is “raising inflation” (paragraph [6]).

Explain how aggregate demand is likely to be affected by an increase in the wealth of consumers and an increase in business confidence.

Define the term consumption indicated in bold in the text (paragraph [3]).

Using an AD/AS diagram, explain how “increasing China’s interest rate” could affect its economic growth (paragraph [5]).

Calculate the total welfare loss resulting from the imposition of the tariff on chia seeds.

Explain the impact that a fall in the world price of oil might have on aggregate supply and gross domestic product (GDP) in an economy.

Explain how increased investment by the government in education and training can affect both aggregate demand and aggregate supply.

Using an AD/AS diagram, explain how an increase in oil prices “could worsen inflationary pressures” (paragraph [4]).

Using an AD/AS diagram, explain how the construction of the China–Laos railway will contribute to economic growth in Laos (paragraph [1]).

Calculate the total welfare loss resulting from the imposition of the tariff on chia seeds.

Examine why, in contrast to the monetarist/new classical model, the economy will not automatically return to the full employment level of output in the Keynesian model.

Explain how a deflationary gap might occur.

Using the monetarist/new classical model and the Keynesian model, discuss the view that increases in aggregate demand will inevitably be inflationary.

Discuss the view that economies will always return to the full employment level of output in the long run.

Calculate the total welfare loss resulting from the imposition of the tariff on chia seeds.

With reference to the figures on the marginal propensity to consume (paragraph [5]), explain how the value of the multiplier in China would compare with the value of the multiplier in a more developed-market economy (no calculation required).

Calculate the maximum possible increase in gross domestic product (GDP) that could result from the rise in investment.

Country Delta is an open economy with a government sector. Investment rises by $2 billion in both Delta and Beta. Explain how the size of the multiplier and the resulting effect on gross domestic product (GDP) might be different in the two countries.

Using the concept of the multiplier, explain how an increase in investment might affect aggregate demand.

Using this information, calculate the value of the Keynesian multiplier.

Using your answer to part (i), calculate the increase in government spending necessary to increase nominal GDP by $100 billion.

Explain the effect an increase in investment might have on real gross domestic product (GDP) using the Keynesian multiplier.

Gardia’s investment (in plant and equipment) increased by 11 million gamma in the last month. In the same month, its government spending decreased by 8 million gamma. It has been estimated that the marginal propensity to consume (MPC) on domestic goods and services in Gardia is 0.75.

Calculate the maximum possible increase in real gross domestic product (GDP) in Gardia that could result from the changes in investment and government spending.

Calculate the estimated value of the multiplier used by the economist.

Calculate the estimated value of the multiplier used by the economist.

Calculate the total welfare loss resulting from the imposition of the tariff on chia seeds.