A cyclical unemployment B regional unemployment C seasonal unemployment D structural unemployment 24 The diagram shows the annual percentage (%) change in employment and output in the UK private sector between 2000 and 2012. 4 2 0 –2 –4 –6 10 5 0 –5 –10 –15 employment employment output output 2000 02 04 06 08 10 12 In which year did labour productivity increase the most? A 2003 B 2007 C 2009 D 2012 25 According to Keynesian theory, when will an increase in the money supply leave the level of output unchanged? A when the liquidity trap is operative B when the money supply increase was not anticipated C when there is a floating exchange rate D when there is an immediate adjustment to expectations about future price levels 26 In a 4-sector economy, consisting of households, firms, government and foreign trade, the level of national income is in equilibrium where C + I + G + (X – M) = Y. What must Y include for an equilibrium to exist? A C + S + M B C + S + T C S + T D S + T + M
10 © UCLES 2016 9708/32/M/J/16 27 When would an economic recession result in an increase in a government’s budget deficit? A The government increases tariffs on imports with inelastic demand and keeps the total amount it spends on unemployment benefit unchanged. B The government keeps the unemployment benefit rate and direct and indirect tax rates unchanged. C The government reduces foreign aid and widens the tax base. D The government reduces the unemployment benefit rate and decreases the tax free allowance on income tax. 28 What will be most likely to rise if unemployment is increasing in an economy? A the human capital of unemployed workers B the living standards of all workers C the nominal money wage rate of employed workers D the tax burden on employed workers 29 What is most likely to result from foreign direct investment in developing economies? A a deterioration in the trade balances of developing economies B a reduction in migration to urban areas in developing economies C a reduction in the transfer of technology to developing economies D a rise in per capita levels of consumption in developing economies 30 What will increase the multiplier effect of an increase in government spending on national income? A an increase in direct taxation B an increase in interest rates C an increase in the marginal propensity to consume D an increase in the marginal propensity to import
11 © UCLES 2016 9708/32/M/J/16 BLANK PAGE
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