BSP2001 Macro & International Economics Sem 1 2014/2015

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Practice MCQs Set 1

1) Which of the following is NOT a central issue in macroeconomics?
A) How do tax changes affect an individual household's choices of what to buy?
B) How should the Central Bank combat inflation?
C) What causes high and persistent unemployment?
D) What factors determine economic growth?


2) Government intervention into economic activity will NOT lead to a change in the
price level in the _______.
A) short run.
B) medium run.
C) long run.
D) All of the above.


3) In the long run, the AS curve is
A) horizontal.
B) vertical.
C) upward-sloping.
D) assumed to be completely price elastic.


4) In the short run, a positive aggregate demand shock will lead to a _______ in
equilibrium.
A) higher price level.
B) higher output level.
C) (A) and (B).
D) None of the above.


5) In the medium run, a negative aggregate demand shock will lead to a _______ in
equilibrium.
A) lower price level.
B) lower output level.
C) All of the above.
D) None of the above.


6) Which of the following can affect the size of the output gap?
A) Changes to potential GDP
B) Changes to actual GDP
C) Changes to aggregate demand
D) All of the above.

fiscal policy
completely horizontal
horizontal AS Curve, downward sloping AD curve
indicators if economy is in boom or recessionary phase - business cycle
BSP2001 Macro & International Economics Sem 1 2014/2015
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7) When the economy goes into a recession, we can generally expect that
A) inflation will decrease while output will increase.
B) inflation will increase while unemployment will decrease.
C) inflation and output will increase.
D) inflation will decrease while unemployment will increase.


8) The income method of measuring GDP includes _______
A) wages
B) profits
C) taxes
D) All of the above.


9) Gross Domestic Product is defined as the _______.
A) value of all final goods and services produced for the market within the country over
a period of time.
B) value of all final goods and services produced for the market by citizens of the
country over a period of time.
C) value of all final goods and services sold within the country over a period of time.
D) value of all goods and services produced and sold within the country over a period of
time.


10) Which of the following identities is FALSE?
A) Y =C +I +G +NX
B) YD =Y - TA +TR
C) I - S =(G - TA +TR) +NX
D) All of the above are false.


11) Which of the following is NOT considered as physical investment?
A) Purchase of a government bond.
B) Inventory accumulation.
C) Purchase of a new machine.
D) All of the above are considered as physical investment.


12) Assume exports =500, imports =600, tax =1600, transfer payments =500,
government purchases =1400, private domestic saving =900. Then the level of
private domestic investment is _______.
A) 200.
B) 700.
C) 900.
D) 1100.
GNP
disposable income either you save or invest
however if I paid a broker as a commission (would be part of broker's income) therefore would be under GDP using the
income method
BSP2001 Macro & International Economics Sem 1 2014/2015
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13) If nominal GDP increased from $6000 billion in the base year to $6300 billion in the
following year and real GDP stayed the same, which is true?
A) GDP deflator increased by approximately 105%.
B) GDP deflator decreased by approximately 5%.
C) GDP deflator remained unchanged.
D) Inflation rate is approximately 5%.


14) Nominal GDP is correctly defined as _______,
A) the monetary value of all goods and services, final and intermediate, produced in a
given year.
B) the monetary value of all wealth that is accumulated in a given year.
C) the monetary value of all final goods and services currently produced in the economy
in a given year.
D) the market value of all goods produced by domestically-owned resources in a given
year.


15) The unemployment rate is defined as the _______.
A) number of unemployed divided by total population.
B) number of people who are not looking for jobs divided by the labor force.
C) fraction of the labor force that cannot find jobs but who are actively looking.
D) fraction of the labor force that cannot find jobs and are not looking for jobs.

GDP deflator = 1
GDP deflator = 1.05
inflation = (1.05-1)/1 = 5%
(recall base year is always 1)