Question 1

Gross domestic product is calculated by adding net property income from abroad to gross national product.

Accepted Answer

A) True 
 B)False  False

Question 2

Deﬂation can leave households that have mortgages with negative equity. This means that:

Accepted Answer

A)   deﬂation causes the value of the mortgage to fall.
B)   deﬂation transfers wealth from the bank to the household with the mortgage.
C)   deﬂation increases the real value of assets like housing.
D)   deﬂation causes the value of the house to be lower than the outstanding balance of the D

Question 3

If the value of the price index was 103 in 2009 and 105 in 2010, what was the inﬂation rate in 2010?

Accepted Answer

A)   2.2%
B)   2.1%
C)   2%
D)   1.9% D

Question 4

Which of the following is a drawback of using gross domestic product (GDP) per capita as a measure of economic welfare?

Accepted Answer

A)   It does not show the average income earned per person in the country.
B)   It does not throw any light on the distribution of income in the economy.
C)   It includes the value of income earned from illegal activities such as smuggling and traﬃcking.
D)   It includes the value of non-monetary transactions in the economy.

Question 5

What is meant by in?ation? How is it measured?

Accepted Answer

The answer of What is meant by in?ation? How is...

Question 6

When would inﬂation targeting using interest rates lead to a recession in an economy?

Accepted Answer

A)   When the central bank publicizes its target goal for the inﬂation rate.
B)   When inﬂation is inversely linked to employment.
C)   When the target rate of inﬂation is very high.
D)   When the inﬂation has been caused by a reduction in aggregate supply.

Question 7

Suppose a person receives a salary of £15 000 in 2012 and the price index for the year is 115. The inﬂation-adjusted salary is approximately _____.

Accepted Answer

A)   £17 250
B)   £13 274
C)   £15 000
D)   £13 043

Question 8

If a union negotiates a wage above the equilibrium wage in an industry, then the resultant unemployment is called _____ unemployment.

Accepted Answer

A)   classical
B)   structural
C)   cyclical
D)   frictional

Question 9

_____ accounts for the use of productive capital in the creation of output.

Accepted Answer

A)   Depreciation
B)   The discount rate
C)   Devaluation
D)   Deferred expenditure

Question 10

How is national income at basic prices calculated from gross national product at market prices?

Accepted Answer

The answer of How is national income at basic prices...

Question 11

Since the prices of goods and services are falling, deﬂation positively affects workers and ﬁrms.

Accepted Answer

A) True 
 B)False

Question 12

If quarterly data on GDP shows an increase, while exports, consumption, investment and government spending show a decline, it is likely that the GDP data is inaccurate.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is included in calculating national income at market prices?

Accepted Answer

A)   Illegal income, such as income earned from smuggling.
B)   The market value of intermediate goods.
C)   Non-monetary payments for goods and services.
D)   Subsidies and taxes.

Question 14

Which of the following types of unemployment is temporary?

Accepted Answer

A)   Classical unemployment.
B)   Structural unemployment.
C)   Cyclical unemployment.
D)   Frictional unemployment.

Question 15

What are the costs of de?ation?

Accepted Answer

The answer of What are the costs of de?ation?...

Question 16

The total output of an economy can be measured as the:

Accepted Answer

A)   net value of the goods and services produced by ?rms in an economy.
B)   value of household earnings spent outside the economy.
C)   net value of corporate and income taxes paid.
D)   value of non-monetary transactions within the economy.

Question 17

The International Labour Organization (ILO) deﬁnes employment as a measure of jobless people who want to work but are not necessarily available to work.

Accepted Answer

A) True 
 B)False

Question 18

When does cost push in?ation occur in an economy?

Accepted Answer

A)   When a fall in aggregate demand leads to an increase in overall prices.
B)   When a rise in aggregate supply leads to an increase in overall prices.
C)   When a rise in aggregate demand leads to an increase in overall prices.
D)   When a fall in aggregate supply leads to an increase in overall prices.

Question 19

When the wage in a market is lower than the equilibrium wage, there will be classical unemployment in the market.

Accepted Answer

A) True 
 B)False

Question 20

The Phillips curve shows the relationship between:

Accepted Answer

A)   the unemployment rate and the level of real income.
B)   the in?ation rate and the level of aggregate demand.
C)   the rate of change in the price level and the unemployment rate.
D)   the wage rate and the level of unemployment.

Exam 10: Measuring Macroeconomic Variables and Policy Issues

Gross domestic product is calculated by adding net property income from abroad to gross national product.

Deﬂation can leave households that have mortgages with negative equity. This means that:

If the value of the price index was 103 in 2009 and 105 in 2010, what was the inﬂation rate in 2010?

Which of the following is a drawback of using gross domestic product (GDP) per capita as a measure of economic welfare?

What is meant by in?ation? How is it measured?

When would inﬂation targeting using interest rates lead to a recession in an economy?

Suppose a person receives a salary of £15 000 in 2012 and the price index for the year is 115. The inﬂation-adjusted salary is approximately _____.

If a union negotiates a wage above the equilibrium wage in an industry, then the resultant unemployment is called _____ unemployment.

_____ accounts for the use of productive capital in the creation of output.

How is national income at basic prices calculated from gross national product at market prices?

Since the prices of goods and services are falling, deﬂation positively affects workers and ﬁrms.

If quarterly data on GDP shows an increase, while exports, consumption, investment and government spending show a decline, it is likely that the GDP data is inaccurate.

Which of the following is included in calculating national income at market prices?

Which of the following types of unemployment is temporary?

What are the costs of de?ation?

The total output of an economy can be measured as the:

The International Labour Organization (ILO) deﬁnes employment as a measure of jobless people who want to work but are not necessarily available to work.

When does cost push in?ation occur in an economy?

When the wage in a market is lower than the equilibrium wage, there will be classical unemployment in the market.

The Phillips curve shows the relationship between: