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ECON1001: Macroeconomics

 
 
Instruction: You have 115 minutes to finish the exam. Please choose the most appropriate answer to each question and mark it in the Scantron answer sheet. Any answer in the problem set will NOT be graded.
 

41. Jack sells $100 worth of wool to Bill. Bill makes cloth out of the cotton and sells to Cathy for $400. Cathy makes Halloween costumes and sells to Daniel for $700. Daniel sells the costumes to children for $1500 for the holiday. The total GDP of this production is:
42. $1,200.
43. $1,500.
44. $2,700.
45. $1,100.

 

42. When the depreciation (consumption of fixed capital) is higher than the gross domestic investment, it indicates that:
43. real GDP is increasing but nominal GDP is decreasing.
44. net investment is negative.
45. net export is negative.
46. the country’s capital stock is increasing.

 

43. In expenditure approach of national income accounting, the consumption includes purchases of:
44. both new and used products.
45. durable goods and nondurable goods but not services.
46. durable goods, nondurable goods, and services.
47. changes in business inventories.

 

44. According to national income accounting, which of the following is not economic investment?
45. The purchase of a new drill press by a local pluming company.
46. The purchase of 100 shares of GE stocks by a college student.
47. Real estate project developed by a construction company.
48. The increase in inventory of a local food company.

 

45. In national income and product accounts, investment include:
46. the increase in business inventories.
47. the increase in the balance of a savings account.
48. the purchase of stock shares of IT company.
49. the purchase of durable goods such as TVs, cars, and refrigerators.
50. When the economy sees an increase in its inventory of goods in a year,
51. gross investment exceeds net investment.
52. this amount should not be included in calculating that year’s GDP.
53. this amount should be subtracted from that year’s GDP.
54. this amount should be included in calculating that year’s GDP.

 

47. In expenditure approach of GDP calculation, government purchases include government spending on:
48. consumption goods and public capital goods.
49. consumption goods only.
50. public capital goods only.
51. consumption goods, public capital goods, and transfer payments like social security payments.

 

48. When calculating GDP, transfer payments should be:
49. excluded because they only affect the price level of the economy.
50. excluded because they do not reflect current production.
51. included because they belong to the investment spending.
52. included because they increase the income of recipients.

 
Answer question 49 with the table. All numbers are in billion dollars.

Government Purchases	$20
Consumption	100
Gross domestic investment	30
Depreciation	10
Export	8
Import	16

 

49. Refer to the table above, the GDP is:
50. $184.
51. $142.
52. $160.
53. $158.

 
 
 
 
Use the following table to answer questions 50 and 51. This country only produces hamburger

Year	Units of output of hamburger	Price of hamburger	Price index (year1 is base year)
1	10	10	100
2	12	20	200
3	15	30	300
4	20	40	400

 

50. Refer to the table above, the nominal GDP in year 2 is:
51. $120.
52. $240.
53. $245.
54. $170.

 

51. Refer to the table above, the real GDP in year 4 is:
52. $180.
53. $350.
54. $325.
55. $200.

 

52. In 2010, Wonderland’s real GDP is $160 billion and nominal GDP is $480 billion, the GDP price index for that year is:
53. 100.
54. 250.
55. 350.
56. 300.

 

53. In 1990, Dreamland had a nominal GDP of $360 billion. In 2000, its nominal GDP rose to $450 billion. If we choose 1985 as base year (GDP price index is 100 in 1985), the GDP price index was 120 in 1990 and 125 in 2000. Between 1990 and 2000, the real GDP of Dreamland:
54. increased by $60 billion.
55. decreased by $30 billion.
56. increased by $120 billion.
57. increased by $170 billion.

 
 
 
 

54. Highland only produces three goods. In 2010, Highland produced the amount of each product as following: A = 10, B = 30, C = 5. The prices information of all three products were A = $2, B = $3, and C = $1. Based on this information in 2010, Highland had a nominal GDP of:
55. $120.
56. $115.
57. $145.
58. $190.

 

55. Mononia only produces three products. In 2012, Mononia produced the amount of three products as following: A = 10, B = 30, C = 5. The prices of all three products were are A = $2, B = $3, and C = $1. Based on this information in 2012, if we choose 2000 as base year when the price of each product was $1, then the GDP price index in 2012 was:
56. 205.5.
57. 255.5.
58. 39.3.
59. 100.

 

56. Dreamland’s labor productivity fell by 4 percent and its total worker-hours remained unchanged between 1990 and 2000. This means in Dreamland:
57. its real GDP declined.
58. its capital stock increased.
59. its production possibilities curve shifted outward.
60. a point moves along one single production possibilities curve.

 
Use the following graph to answer questions 57 and 58
 
 
 

57. The graph above is the PPC of Wonderland. If Wonderland has an increase in its labor productivity, it would:
58. move Wonderland’s production point away from point A and toward point B.
59. move Wonderland’s production point away from point B and toward point A.
60. shift the PPC from AB to CD.
61. shift the PPC from CD to AB.

 

58. The graph above is the PPC of Wonderland. If Wonderland has an increase in its human capital, it would:
59. move Wonderland’s production point away from point A and toward point B.
60. shift the PPC from CD to AB.
61. move Wonderland’s production point away from point B and toward point A.
62. shift the PPC from AB to CD.
63. A country’s labor productivity can be calculated as the:
64. ratio of capital to labor.
65. real output per worker hour.
66. real output per capita.
67. ratio of worker hours to real GDP.

 

60. Which of the following contributes the most to the improvement of the labor productivity in the U.S.?
61. the reallocation of labor force from agriculture to manufacturing industry.
62. the improvements in labor quality.
63. the increases in the quantity of capital.
64. the technological advance.

 

61. According to economists, the economies of scale is the fact that:
62. public corporations have complex structure and thus less efficient in operation than small partnership business.
63. infrastructure investment in highways, utilities, and so on boost economic growth.
64. large corporations are able to use more efficient technologies than smaller companies.
65. the reallocation of labor force among different industries.

 

62. The following statements explains human capital correctly except?
63. It is the skills and knowledge that workers gained from school and training
64. It works in the similar way as physical capital.
65. The tools and machines workers are using.
66. It is important for economic growth.

 
 
 

63. Lowland’s labor productivity and total amount of available labor hours both decreased by 3 percent between 2010 and 2016. This means in Wonderland:
64. the real GDP increased by 3 percent.
65. the real GDP remained constant.
66. the real GDP decreased by 6 percent.
67. the capital stock increased by 3 percent.

 

64. In a year, Country B has a real GDP of $4,000 and labor productivity of $8. This means in that year:
65. its real GDP per capita is $500.
66. the GDP price index is higher than 1000.
67. its nominal GDP is $5000.
68. it total amount of labor hours is 500.

 

65. Economists use the term human capital to describe:
66. the skills and knowledge that workers gained from school and training
67. the machines and tools used by workers.
68. the accumulation of financial assets by households.
69. the purchase of newly built houses by households.

 

66. People hold different opinions about the relation between economic growth and pollution. The economic growth critics agrees to the following statements except:
67. People have to suffer from an inevitable pollution.
68. pollution happens, not because of growth, but because common resources are treated as free goods.
69. pollution is the price to pay to maintain high-speed economic growth.
70. pollution is harmful to the society and should be reduced to zero at the cost of economic growth.

 

67. Although economic growth improves the standard of living of a country, some critics argues that:
68. economic growth and industrialization can reduce pollution.
69. economic growth itself cannot necessarily resolve some socioeconomic problems like inequality in income distribution.
70. economic growth can increase people’s economic security.
71. economic growth can create balance economic growth and civilization advance.

 

68. The economic fluctuation, or the ups and downs in an economy’s outputs over time is called:
69. economics recessions.
70. business cycles.
71. economic growth.
72. periodic change in output.
73. Business cycle tends to have different tolls on different industries in an economy. Which of the following industries or sectors are more likely to be affect the most by business cycle?
74. guns, tanks and other military goods.
75. college education services and nondurable consumer goods, like foods.
76. high school education service and consumer clothing.
77. capital goods and durable consumer goods.

 

70. In business cycle analysis, the peak or trough of it is called:
71. the trough.
72. a recession.
73. a turning point.
74. the peak.

 

71. In business cycle analysis, an economic recession is defined as the period when:
72. demand-pull inflation occurs.
73. nominal GDP declines.
74. cost-push inflation occurs.
75. real GDP declines.

 

72. When an economy moves across different phases of a business cycle, which phase is most likely to see a rising real output and falling unemployment rates?
73. expansion.
74. peak.
75. trough.
76. recession.

 

73. Most macroeconomists agree that the immediate cause of most business cycle is:
74. an unexpected drop in the labor productivity.
75. an unexpected change in the total spending.
76. the destruction of old products and invention of new products.
77. the life cycle of bubbles in financial market.

 

74. Economists agree that a sudden change in total spending can cause cyclical movement of real outputs and unemployment. This is mainly because?
75. the sudden change in total spending triggers supply shocks which cause the cyclical movements in output and unemployment.
76. the sudden change in total spending catches the government off guard.
77. prices are sticky in the short run.
78. prices are free to change in the long run.

 
 
The following table shows the employment information for Wonderland. All figures are in millions. Use the following table to answer questions 73 through 75

Total population	245
Unemployed	15
Employed	170
Discouraged workers	10

 

75. Based on the information in the table, Wonderland has a labor force of:
76. 245 million.
77. 185 million.
78. 195 million.
79. 170 million.

 

76. Based on the information in the table, Wonderland has an unemployment rate of:
77. 5.5 percent.
78. 4.2 percent.
79. 6.7 percent.
80. 8.1 percent.

 

77. Based on the information in the table, if Wonderland has a natural rate of unemployment of 5 percent, then its:
78. frictional unemployment is about 1 percent.
79. structural unemployment is about 2 percent.
80. cyclical unemployment is about 3 percent.
81. marginal unemployment is about 4 percent.

 

78. Two years ago, Kathy quitted her job as an associate at a local branch of Bank of America and went to earn a MBA degree. With the degree in hand, she is now searching for a job in management. Kathy now belongs to:
79. structural unemployment.
80. cyclical unemployment.
81. frictional unemployment.
82. not-in-labor-force.
83. The natural rate of unemployment in a country is:
84. always higher than the full-employment rate of unemployment.
85. always lower than the full-employment rate of unemployment.
86. the unemployment rate when the economy is at its potential output.
87. calculated as the ratio of total unemployment to the labor force.

 

80. Mary works at home as her own housekeeper and full-time caretaker of her children. Mary can be claimed as:
81. cyclically unemployed.
82. frictionally employed.
83. not in the labor force.
84. structurally unemployed.

 

81. In Dreamland, its unemployment rate is 8 percent and its natural rate of unemployment is 4 percent, this means its:
82. frictional unemployment rate is 4 percent.
83. cyclical and frictional unemployment rates together are 8 percent.
84. cyclical unemployment rate is 4 percent.
85. natural rate of unemployment is 12 percent.

 

82. Jack is temporarily unemployed because he quitted his job with a local cable company last month and will begin his new job at an internet company next week. Now Jack can be claimed as:
83. cyclically unemployed.
84. frictionally unemployed.
85. structurally unemployed.
86. self-employed.

 

83. Maria was laid off two days ago from a local steel company due to the competition from overseas. She is planning to move to Mississippi to look for a job. Now she belongs to:
84. seasonal unemployment.
85. cyclical unemployment.
86. structural unemployment.
87. frictional unemployment.

 

84. A country’s natural rate of unemployment include:
85. cyclical and frictional unemployment.
86. structural and frictional unemployment.
87. structural and cyclical unemployment.
88. cyclical, frictional, and structural unemployment.

 

85. During the Great Recession in 2007-2009, which of the following will most likely change with the recession:
86. frictional unemployment.
87. structural unemployment.
88. cyclical unemployment.
89. seasonal unemployment.

 

86. When the U.S. economy reaches its natural rate of unemployment:
87. the U.S. economy also reaches its potential output.
88. the U.S. economy still experiences a very little cyclical unemployment.
89. the U.S. economy only experiences frictional unemployment.
90. the U.S. economy only experiences structural unemployment exists.

 
 

87. Based on economists’ estimate, Highland is seeing insufficient overall demand for goods and services, this is most likely associated with:
88. structural unemployment.
89. frictional unemployment.
90. cyclical unemployment.
91. natural unemployment.

 

88. Lowland has an actual GDP of $520 billion and a negative GDP gap of $15 billion, then the potential GDP is:
89. $535 billion.
90. $505 billion.
91. $520 billion.
92. $15 billion.

 

89. Most economists agree that the natural rate of unemployment in the U.S. economy is about 5 percent. If the current unemployment rate is 8 percent, according to Okun’s law, the negative GDP gap is:
90. 8 percent.
91. 6 percent
92. 10 percent.
93. 13 percent.

 

90. An economy’s full-employment level of output is also called:
91. real output.
92. equilibrium output.
93. potential output.
94. actual output.

 

91. When a country is experiencing Inflation, it means that:
92. the prices of all products are rising, but may at different rates.
93. the prices of all products are rising and at the same rate.
94. the overall price level is rising, although the prices of some products may be falling.
95. real income of the economy is increasing.

 

92. Farmland sees its consumer price index (CPI) rising from 200 to 220 in a particular year, the rate of inflation in that year is:
93. 10 percent.
94. 33 percent.
95. 20 percent.
96. 11 percent.

 

93. People use the phrase “too much money chasing too few goods” to best describe:
94. the cost-push inflation.
95. the demand-pull inflation.
96. the inflation premium.
97. the real GDP gap.

 

94. When an economy experiences increases in wages or other resource prices, we can expect this economy is likely to have:
95. demand-push inflation.
96. demand-pull inflation.
97. cost-push inflation.
98. cost-pull inflation.

 

95. If the U. S. economy sees rising per-unit production costs, soon enough we can expect:
96. natural unemployment.
97. structural unemployment.
98. demand-push inflation.
99. cost-push inflation.

 

96. Paul is told by his boss that his salary will increase from $20,000 to $22,000 next year. If the consumer price index is expected to increase from 100 to 104, Paul’s real income will:
97. fall by about 10 percent.
98. fall by about 4 percent.
99. rise by about 6 percent
100. rise by about 20 percent.

 
 
 
 
 
 
 
 
 

97. United Automobile Workers (UAW), a labor union, argued that its members’ standard of living was falling. But some critics argued that this couldn’t be true because the union members had increases in their nominal income through collective bargaining. Do you agree?
98. Yes. If one has a large nominal income, his standard of living will surely increase.
99. No. If prices increase more proportionately than the increase in nominal income, the real income actually falls.
100. No. If prices increase less proportionately than the increases in nominal income, the real actually income increases.
101. Yes. If prices increase less proportionately than the increases in nominal income, the real income actually falls.

 

98. In 2015, Wonderland’s nominal income rose by 5.2 percent and the price level rose by 2.5 percent. Then, Wonderland’s real income:
99. remained unchanged.
100. increased by about 5.2 percent.
101. increased by about 2.7 percent.
102. decreased by about 7.7 percent.

 

99. In Highland, the nominal interest rate is 7 percent and the real interest rate is 3 percent, then the inflation premium is:
100. 7 percent.
101. 3 percent.
102. 4 percent.
103. 10 percent.

 

100. Let’s say you want to get a real rate of interest of 4 percent when you loan your money out for a year. If you expect inflation to remain steady at 3 percent next year, you should charge a nominal interest rate of:
101. 4 percent.
102. 3 percent.
103. 1 percent.
104. 7 percent.

 

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