Execise Sheets Introduction TO Macroeconomics PDF

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2 of 31

1) Which of the following is NOT a topic studied in Macroeconomics? A) gross domestic product B) the unemployment rate C) the price of IBM computers D) the inflation rate

3 of 31

2) Which of the following is a topic studied in Macroeconomics? A) gross domestic product B) the wage of auto workers C) the price of IBM computers D) the amount of pizza produced

4 of 31

3) Which of the following is a topic studied in Macroeconomics? A) the functioning of individual industries B) aggregate behavior of households and industries C) the behavior of individual households D) the decision- making behavior of individual business firms

5 of 31

4) An increase in the overall price

level is known as A) deflation. B) recession. C) inflation. D) stagflation.

6 of 31

5) Aggregate behavior is

A) the behavior of each household and firm. B) the behavior of each individual. C) the behavior of all households and firms together. D) none of the above

7 of 31

6) Inflation is a(n)

A) decrease in the overall price level. B) decrease in the overall level of economic activity. C) increase in the overall price level. D) increase in the overall level of economic activity

8 of 31

7) Deflation occurs when

A) the average price level declines. B) economic activity declines. C) the economic growth rate declines. D) the unemployment rate declines

9 of 31

8) A period of very rapid increase in

the overall price level is known as A) stagnation. B) hyperinflation. C) stagflation. D) depression.

10 of 31

9) The term business cycle refers to the A) short- term ups and downs in the price level. B) long- term trends in the price level. C) short- term ups and downs in the level of economic activity. D) long- term trends in the level of economic activity

11 of 31

10) A period during which aggregate

output rises is known as a(n) A) recession. B) inflation. C) hyperinflation. D) expansion

12 of 31

11) A period when the economy shrinks is known as A) a recession. B) a contraction. C) a slump. D) all of the above

13 of 31

12) In a business cycle, a peak represents the end of________ and a trough represents the end of ________. A) an expansion; a recession B) a depression; an expansion C) a trough; a peak D) a recession; an expansion

14 of 31

13) In a business cycle, a peak represents the end of A) an expansion. B) a depression. C) trough. D) a recession

15 of 31

14) In a business cycle, a trough represents the end of A) an expansion. B) an inflation. C) a peak D) a recession

16 of 31

15) Between a trough and a peak, the economy goes through a(n) A) recession. B)bust. C) expansion. D) hyperinflation.

17 of 31

16) Between a peak and a trough, the economy goes through a(n) A) expansion. B) inflation. C) recession. D) boom.

18 of 31

17) Unemployment

generally________ during recessions and________ during expansions. A) falls; rises. B) falls; falls. C) rises; falls. D) rises; rises

19 of 31

18) A prolonged and deep recession

is called A) a business cycle. B) a depression. C) a stagflation. D) hyperinflation

20 of 31

19) Unemployment implies that in the labor market A) there is an excess supply of labor. B) there is an excess demand for labor. C) there are too few workers for the jobs available. D) quantity demanded of labor exceeds quantity supplied

21 of 31

20) Which of the following is NOT a topic studied in Macroeconomics? A) gross domestic product B) the unemployment rate C) the price of IBM computers D) the inflation rate

22 of 31

21) If output is rising and unemployment is falling, the economy MUST be in a(n)

A) contraction. B) expansion. C) depression. D) hyperinflationary period

23 of 31

22) Which of the following is NOT a topic studied in Macroeconomics? A) gross domestic product B) the unemployment rate C) the price of IBM computers D) the inflation rate

24 of 31

23) Government policies regarding

taxes and expenditures are called A) fiscal policy. B) income policies. C) supply- side policy. D) monetary policy

25 of 31

24) The Bank of England affecting the supply of money is known as A) fiscal policy. B) monetary policy. C) growth policy. D) supply side policy

26 of 31

25) Policies designed to affect the

quantity of money are A) fiscal policies. B) supply side or growth policies. C) government spending policies. D) monetary policies

27 of 31

26) The diagram that shows the income received and payments made by each sector of the economy is the A) aggregate demand- aggregate supply diagram. B) circular flow diagram. C) income flow diagram. D) income- production diagram

28 of 31

27) A transfer payment is A) a bonus to get a worker to accept a transfer. B) a cash payment made by the government to people who do not supply goods, services or labor in exchange for the payment. C) a cash payment for transferring a good from one person to another. D) an in kind payment for workingʺ off the books.ʺ

29 of 31

28) In the goods- and- services

market, households A) only supply. B) only demand. C)both supply and demand. D) neither supply nor demand

30 of 31

30) In the circular flow diagram, firms ________ labor and households ________ goods and services. A) demand; supply. B) demand; demand. C) supply; demand. D) supply; supply

31 of 31

31) Securities issued by the UK Treasury government when it borrows money are known as A) Treasury shares. B) Treasury stocks. C) Treasury bonds. D) none of the above

32 of 31

32) Securities issued by a

corporation when it borrows money is a A) share. B) corporate bond. C) corporate dividend. D) stock.

33 of 31

33) To bring the economy out of an inflationary period, Keynes argued that the government should A) cut both taxes and government spending. B) increase both taxes and government spending. C) increase taxes and/or decrease government spending. D) decrease taxes and/or increase government spending.

34 of 31

33) Rapid increases in the price level during periods of recession or high unemployment are known as A) stagflation. B) stagnation. C) depression. D) inflation.

35 of 31

34) Stagflation occurs when the economyʹs inflation rate is high and A) employment is high. B) the unemployment rate is high. C) the unemployment rate is low. D) the rate of change in economic activities is positive

36 of 31

TRUE or FALSE Macroeconomics is concerned with inflation or deflation, output growth and unemployment. 2. Macroeconomics is concerned with the market price and equilibrium quantity of each good or service. 3. Hyperinflation and stagflation are two different names which refer to identical economic conditions. 4. Macroeconomic behavior is the sum of all the microeconomic decisions made by individual households and firms. 5. A recession is usually associated with increasing unemployment. 6. An expansion is usually associated with rising price levels. 7. A recession is associated with a negative rate of growth of the economy. 1.

2 of 31

1) Which of the following is NOT a topic studied in Macroeconomics? A) gross domestic product B) the unemployment rate C) the price of IBM computers D) the inflation rate

3 of 31

2) Which of the following is a topic studied in Macroeconomics? A) gross domestic product B) the wage of auto workers C) the price of IBM computers D) the amount of pizza produced

4 of 31

3) Which of the following is a topic studied in Macroeconomics? A) the functioning of individual industries B) aggregate behavior of households and industries C) the behavior of individual households D) the decision- making behavior of individual business firms

5 of 31

4) An increase in the overall price

level is known as A) deflation. B) recession. C) inflation. D) stagflation.

6 of 31

5) Aggregate behavior is

A) the behavior of each household and firm. B) the behavior of each individual. C) the behavior of all households and firms together. D) none of the above

7 of 31

6) Inflation is a(n)

A) decrease in the overall price level. B) decrease in the overall level of economic activity. C) increase in the overall price level. D) increase in the overall level of economic activity

8 of 31

7) Deflation occurs when

A) the average price level declines. B) economic activity declines. C) the economic growth rate declines. D) the unemployment rate declines

9 of 31

8) A period of very rapid increase in

the overall price level is known as A) stagnation. B) hyperinflation. C) stagflation. D) depression.

10 of 31

9) The term business cycle refers to the A) short- term ups and downs in the price level. B) long- term trends in the price level. C) short- term ups and downs in the level of economic activity. D) long- term trends in the level of economic activity

11 of 31

10) A period during which aggregate

output rises is known as a(n) A) recession. B) inflation. C) hyperinflation. D) expansion

12 of 31

11) A period when the economy shrinks is known as A) a recession. B) a contraction. C) a slump. D) all of the above

13 of 31

12) In a business cycle, a peak represents the end of________ and a trough represents the end of ________. A) an expansion; a recession B) a depression; an expansion C) a trough; a peak D) a recession; an expansion

14 of 31

13) Between a trough and a peak, the economy goes through a(n) A) recession. B)bust. C) expansion. D) hyperinflation.

15 of 31

14) Between a peak and a trough, the economy goes through a(n) A) expansion. B) inflation. C) recession. D) boom.

16 of 31

15) Unemployment

generally________ during recessions and________ during expansions. A) falls; rises. B) falls; falls. C) rises; falls. D) rises; rises

17 of 31

16) A prolonged and deep recession

is called A) a business cycle. B) a depression. C) a stagflation. D) hyperinflation

18 of 31

17) Unemployment implies that in the labor market A) there is an excess supply of labor. B) there is an excess demand for labor. C) there are too few workers for the jobs available. D) quantity demanded of labor exceeds quantity supplied

19 of 31

18) If output is rising and unemployment is falling, the economy MUST be in a(n)

A) contraction. B) expansion. C) depression. D) hyperinflationary period

20 of 31

19) Government policies regarding

taxes and expenditures are called A) fiscal policy. B) income policies. C) supply- side policy. D) monetary policy

21 of 31

20) The Bank of England affecting the supply of money is known as A) fiscal policy. B) monetary policy. C) growth policy. D) supply side policy

22 of 31

21) Policies designed to affect the

quantity of money are A) fiscal policies. B) supply side or growth policies. C) government spending policies. D) monetary policies

23 of 31

22) The diagram that shows the income received and payments made by each sector of the economy is the A) aggregate demand- aggregate supply diagram. B) circular flow diagram. C) income flow diagram. D) income- production diagram

24 of 31

23) A transfer payment is A) a bonus to get a worker to accept a transfer. B) a cash payment made by the government to people who do not supply goods, services or labor in exchange for the payment. C) a cash payment for transferring a good from one person to another. D) an in kind payment for workingʺ off the books.ʺ

25 of 31

24) In the goods- and- services

market, households A) only supply. B) only demand. C)both supply and demand. D) neither supply nor demand

26 of 31

25) In the circular flow diagram, firms ________ labor and households ________ goods and services. A) demand; supply. B) demand; demand. C) supply; demand. D) supply; supply

27 of 31

26) Securities issued by the UK Treasury government when it borrows money are known as A) Treasury shares. B) Treasury stocks. C) Treasury bonds. D) none of the above

28 of 31

27) Securities issued by a

corporation when it borrows money is a A) share. B) corporate bond. C) corporate dividend. D) stock.

29 of 31

28) To bring the economy out of an inflationary period, Keynes argued that the government should A) cut both taxes and government spending. B) increase both taxes and government spending. C) increase taxes and/or decrease government spending. D) decrease taxes and/or increase government spending.

30 of 31

29) Rapid increases in the price level during periods of recession or high unemployment are known as A) stagflation. B) stagnation. C) depression. D) inflation.

31 of 31

30) Stagflation occurs when the economyʹs inflation rate is high and A) employment is high. B) the unemployment rate is high. C) the unemployment rate is low. D) the rate of change in economic activities is positive

32 of 31

TRUE or FALSE Macroeconomics is concerned with inflation or deflation, output growth and unemployment. TRUE 2. Macroeconomics is concerned with the market price and equilibrium quantity of each good or service. FALSE 3. Hyperinflation and stagflation are two different names which refer to identical economic conditions. FALSE 4. Macroeconomic behavior is the sum of all the microeconomic decisions made by individual households and firms. TRUE 5. A recession is usually associated with increasing unemployment. TRUE 6. An expansion is usually associated with rising price levels. TRUE 7. A recession is associated with a negative rate of growth of the economy. TRUE 1.

Keith Pilbeam

Workshop 1

Intro to Macro

Macro concepts Question 1 The following table contains output and expenditure data for an economy:

Consumption (at market prices) Investment (at market prices) Government spending (at market prices) Net Exports (at market prices) Net Property income from abroad Indirect taxes

£ billions 300 90 100 -10 15 60

Gross Domestic Product at BASIC PRICES (FACTOR COST) and Gross National Income at MARKET PRICES are respectively: A B C D

420, 495 480, 435 420, 435 480, 495

Question 2 If a country has negative net property income from abroad then: A Gross Domestic Product is greater than Gross National Income. B Gross Domestic Product is less than Gross National Income. C Gross Domestic Product is the same as Gross National Income. D we cannot say whether Gross Domestic Product differs from Gross National Income from this information. Question 3 Assume that the total output of goods and services is held constant and the general price level increases. Which one of following observations concerning Gross Domestic Product (GDP) is FALSE? A Nominal GDP increases. B Real GDP remains constant. C Nominal GDP changes by more than real GDP. D Nominal GDP changes by less than real GDP.

Question 4 Given the following data for an economy: Consumer expenditure Investment Government expenditure Exports Imports Capital depreciation Net property Income from abroad

£70 million £20 million £40 million £10 million £30 million £20 million £10 million

What is the value of its Net National Income? A £90 million B £100 million C £110 million D £120 million Question 5 Given the following macroeconomic data: Consumer expenditure Investment expenditure Government expenditure Exports Imports Net income from abroad

£70 million £20 million £40 million £20 million £30 million £10 million

What is the value of the Gross Domestic Product? A B C D

£150 million £130 million £120 million £110 million

Question 6 If an economy experiences an unplanned increase in its inventories (stocks of goods) then: A Gross Domestic Product will have increased. B Recorded (or Realized) investment will have increased. C Producers. desired level of inventories is more than the actual level. D Total expenditure in the economy is greater than the value of total output produced.

2

Question 7 The following transactions take place in a simple closed economy. A company producing good X sells its output for £1 million. In producing good X the company buys raw materials for £400,000, uses £100,000 worth of electricity and depreciates capital equipment to the value of £200,000. What is the contribution of the company to the country's Gross Domestic Product? A £600,000 B £500,000 C £400,000 D £300,000

Question 8 A fall in real Gross Domestic Product would result from an increase in all of the following with the exception of: A saving. B imports. C taxation. D government expenditure. Question 9 A country has a total population of 15 million, 12 million of whom are in employment and 1 million of whom are registered unemployed. What is the country’s unemployment rate? A 3.7% B 6.7% C 7.7% D 8.3% Question 10 In the circular flow of income model: A savings, taxes and investment are leakages B exports, imports and government expenditure are leakages C investment, government expenditure and exports are injections D investment, exports and consumption are injections Question 11 Net National Income is defined as Gross National Income minus: A taxes B transfer payments C depreciation D retained corporate earnings

3

Question 12 Which of the following is an example of an injection into the circular flow of income? A Investment B Saving C Taxation D Imports Question 13 In a country with a rising population, nominal Gross Domestic Product (GDP) increases at a rate of 6 per cent per year while the GDP deflator increases at 4 per cent per year, then which of the following must be TRUE? A Real GDP per capita falls. B Real GDP per capita rises. C Real GDP falls. D Real GDP rises.

Question 14 Which one of the following is NOT part of the Gross National Income? A B C D

Wages from self employment Profits of private companies Social security benefit payments Net property income from abroad

Question 15 Gross National Income is equal to: A B C D

Gross Domestic Product minus depreciation Net National Income plus net property income from abroad Gross Domestic Product plus net property income from abroad Net National Income minus depreciation

4

Keith Pilbeam

Workshop 1

Intro to Macro

Macro concepts Question 1 The following table contains output and expenditure data for an economy:

Consumption (at market prices) Investment (at market prices) Government spending (at market prices) Net Exports (at market prices) Net Property income from abroad Indirect taxes

£ billions 300 90 100 -10 15 60

Gross Domestic Product at BASIC PRICES (FACTOR COST...