✅Semester A, 2017-2018 C04Semester A, 2012-2013Semester A, 2012-2013Semester A, 2012-2013 PDF

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Name:___________Student ID:___________CITY UNIVERSITY OF HONG KONGCourse code & title : CB2402 Macroeconomics (Section: CA4 C04)Session : Semester A 2017/Time allowed : 90 MinutesThis paper has pages (including this cover page). This paper consists of 40 questions. Answer ALL questions. You are ...

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Name:___________ Student ID:___________ CITY UNIVERSITY OF HONG KONG

Course code & title :

CB2402 Macroeconomics (Section: CA4 C04)

Session

:

Semester A 2017/18

Time allowed

:

90 Minutes

This paper has pages (including this cover page).

1.

This paper consists of 40 questions.

2.

Answer ALL questions.

3.

You are not allowed to take away the question papers.

This is a closed-book examination.

No materials or aids are allowed during the whole examination. If any unauthorized materials or aids are found on a candidate during the examination, the candidate will be subject to disciplinary action.

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1. Gross domestic product is calculated by summing up A) the total quantity of goods and services in the economy. B) the total quantity of goods and services produced in the economy during a period of time. C) the total market value of goods and services in the economy. D) the total market value of final goods and services produced in the economy during a period of time. Answer: D 2. Consider the data (in billions of dollars) for an economy: Consumption expenditures $800 Investment expenditures 300 Government purchases 300 Government transfer payments 400 Exports 300 Imports 100 Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $2,100. C) $1,600. D) $1,400. Answer: C 3. The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion. You should conclude A) a typical person in Vietnam is 10 times as well off as the typical person in the Philippines. B) a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines. C) a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines. D) it is not possible to make a good comparison of the economic well being of a typical individual in the 2 countries without additional information. Answer: D A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2011 and 2016 are shown in the table: 2011 2016 Product Quantity Price Quantity Camera 100 $10 120 Legal services 50 15 45 Books 200 40 210 The next three questions are based on data in this table. 4.

What is real GDP in 2016, using 2011 as the base year? 2

Price $12 20 45

A) $28,885 B) $11,790 C) $11,200 D) $10,275 Answer: D 5. What is real GDP in 2016, using 2016 as the base year? A) $28,885 B) $11,790 C) $11,200 D) $10,275 Answer: B 6. What is the GDP deflator in 2011 if 2016 is the base year? A) 187 B) 87 C) 8.7 D) 0.87 Answer: B 7. Which of the following is included in both the Hong Kong GDP and Hong Kong GNP? A) the value of what a Hong Kong-owned firm produces in Hong Kong B) the value of what a Hong Kong-owned firm produces in Mainland China C) the value of what a US-owned firm produces in Hong Kong D) the value of what a Hong Kong-owned firm produces in Hong Kong and in Mainland China Answer: A 8. The GDP deflator is the A) difference between real GDP and nominal GDP multiplied by 100. B) difference between nominal GDP and real GDP divided by 100. C) ratio of real GDP to nominal GDP multiplied by 100. D) ratio of nominal GDP to real GDP multiplied by 100. Answer: D 9. Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause A) the unemployment rate to decrease. B) the labor force participation rate to decrease. C) the number of discouraged workers to increase. D) no change in the unemployment rate. Answer: B 10. Which of the following is an example of a worker experiencing cyclical unemployment? A) a worker who changes jobs to move closer her family 3

B) an assembly line worker who loses his job because of automation C) a freightliner employee that got laid off because of the recession of 2007-2009 D) a lifeguard who was hired during the summer season is laid off after summer is over Answer: C

11. The increased generosity of unemployment insurance programs in Canada as compared to the United States should A) decrease the duration of unemployment in Canada as compared to the United States. B) increase the duration of unemployment in Canada as compared to the United States. C) have no impact on the duration of unemployment in Canada. D) raise the duration of unemployment in the United States. Answer: This question is cancelled.

12. Efficiency wages cause unemployment because A) firms pay wages that are below the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. B) firms pay wages that are below the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. C) firms pay wages that are above the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. D) firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. Answer: D

13. If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would A) increase. B) remain the same. C) decrease. D) equal 20%. Answer: C 14. Which of the following is true about the consumer price index? A) It accounts for people switching to goods whose prices have fallen. B) It assumes that consumers purchase the same amount of each product in the market basket each month. C) It frequently updates the price changes of new products added to the market basket, as these have a tendency to fall. D) It filters out the part of price increases that occurs because of quality improvements in products. 4

Answer: B 15) Your grandfather tells you that he earned $7,000/year in his first job in 1961. You earn $35,000/year in your first job in 2016. You know that average prices have risen steadily since 1961. You earn A) 5 times as much as your grandfather in terms of real income. B) more than 5 times as much as your grandfather in terms of real income. C) less than 5 times as much as your grandfather in terms of real income. D) less than 5 times as much as your grandfather in terms of nominal income. Answer: C Table 20-16 Year 2014 2015 2016

Nominal Average Hourly Earnings $10 10 12

CPI (1982-1984 =100) 100 105 110

16. Refer to Table 20-16. Looking at the table above, real wages ________ from 2014 to 2015, and real wages ________ from 2015 to 2016. A) rose; rose B) rose; fell C) fell; rose D) fell; fell Answer: C

17. Table

Year 2013 2014 2015 2016

Real GDP (billions of 2000 dollars) $8,000 8,275 9,000 9,480

Refer to the Table above. Using the table above, what is the approximate growth rate of real GDP from 2014 to 2015? A) 7% B) 8% C) 9% D) 10%

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Answer: C

18. Which of the following increases labor productivity? A) an increase in the aggregate hours of work B) decreases in the availability of computers and factory buildings C) inventions of new machinery, equipment, or software D) a decline in the health of the population Answer: C 19. Which of the following is an example of human capital? A) a computer B) a factory building C) a college education D) a software program Answer: C

20. Table Real GDP

Population (millions of people) W 3 9 X 2 4 Y 4 8 Z 3 12 Refer to the Table above. Based on the table above, which country has a higher standard of living and why? A) W has a higher standard of living than X because their GDP is higher. B) X has a higher standard of living than Y because their GDP per capita is higher. C) W has a lower standard of living than Z because their GDP per capita is lower. D) X has a higher standard of living than Z because their GDP per capita is higher. Country

Answer: D

21. If real GDP per capita in country X is estimated to be $7,500 in 2016, what will real GDP per capita be in 2021 approximately, if real GDP per capita grows at an annual rate of 3.2%? A) $8,820 B) $8,780 C) $8,740 6

D) $8,700 Answer: B

22. If real GDP per capita in the United States is 9,000 in 2016, and if real GDP per capita is $15,000 in 2030, what is the total percent change in the growth rate of GDP per capita between 2016 and 2030? A) 33% B) 50% C) 67% D) 90% Answer: C 23. If a country's real GDP is rising by 4% per year while its population is rising at 6% per year, which of the following is true? A) The country's standard of living is falling. B) The country's standard of living is rising. C) Growth in nominal GDP outweighs growth in the population. D) Growth in nominal GDP is less than the growth in the population. Answer: A

24. In the long run, ________ differences in economic growth rates result in ________ differences in GDP per capita. A) large; small B) large; no C) small; large D) small; no Answer: C

Table 23-3 Consumption (dollars) $1,200 2,100 3,000

Disposable Income (dollars) $3,000 4,000 5,000

25. Refer to Table 23-3. Given the consumption schedule in the table above, the marginal 7

propensity to consume is A) 0.1. B) 0.3. C) 0.6. D) 0.9. Answer: D 26. Refer to Table 23-3. Given the consumption schedule in the table above, the marginal propensity to save is A) 0.1. B) 0.4. C) 0.7. D) 0.9. Answer: A 27. If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then A) the multiplier is 0.1. B) the multiplier is 1. C) the multiplier is 10. D) the multiplier is 100. Answer: C 28. If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP, then A) the MPC is 0.25. B) the MPC is 0.75. C) the MPC is 0.8. D) the MPC is 2.5. Answer: B 29. A general formula for the multiplier is A) . B)

.

C) D)

. .

Answer: C 30. All of the following are true statements about the multiplier except A) the multiplier rises as the MPC rises. 8

B) the smaller the MPS, the larger the multiplier. C) the multiplier is a value between zero and one. D) the multiplier effect occurs when autonomous expenditure changes. Answer: C 31.The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) aggregate demand curve B) savings line C) 45-degree line D) consumption function Answer: A 32. An increase in the price level ________ real wealth, which causes consumption to ________. A) lowers; increase B) lowers; decrease C) raises; increase D) raises; decrease Answer: B 33. If the Hong Kong dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve in Hong Kong? A) This will move the economy up along a stationary aggregate demand curve. B) This will move the economy down along a stationary aggregate demand curve. C) This will shift the aggregate demand curve to the left. D) This will shift the aggregate demand curve to the right. Answer: D 34. Suppose that the tax rate of personal incomes in Hong Kong changes from 15% to 10%. How does it affect the aggregate demand in Hong Kong? A) It increases disposable income, consumption, and aggregate demand. B) It decreases disposable income, consumption, and aggregate demand. C) It increases corporate investment and aggregate demand. D) It decreases corporate investment and aggregate demand. Answer: A 35. If, due to the 2007-2009 recession, Chinese Americans begin to leave the United States to search for temporary work in China until the recession has ended, this will A) shift the short-run aggregate supply curve of China to the left. B) shift the short-run aggregate supply curve of China to the right. C) shift both the long-run and the short-run aggregate supply curves of China to the left. D) shift both the long-run and the short-run aggregate supply curves of China to the right. Answer: B 36. Workers and firms both expect that prices will be 2% higher next year than they are this year. 9

As a result A) workers will be willing to take lower wages next year. B) the purchasing power of wages will rise if wages increase by 2%. C) the short-run aggregate supply curve will shift to the left as wages increase. D) aggregate demand will increase by 2%. Answer: C 37. Suppose there has been an increase in investment. As a result, real GDP will ________ in the short run, and ________ in the long run. A) increase; increase further B) increase; decrease to its initial value C) decrease; decrease further D) decrease; increase to its initial level Answer: B 38. The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________. A) raises; recession; lowers; expansion B) raises; expansion raises; recession C) lowers; expansion; lowers; recession D) lowers; recession; raises; expansion Answer: D Hurricane Harvey destroyed oil and natural gas refining capacity in Texas which subsequently drove up natural gas, gasoline, and heating oil prices in the United States. Use this information to answer the following question. 39. In the long run, this shock causes A) the long-run aggregate supply curve to shift to the left. B) the price level to rise initially, and then return to its lower level. C) unemployment to fall initially, and then return to its higher level. D) the real GDP to rise initially, and then return to its lower level. Answer: B

40. Suppose the U.S. government uses a policy to shift the aggregate demand curve to fight the recession as a result of Hurricane Harvey. Using policy this way would A) bring real GDP back to potential GDP quickly but would result in a permanently higher price level. B) bring real GDP back to potential GDP quickly but would result in a permanently lower price level. C) bring real GDP back to potential GDP and the price level back to its original level quickly D) bring the price level back to its original level quickly but would result in a permanently lower level of potential GDP. Answer: A

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