Question Bank - Macro Economics

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    ITM University Management Studies Database

    Subject Name: BUSINESS

    ECONOMICS II -

    MACROECONOMICS

    Subject Code: SML 104

    Class: BBA

    Submitting Date:

    11th

    Feb 2013

    Phase: I

    Total Pages : 01

    Total Questions: 25

    Faculty:

    PREETI BANSAL Semester: II

    Questions

    1. Suppose an economys expenditures are equal to $7,000 billion. Income in the economy is:a. Less than $7,000 billion.

    b. More than $7,000 billion.c. Exactly $7,000 billion.d. Somewhere between $7,000 billion and $8,000 billion.

    2. National income accounting:a. Provides a set of rules for determining macroeconomic policy.

    b. Provides a set of rules and definitions for measuring economic activity in the aggregateeconomy.c. Is a useful tool for microeconomists.

    d. Can be used to measure a nation's output but not its production or consumption.

    3. Real gross domestic product is bestdefined as:a. The market value of goods and services produced in an economy.

    b. All goods and services produced in an economy stated in the prices of a given year.c. The market value of all final goods and services produced in an economy stated in the pricesof a given year.d. The market value of goods and services produced in an economy stated in current-year

    prices.

    4. The United States produces and sells millions of types of products. To add them up to asingle aggregate, each good is weighted by:a. Its cost of production.

    b. Its market price.c. Its utility to consumers.d. Its contribution to corporate profits.

    5. To calculate nominal GDP:a. Sum the quantity of all final goods and services produced in an economy in a year.

    b. Sum the quantity of all goods and services sold in an economy in a year.c. Weight the output of each final good and service produced in an economy in a year by its

    price that year and then sum the result.d. Weight the output of each good and service produced in an economy in a year by its price inthat year, and then sum the result.

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    6. To compute GDP, the quantity of each final good or service produced must first be weightedby:a. Its market price.

    b. Its cost of production.c. Its share of total output.d. Its contribution to corporate profits.

    7. Which of the following is an example of an intermediate product?a. A pair of skis sold by a sporting goods retailer to a skier.

    b. A share of IBM stock.c. The lumber produced by Boise Cascade and sold to a builder of new houses.d. An antique car sold to the highest bidder.

    8. Which of the following is an example of a final good or service?a. Unemployment compensation.

    b. A CD player purchased as a gift.c. Steel used in the production of appliances.

    d. Vegetables purchased by local restaurants to make soup.

    9. Double counting in the national income accounts will notoccur if GDP is computed bysumming all:a. Sales of final output.

    b. Sales of final output and intermediate goods.c. Sales.d. Production costs.

    10. Use the following information to answer the question. There are three firms in an economy:X, Y, and Z. Firm X buys $200 worth of goods from Y, and $300 worth of goods from firm Z,and produces 250 units of output at $4 per unit. Firm Y buys $150 worth of goods from firm X,and $250 worth of goods from firm Z, and produces 300 units of output at $6 per unit. Firm Z

    buys $75 worth of goods from firm X, and $50 worth of goods from firm Y, and produces 500units at $2 per unit. Given this information, what is the economys GDP? Hint: remember that

    part of each firms production is used by one of the other firms as a production input (anintermediate product).a. $1825.

    b. $2700.c. $2775.d. $3800.

    11. Which of the following would be considered an investment expenditure?a. The Smiths buy a home that was built in 1990.

    b. The federal government pays the salary of a captain in the Air Force.c. Jacks Boat Storage buys a new boat lift. d. Chairs-R-Us buys a used machine to manufacture chairs.

    12. For purposes of calculating GDP, which of the following payments is notincluded in thegovernment spending component?a. Social security payments.

    b. Wages paid by a local government to its road crew.

    c. Wages paid by a state government to the workers in its welfare department.d. The federal governments purchase of a submarine from a shipbuilder.

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    13. Spending on capital equipment and inventories is referred to as:a. Consumption expenditure (C).

    b. Investment expenditure (I).c. Government expenditure (G).d. Expenditure on net exports (X- M)

    14. The sale of illegal drugs:a. Is included in GDP under services.

    b. Is included in GDP under investment.c. Is included in GDP as a component of home production (non-market activity).d. Is not included in GDP.

    15. Which of the following would be counted in the calculation of GDP?a. The sale of a rare coin to a coin collector.

    b. Homes that are rebuilt after being completely destroyed by a hurricane.c. The sale of a 1966 Ford Fairmont.d. The sale of cocaine in the black market.

    16. Which of the following would NOT be counted as a final good for inclusion in GDP?a. A piece of glass bought by a consumer to fix a broken window.

    b. A sheet of glass purchased by a commercial builder of a new home.c. A sheet of glass produced this year and ending up in the inventory of a retail store.d. A home that is built this year, but is not sold.

    17. Which of the following economic activities would notbe included in US GDP?a. Mohan hires a stenographer for $10 an hour for clerical work. b. Joseis a great hairdresser, often receiving $20 tips (which he reports on his income taxes).c. MaxiPress adds $8,000 worth of books to its inventory which remains unsold by the end ofthe year.d. Ritu has a job after school washing dishes 2 hours each evening in her parents diner. Theother dishwashers get $6 an hour, but her parents give her room and board instead.

    18. Which of the following is nota part of US GDP?a. The value of an insurance policy on a new BMW sold by a U.S. company.

    b. The value of a BMW imported from Germany.c. The value of a BMW produced in the U.S.d. The commissions earned by a BMW dealership in the US.

    19. If a used car dealer buys a car for $6,000 and resells it for $6,500, how much has beenadded to GDP?a. Nothing.

    b. $500.c. $6,000d. $6,500.

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    20. If U.S. imports of goods and services exceed exports:a. U.S. GDP is less than the sum of consumption, investment, and government purchases.

    b. U.S. GDP exceeds the sum of consumption, investment, and government purchases.c. U.S. net exports are positive.d. U.S. GDP equals the sum of consumption, investment, and government purchases.

    billions ofdollars

    Consumption 4,900

    Investment 1,300

    Transfer payments 1,050

    Government expenditures 1,200

    Exports 1,050

    Imports 950

    Net foreign factor income 20

    21. Use the table above to calculate GDP.a. 6,200.

    b. 7,400.c. 7,500.d. 8,450.

    22. Use the table above to calculate net exports.a. -100.

    b. 100.c. 950.d. 1050.

    In billions of dollars

    Consumption 3600

    Investment 800

    Transfer payments 750

    Government expenditures 1000

    Exports 650

    Imports 450

    Net foreign factor income -30

    23. Calculate GDP using the table above.

    a. 5570b. 5600c. 6050d. 6320

    24. Per capita real output product is bestdefined as:a. The market value of all final goods and services produced in an economy in current prices.

    b. The market value of all final goods and services produced in an economy in current pricesdivided by the population.c. The market value of all final goods and services produced in an economy in the prices of agiven year.d. The market value of all final goods and services produced in an economy in the prices of agiven year divided by the population.

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    25. Suppose the Gross Domestic Product in a country is $450 million and the population of thatcountry is $150 million. What is the per-capita GDP of that country?a. $300

    b. $30c. $3d. $0.3

    ANSWER KEY

    Question No. Answer

    1 C

    2 B

    3 C

    4 B

    5 C

    6 A

    7 C

    8 B9 A

    10 C

    11 C

    12 A

    13 B

    14 D

    15 B

    16 B

    17 D

    18 B19 B

    20 A

    21 C

    22 B

    23 B

    24 D

    25 C