Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz

Unit 3.1-3.2 and 3.5-3.7: Multiple choice questions

1. Which of the following is not a leakage from the circular flow of national income?

Saving

Exports

Taxes

Imports

2. A country is in recession meaning that there is an output gap in the economy. This is shown on a production possibility frontier as:

A shift inwards in the PPF

A movement to a point inside the PPF

A movement along the PPF

A shift outwards in the PPF

3. National income can be calculated by which of the following methods:

Income method, consumer method and production method

Income method, expenditure method and production method

Income method, expenditure method and output method

Income method, output method and production method

4. GDP or gross domestic product is calculated by adding up which of the following:

Income from employment, income from self-employment, company profits, exports minus imports

Income from employment, income from self-employment, imports and exports, minus taxes

Income from employment, income self-employment and company profits, minus taxes

Income from employment, income from self-employment, company profits, imports and exports, minus taxes

5. Complete the following table:

	Billion $
Consumption	1,220,000
Government spending	503,000
Investment	175,500
Exports	310,500
Imports	410,000
Total GDP	?

$ 1,399,000

$ 1,929,000

$ 1,799,000

$ 1,389,000

GDP is calculated by adding up consumption, government spending, investment, exports and taking away imports.

6. Which of the following is the best measure of a nation's living standards?

GNI

GNI per capita

GDP per capita

GDP

7. To calculate GNI (gross national income) we must:

Calculate the total income generated in the country plus net capital flows

Calculate the total income generated by all citizens from that country plus net capital flows into the country

Calculate the total income generated in the country

Calculate the total income generated by all citizens and institutions in the country

8. The difference between GNP and NNP (net national product) is:

NNP = GDP - taxes paid plus subsidies paid to businesses

NNP = GNP - depreciation of assets

NNP = GDP + net property income from abroad

NNP = GDP - taxes

9. In 1999 a terrifying earthquake hit Western Turkey and destroyed large areas of the largest city Istanbul. Estimates record approximately 150 000 houses as being completely destroyed or damaged beyond repair. Assisted by significant outside assistance the city was repaired and gradually went back to normal. Which of the following statements is the most correct?

The earthquake had the most significant impact on Turkey's NNP

The earthquake had the most significant impact on Turkey's real GDP

The earthquake had the most significant impact on Turkey's GDP

The earthquake had the most significant impact on Turkey's GNI

10. In the first year of calculating a country had a GDP of $ 900 billion and a population of 50 million people. One year later GDP had risen to $ 1,000 Billion and the population had risen to 52 million people. At the same time average prices in the country had risen by 5%. Calculate the % change in real GDP per capita.

6.83%

1.83%

11. Complete the followng table:

Year	GDP m$	Inflation	GDP growth	Real GDP growth
2012	2,595	4%	-	-
2013	2,630	2%	A	B

A=1.35%, B=(0.65%)

A=3.18%, B=1.18%

A=1.35%, B=(2.65%)

A=3.18%, B=3.18%

12. Which of the following should not be a reason for a government collecting national income statistics:

To provide political parties with material in which to campaign during an election

To compare the economic performance over time

To compare the economic performance of one country with that of another country

To use as the basis for making interest rate and taxation decisions

13. Which of the following is not a weakness in national income accounting?

Using different calculation methods i.e. output, income and expenditure method provide governments with a different result

GDP calculations do not consider the costs of economic growth

GDP does not consider the proportion of national income spent on defence

The size of the grey economy can make it difficult to record accurately

14. Aggregate demand

Represents the total value of all goods and services produced in the economy

Represents the total value of all goods and services demanded in the economy

Is calculated by adding up consumption + investment + government spending + exports

Represents the total real level of output or income in the economy

15. Which of the following will cause a rise in aggregate demand?

A rise in government spending

A rise in interest rates

A rise in taxation

A rise in prices

16. Which of the following sets of policies represent an expansionary fiscal policy?

A rise in government spending and a fall in interest rates

A rise in government spending and a fall in income tax rates

A rise in tax rates and a fall in the level of government spending

A rise in interest rates and government spending

17. Equilibrium unemployment exists when:

The economy is in equilibrium

The economy is producing on its production possibility frontier

The economy is producing at its maximum or full employment level

The demand for labour equals the supply of labour in the economy

18. In a neo-classical LRAS curve the long run aggregate supply is perfectly inelastic because:

There is no link between the average prices in the economy and producers willingness and ability to produce goods and services

Average prices and real output are independent of each other

As the economy reaches full employment the factor resources in the economy become increasingly scarce

There is a physical limit to what can be produced in an economy in the long run

19. Which of the following is not a negative consequence of a keynesian stimulus package designed to raise aggregate demand in the economy.

Rising output levels in the economy

Rising levels of average prices in the economy

Increased level of government debt

Crowding out

20. According to monetarist economics which of the following will not increase inflation in the economy?

An increase in the money supply

An increase in government spending

A fall in interest rates

A rise in the number of transactions in the economy

Total Score:

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Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz

Unit 3.1-3.2 and 3.5-3.7: Multiple choice questions