Money supply growth

MACROECONOMICS

Mock Exam April 8, 2005

Name_______________________ group________

SECTION I

Time - 70 minutes

Directions: Each of the sixty questions below is followed by five suggested answers. Select the one that is best in each case and then circle around the corresponding letter in your blank of answers. Good Luck!

All of the following are a flow except:

(A) Depreciation

(B) Government budget deficit

(A) Saving

(B) Labor supply

(C) Business expenditures on plant and equipment

In a closed economy, ceteris paribus, if taxes rise:

(A) Consumption rises.

(B) National saving falls.

(C) Personal saving rises.

(D) Investment rises.

(E) Interest rate rises.

Which of the following is not an important variable in growth accounting calculations?

Productivity growth

Money supply growth

Labour growth

Capital growth

Output growth

If disposable income is 4,000, consumption is 3,500, government spending is 1,000 and tax revenues are 800, national saving equals to:

(A) 300 (B) 500 (C) 700 (D) 1,000 (E) 2,000

Which of the following item(s) should not be added to total final production when measuring GDP?

I. The new car sold by mother to her son.

II. The country house build by a carpenter for his family.

III. The gas bought by the driver of a taxicab.

IV. The oil bought to heat your house.

(A) Only I and II

(B) Only I, II and III

(C) Only I and III

(D) Only I, II and IV

(E) I, II, III and IV.

To avoid double counting when the GDP is estimated, economists

(A) Use the GDP deflator

(B) Calculate the GDP at factor costs

(C) Calculate value added at each stage of production

(D) Count goods for sale at retailed shops only

(E) All of the above

Which of the following is considered an imputed value in the GDP?

(A) The salary paid to a federal judge.

(B) The value of housing services enjoyed by homeowners.

(C) The value of automobile services enjoyed by car owners.

(D) The value-added of a shipping company that transports goods from the factory to retail stores.

(E) All of the above.

In which case is total expenditure in an economy not equal to total income?

(A) If total saving is larger than total investment.

(B) If net exports are not zero.

(C) If inventory investment is negative.

(D) If there is budget deficit.

(E) None of the above - they are always equal.

If there is an increase in the price of apples which causes consumers to purchase fewer pounds of apples and more pounds of oranges, the CPI will suffer from

(A) Base year bias.

(B) Substitution bias.

(C) Bias due to the introduction of new goods.

(D) Bias due to unmeasured quality change.

(E) None of the above.

Investors A, B and C each have $1000 to invest in the bond market. Investors A, B, and C believe the long-run normal rate of interest is 12%, 8%, and 7%, respectively. If the current market rate of interest is 9%, then

(A) Investor A will purchase bonds.

(B) Investors A and B will purchase bonds.

(C) Investors B and C will purchase bonds.

(D) Investor B will purchase bonds.

(E) Investors A, B, and C hold money for speculative purposes.

When aggregate demand exceeds output

(A) Injections exceeds leakages

(B) A recessionary gap exists

(C) An inflationary gap exists

(D) Leakages exceeds injections

(E) Keynes would call for a decrease in government spending

According to Keynesian theory, decreasing taxes and government spending by the same amount will most likely change consumption expenditures and investment in which of the following ways?

Consumption ExpendituresInvestmentUnemployment

(A) Decrease Increase Increase

(B) Decrease No change Increase

(C) Increase Decrease Decrease

(D) Decrease No change Decrease

(E) No change No change No change

In the economy with trade balance a reduction in planned invest­ment would probably lead to

(A) A decline in output and a trade surplus

(B) A decline in output and a trade deficit

(C) No change in output and a trade balance

(D) A decrease in output and no change in trade balance

(E) An increase in output and a trade deficit

The effect of a government surplus upon the equilibrium level of GDP is substantially the same as an increase in:

10. Net exports

11. Unplanned inventory investment

12. Consumption

Saving

14. Fixed investment

In a closed economy with Keynesian unemployment and with fixed demand for investment and government expenditures a fall in the rate of the proportional tax will bring to:

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