BSP2001 MACRO AND INTERNATIONAL ECONOMICS SEM 1 2015/2016

Practice MCQs Set 1

1) Macroeconomics focuses on _______.

A) the effects of policies that affect aggregate consumption and savings.
B) the determination of changes in wages and prices at aggregate level.
C) the determination of interest rates.
D) All of the above.

2) Government intervention into economic activity will NOT lead to a change in the
price level in the _______.
A) short run.
B) medium run.
C) long run.
D) All of the above.

3) In the long run, the AS curve is _______ because prices are _______.
A) horizontal; rigid.
B) horizontal; flexible.
C) vertical; rigid.
D) vertical; flexible.

4) In the short run, a negative aggregate demand shock will _______.

A) affect the price level but not the output level.
B) affect the output level but not the price level.
C) affect both the price and output level.
D) not affect the price and output level.

5) In the medium run, a negative aggregate demand shock will lead to a _______ in
equilibrium.
A) lower price level.
B) lower output level.
C) All of the above.
D) None of the above.

6) When the economy goes into a recession, we can generally expect that _______.
A) inflation will decrease while output will increase.
B) inflation will increase while unemployment will decrease.
C) inflation and output will increase.
D) inflation will decrease while unemployment will increase.

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BSP2001 MACRO AND INTERNATIONAL ECONOMICS SEM 1 2015/2016

7) Gross Domestic Product is defined as the _______.

A) value of all final goods and services produced within the country over a period of
time.
B) value of all final goods and services produced for the market by citizens of the
country over a period of time.
C) value of all final goods and services sold within the country over a period of time.
D) value of all goods and services produced and sold within the country over a period of
time.

8) Consumer spending is spending by ________ households on final goods and services

produced ________.
A) domestic; domestically.
B) domestic; domestically and abroad.
C) domestic and foreign; domestically.
D) domestic and foreign; domestically and abroad.

9) Which of the following can affect the size of the output gap?
A) Changes to potential GDP
B) Changes to actual GDP
C) Changes to aggregate demand
D) All of the above.

10) Assume exports = 300, imports = 400, tax = 1100, government purchases = 1400,
private domestic saving = 900. Then the level of private domestic investment is
A) 500
B) 600
C) 700
D) 900

11) Assume you purchased a newly-built house, bought a used car, and bought some
government bonds. When calculating GDP, which of the following is true?
A) Investment went up since you purchased a newly-built house.
B) Investment went up since you bought government bonds.
C) Government purchases went up since you bought government bonds.
D) Consumption went up since you bought a new house and a used car.

12) Intermediate goods are _______.

A) final goods that are sold.
B) final goods that remain unsold.
C) goods that are used to produce other goods.
D) second-hand goods that are sold.

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BSP2001 MACRO AND INTERNATIONAL ECONOMICS SEM 1 2015/2016

13) Nominal GDP is correctly defined as _______,

A) the monetary value of all goods and services, final and intermediate, produced in a
given year.
B) the monetary value of all wealth that is accumulated in a given year.
C) the monetary value of all final goods and services currently produced in the economy
in a given year.
D) the market value of all goods produced by domestically-owned resources in a given
year.

14) If nominal GDP decreased from $500 billion in the base year to $400 billion in the
following year and real GDP stayed the same, which is true?
A) Inflation decreased by approximately 20%.
B) Inflation decreased by approximately 25%.
C) Inflation decreased by approximately 80%.
D) Inflation remained unchanged.

15) The unemployment rate is defined as the _______.

A) fraction of the labor force that cannot find jobs and are not looking for jobs.
B) fraction of the labor force that cannot find jobs but who are actively looking.
C) number of unemployed divided by total population.
D) number of people who are not looking for jobs divided by the labor force.