BEEB1013 _. CONFIDENTIAL Universit Utara Malaysia @UUM UNIVERSITI UTARA MALAYSIA FINAL EXAMINATION FIRST SEMESTER 2013/2014 SESSION COURSE CODE/NAME :_BEEB1013 PRINCIPLES OF ECONOMICS DATE : 2 JANUARY 2014 (MONDAY) TIME : 2.30- 5.00 PM (2% HOURS) VENUE : DMS, DTSO, TE, PMI, MKM INSTRUCTIONS: 1. This examination paper contains SEVENTY (70) questions in FOURTEEN (14) printed pages excluding the cover page and appendices. 2. Candidates are required to answer ALL questions in the OMR form provided. 3. Candidates are NOT ALLOWED to take both examination question and OMR form out of the examination hall. 4. Candidates are bound by the UUM’s RULES AND PROCEDURES ON ACADEMIC FRAUD. MATRIC NO.2_ (in words) (in numbers) IDENTIFICATION CARD NO.: [ LECTURER’S NAME: rove: [| TABLE NO.: [ DO NOT OPEN THIS EXAMINATION PAPER UNTIL INSTRUCTED CONFIDENTIAL[BEEB 1013/PRINCIPLES OF ECONOMICS ‘MATRIC NO. QUESTIONS Macroeconomics is a study about economic growth, business cycles, and inflation. industry sales, marketing strategies and corporate growth. product demand, product cost, and profit maximization, public choices, private choices, and consumer maximization. poppe ‘The base year is the year in which prices are unstable. in which prices are lowest. in which prices are highest. that serves as a reference point or benchmark yawEn 3. If the CPI is 100 in the base year and 112 in the current year, how much did prices rise between the base year and the current year? A. 12 percent B. 112 percent C. 1.2 percent D. 0.12 percent 4, Persons who are retired or engaged in own-home housework are considered to be in which of the following categories? in the civilian labor force not in the labor force employed unemployed pomp 5. The employment rate equals the number of A. employed persons divided by the number of unemployed persons. B. unemployed persons divided by the civilian non-institutional population. C. employed persons divided by the civilian labor force. D. employed persons divided by the civilian non-institutional population. 6. "Full employment" is said to exist when the unemployment rate equals A. zero. B. the cyclical unemployment rate. C. the structural unempioyment rate D. the natural unemployment rate.LEB 101PRINCIPLES OF ECONOMICS. ‘MATRIC NO: 7. In an economy with 100 million people, 70 million hold civilian jobs and 19 million are not working but are looking for jobs. The unemployment rate is A. 12.86% B. 21.35%. C. 9.19%, D. 27.14%. 8, Gross Domestic Product (GDP) is the total market value of all A. final goods and services produced annually within a country's borders. B. final and intermediate goods and services produced annually within a country's borders. C. intermediate goods and services produced annually within a country's borders. D. final goods and services produced every month within a country's borders. 9, The best reason economists take only final goods and services into account when calculating, GDP is that this is the way things have always been done. they want to avoid the problem of final counting, they want to avoid the problem of double counting. this is the only way things can be done. paw 10. Underground activities are not counted in GDP because ‘A. some underground activities are illegal and the government doesn't want to place, for instance, drug dealers on an equal footing with small businesses, B. there are no written records of underground activities C. of a decision made in the 1930s and no one has gotten around to changing it yet. D. although it is possible to accurately measure underground activities, it is harder than measuring above-ground activities because with the latter, oné doesn't have to dig as deep. Disposable income is equal to GDP minus the eapital consumption allowance. that portion of personal income that can be used for consumption and saving, the sum of all payments to suppliers of the factors of production the amount of income that individuals actually receive, one>BEEB 101 PRINCIPLES OF ECONOMICS MATRIC NG, A business cycle refers to the continued expansion in Real GDP. recurrent swings (up and down) in Real GDP. continued decline in Real GDP. period when Real GDP grows at unusually high rates, pOeEs 13, If Real GDP was $8,742 billion in year 2 and it had been $8,509 billion in year 1, what was the approximate economic growth rate during this time period? A. 9.73 percent B. 2.67 percent C. 3.58 percent D, 2.74 percent 14, The two ways of measuring Gross Domestic Product are the approach and the. approach A. expenditure; income B. expenditure; national product C. national product; income D. real gross domestic product; nominal gross domestic product 15. Personal income is ‘A. equal to GDP. B. thet portion of national income that can be used for consumption and saving C. the sum of all payments to suppliers of the factors of production D. the amount of income that individuals actually receive 16. What does annual economic growth refer to? ‘A. annual increases in GDP B. annual increases in consumption spending C. anauai increases in investment spending D. annual increases in Real GDP 17. Depreciation refers to a decrease in the value of a good caused by A. an increase in the price level B. a decrease in the price level. C. “wear and tear" of capital goods over time. D. the depreciation allowance,[BEEH 101¥/PRINCIPLES OF ECONOMICS MATRIC . Increases in import spending raise GDP. lower GDP. are always balanced off in GDP by changes in exports. may raise or lower GDP. yop $900 billion; 19. Look at the following data: personal income = $4,900 billion; personal taxe: transfer payments = $980 billion. What is disposable income’ A. $3,200 billion B. $4,000 billion C. $4,980 billion D. $1,880 billion 20. Suppose that net exports are -§300 billion and exports are $500 billion. Imports equals ‘A. $800 billion B. $400 billion, C. $200 billion. D. -$200 billion, 21. If people buy more than has been produced, A. the economy is in equilibrium. B. total expenditures are greater than total production, C. there will be an increase in inventory. D. there will be a decrease in total output, 22. Consumption and disposable income are A. indirectly related B. directly related. C. not related. D. sometimes directly and sometimes indirectly related, depending upon whether consumption is planned or unplanned, 23. Autonomous consumption is A. the change in consumption that results as a person’s (or nation’s) income increases or decrease: B. that portion of total consumption that is dependent upon the level of income. C. the steady increase in the consumption of goods and services that automatically occurs as a person grows from a child to an adult D. that portion of total consumption that is independent of the level of income.BEER 101m r LBS OF BOONOMICS MATRIC NO: 24. If income rises from $1,000 to $1,400 and consumption rises from $1,100 to $1,440, the marginal propensity to save (MPS) is A. O15. B. 0.85. C. 0.25. D. 0.20. 25. Here is a consumption function: C = Co + MPC(Y4). If MPC is 0.80, then we know that A. as Ya rises by $1, Co rises by $0.80. B. as Yarises by $1, C rises by $0.80. C. Yarises by $0.80. D. as Co rises by $0.80, Ya rises by $1. 26, If autonomous consumption rises by $20 and real GDP rises by $200, then the multiplier is A 4, B. 5. C6 D1 0. 27. If autonomous consumption rises by $60 and, as a result, Real GDP rises by $240, tten che marginal propensity to coasume is, A. 025. B. 0.75. C. 005. D. 0.95. 28. When the MPC A. 0.40, B. 2.50, C 1.67 D. 6.00. 0.6, the multiplier is Keynes believed that saving is more responsive to changes in income than to changes in interest rates Jess responsive to changes in income than to changes in interest rat equally responsive to changes in income and to changes in interest rates. dependent only on changes in interest rates. POB>yBEER 101VPRINCIPLES OF ECONOMICS MATRIC NO. Figure 1 et GOP (ations of key 30. Refer to Figure 1, When TE is $700 billion, what state is the economy in? ‘A. TE'TP, individuals are buying more output thea firms produce. C, TE=TP, the economy is in equilibrium D. TE TP, individuals ave buying more output than firms produce. ‘TE ="TP, the economy is in equilibrium, TE 41. If Bank Negara Malaysia purchases government securities from commercial banks, the reserves of the banking system will immediately A. increase by the amount of the purchase. B. increase by more than the amount of the purchase, C. remain constant. D. decrease by the amount of the purchase, 42. When the federal government incurs a budget deficit, it will A. mint more coins and spend thern. B. impose a special tax on afl income eamers, C. borrow money from the Bank Negara Malaysia by issuing securities D. borrow money from the public by issuing government securities. 43, Bank Negara Malaysia can change the money supply by etanging, A. the required reserve ratio. B. marginal income tax rates. C. federal excise taxes. D. unemployment benefits 44, When a commercial bank borrows from the Bank Negara Malaysia, A. the reserves of the bank fall B. the bank can make more loans. C. it must be because the bank is not meeting its reserve requirements, D. the money supply falls. 45. A decrease in the required reserve ratio purchase _ the money supply. decreases; decreases decreases; increases: increases; increa: increases; decreases the money supply; an open market poeBEB 101.MPRINCIPLES OF ECONOMICS MATRICNO: 46. if Bank A borrows from Bank B, reserves in the banking system. If Bank A borrows from the Bank Negara Malaysia, reserves in the banking system A. rise; fall B. fall; remain unchanged C. remain unchanged; remain unchanged D. remain unchanged; rise 47. The demand-for-money curve illustrates the relationship between the quantity demanded of money and A. inverse; the interest rate B. direct; GDP. C. direct; the inter D. faverse; GDP 48. If the interest rate increases, the opportunity cost of holding money and the quantity demanded of money A. does not change; does not change B. increases; also increases C. decreases; increase: D. increases; decreases 49. Monetary policy refers to ‘A. actions taken by hanks and other financial institutions regarding their approaches to lending, account management, etc. changes in the money supply to achieve particular economic goals. changes in government expenditures and taxation to achieve particular economic goals D. the change in private expenditures that occurs as a consequence of changes in the money supply. ae 50. A decrease in the money supply will shift the aggregate __ curve to the supply; left supply; right demand; left demac, right pneP>BEER 101VPRINCIPLES OF ECONOMICS. ‘MATRIC NO. 51. The quantity supplied of money is assumed (in the textbook) to be A. inversely related to the interest rate. B. directly related to the interest rate. C. independent of the interest rate. D. determined exclusively by banks. . An aggregate demand (AD) curve shows the amount of a particular good people are willing and able to buy at a particular price, ceteris paribus B. real output (Real GDP) people are willing and able to sell at different price levels, ceteris paribus. C. real output (Real (GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. D. real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus. eS 53. One of the reasons why the AD curve slopes downward is that as the A. price level rises, purchasing power rises B. price level falls, purchasing power rises. . nation's income level rises, purchasing power rises. D. nation's income level rises, purchasing power falls. 54, Suppose consumption decreases at each price level. As a result, aggregate demand and the AD curve shifts A. increases; leftward B. decreases; leftward C. increases; rightward D. decreases; rightward 55. Which of the following factors can shift the AD curve? A. net exports B, government purchases C. the money supply D. all above. 10BEB 101:/PRINCIPLUS OF ECONOMICS MATRIC NO. 56. An increase in the money supply may shift of the AD curve. increase; rightward increase; leftward decrease; rightward decrease; leftward pop A short-run aggregate supply curve shows the amount of a particular good producers are willing and able to buy at a particular price, ceteris paribus. real output (Real GDP) producers are willing and able to sell at different price levels, ceteris paribus. real output (Real GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus. lee ee ee Uy 58. Changes in which of the following will nor cause the SRAS curve to shift? A. the wage rate B. prices of nonlabor inputs C. the price level D. productivity 59. If the price level remains constant but the wage rate increases, then there will be in production and the SRAS curve will shift ‘A. an increase; rightward B. adecrease; rightward C. an increase; leftward D. a decrease; leftward 60. Which of the following is an example of an advers A. anationwide drought lasting for many months B. an outbreak of war among several of the Middle Bastem oil-producing countries, C. an influenza virus that affects 50 percent of the labor force for two weeks D. All above supply shock? aBEE 10LVPRINCIPLES OF ECONOMICS ‘MATRIC NOW. 61. If aggregate quantity supplied is greater than aggregate quantity demanded at a particular price level, then a A. shortage exists and consumers will bid the price level up. B. surplus exists and consumers will bid the price level up, C. surplus exists and the price level will decline. D. shortage exists and the price level will decline. 3 :2.Ceteris paribus, Real GDP and the unemployment rate are directly related. inversely related unrelated. directly related when GDP is below its natural level and inversely related when GDP is above its natural level copp ‘A balanced budget occurs when the national de bt is reduced to zero dollars. a budget deficit during one year is matched by a budget surplus in the next year. transfer payments equal tax revenues government expenditures equall tax revenues. POPE Fiscal policy refers to efforts to balance a government's budget. changes in the money supply to achieve particular economic goals. changes in government expenditures and taxation to achieve particular economic goals the change in private expenditures that occurs as a consequence of changes in government spending. ape s 65. Expansionary fiscal policy actions include government spending and/or __taxes, while contractionary fiscal policy actions include _ government spending and/or taxes A. increasing; increasing; decreasing; decreasing, B. decreasing; decreasing; incr C. decreasing; increasing; increasing; decreasing, D. increasing; decreasing; decreasing; increasing 2[BEEN 1OLVPRINCIPLES OF ECONOMICS "MATRIC NO, 66. An expansionary fiscal policy will A. always result ina budget deficit. B. always result in a budget surplus. C. sometimes result in a budget deficit. D. never result in a budget surplus. 67. With complete crowding out, an increase in government spending A. is completely offset by a reduction in private spending, B. is matched by an increase in private spending, C. results in an increase in aggregate supply. D. results in an increase in aggregate demand 68. The AD curve shifts to the right with a__ in government purchases (G) or a ___ in taxes. A. rise; rise B. rise; fall C. fal; rise D. fall; fall Figure 2 es, Price Level ° ew Red oe 69. Refer to Figure 2. The economy is currently at point 1. Suppose the federal government increases purchases and there is complete crowding out. As a result, the aggregate demand (AD) curve in the exhibit A. maintains its present position at AD, B. shifts rightward, but does not shift rightward by enough to go through point 2. C. shifts rightward by enough to go through point 2. D. shifts leftward. 3BEEE 10LVPRINCIPLES OF ECONOMICS MATRIC NO. 70. Refer to Figure 2. The economy is currently at point 1. In this situation, Keynesian economists would most likely propose pomp an increase in government purchases. a decrease in government purchases. an increase in taxes. AandC. -END OF QUESTIONS- 4