ECON 2123 Quiz 1

Instructor: Prof. Wenwen Zhang

TA: Mr. Ding Dong

Measuring GDP
1. Fill in the blank for the following: GDP is the value of all () produced in a given
period.
A) final and intermediate goods and services produced by the private sector only
B) final goods and services
C) final and intermediate goods and services, plus raw materials
D) all of the above
Answer: B
Tips: Definition of GDP.

2. Which of the following transactions will be counted in GDP?

A) Tom purchased a used car from David for a price of 40,000 HKD.
B) You assembled new bedsteads you purchased from IKEA which saved you 300
HKD.
C) At Chinese New Year you received red pockets of 200 HKD from your parents.
D) You pay 70,000 HKD as your tuition fee for Spring term at HKUST.
Answer: D
Tips: Categories that are not counted in GDP: used goods (like A); non-market
production (like B); Financial transactions (like C). D is counted in GDP because
tuition fee is paid for educational service provided by the university.

3. A firm’s value added equals

A) its revenue minus all of its costs.
B) its revenue minus its wages.
C) its revenue minus its wages and profit.
D) its revenue minus its cost of intermediate goods.

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Answer: D
Tips: Definition of value added.

4. For the aggregate economy, income equals

A) expenditure, but does not generally equal to GDP.
B) GDP, but does not generally equals expenditure.
C) expenditure, and equals GDP.
D) expenditure, and equals GDP only if there is no government or foreign sectors.
Answer: C
Tips: GDP can be measured either by aggregate expenditure or aggregate income.

5. Based on the notation presented in lectures, which of the following expressions

represents nominal GDP? (Q represent quantity of output)
A) Qt
B) PtQt
C) Qt/Pt
D) Pt/Qt
Answer: B
Tips: Nominal GDP is simply quantity(Qt) times current price(Pt).

Measuring Unemployment
6. Which one of the following people would be counted as unemployed?
A) a part-time worker who repeatedly expresses a desire to become a full-time worker
B) a person who has been seeking a job for the last six months, but recently gave
up looking because he was discouraged by his job prospects
C) a person who will be starting a new job in 6 months
D) a person who has been laid off for 10 weeks and is not looking for a job because
he is waiting to be called back to his old job
Answer: D

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Tips: Definition of unemployment. A part-worker is already employed (like A). A
person who gives up looking for jobs is no longer in the labor force (discouraged
workers) (like B). A person will be starting a new job is not yet in the labor market,
thus not counted as labor force(like C). For the person in D, he is currently unem-
ployed but he is looking for (his old) job, so he is counted as unemployed.

7. In a country with a working-age population of 30 million, 18 million are employed,

2 million are unemployed, and 2 million of the employed are working part-time, half
of whom wish to work full-time. The labor force participation rate is :
A) 73.3 %.
B) 66.7 %.
C) 60 %.
D) 53.3 %.
Answer: B
Tips: Labor participation rate= people in the labor force/ working-age population
=(employed+unemployed) / working-age population = (18+2) /30 = 66.7%

8. Suppose you are provided with the following data for your country for a particular
month: 200 million people are working, 20 million are not working but are looking
for work, and 40 million are not working and have given up looking for work. The
official unemployment rate for that month is :
A) 7.7%.
B) 9.1%.
C) 10%.
D) 23%.
Answer: B
Tips: Unemployment rate= unemployment / labor force= 20 /(200+20) =9.1%

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Inflation and Aggregate Price
9. Inflation represents
A) an increase in output.
B) an increase in the aggregate price level.
C) an increase in the unemployment rate.
D) a recession.
Answer: B
Tips: Definition of inflation.

10. For the year 2013, nominal GDP is $200 and real GDP is $200 (The deflator
is always 100 in the base year.) For the year 2014, nominal GDP is $600 and real
GDP is $350 (so the GDP deflator is 171. ) Whats the inflation rate?
A) 71 %.
B) 25 %.
C) 7.1 %.
D) 15 %.
Answer: A
Tips: Inflation rate = (GDP deflator of 2014 -GDP deflator of 2013)/ GDP deflator
of 2013= (171-100) /100 =71%.

THIS IS THE END OF QUIZ 1.