QUIZ 1

SE 2023 MACROECONOMICS

INSTRUCTION: ANSWER ALL QUESTIONS

1.GDP
a. is used to monitor the performance of the overall economy but is not the
single best measure of a society’s economic well-being.
b. is used to monitor the performance of the overall economy and is the
single best measure of a society’s economic well-being.
c. is not used to monitor the performance of the overall economy but is the
single best measure of a society’s economic well-being.
d. is not used to monitor the performance of the overall economy and is not
the single best measure of a society’s economic well-being.

2. Gross domestic product measures

a. income and expenditures.
b. income but not expenditures.
c. expenditures but not income.
d. neither income nor expenditures.

3. Which of the following statements about GDP is correct?

a. GDP measures two things at once: the total income of everyone in the
economy and the total expenditure on the economy’s output of goods and
services.
b. Money continuously flows from households to firms and then back to
households, and GDP measures this flow of money.
c. GDP is generally regarded as the best single measure of a society’s
economic well-being.
d. All of the above are correct.

4. Which of the following is not included in GDP?

a. carrots grown in your garden and eaten by your family
b. carrots purchased at a farmer’s market and eaten by your family
c. carrots purchased at a grocery store and eaten by your family
d. None of the above are included in GDP.

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5.Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which
it used to bake bread that customers purchased. In which case will the flour be
counted as a final good?
a. Janet’s purchase and ABC Bakery’s purchase.
b. ABC Bakery’s purchase but not Janet’s purchase.
c. Janet’s purchase but not ABC Bakery’s purchase.
d. Neither Janet’s purchase nor ABC Bakery’s purchase.

6.Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and
sells it to Couches, Inc., which produces and sells leather furniture. With each
RM1,000 of leather that it buys from Cowhide, Inc., Couches, Inc. produces a
couch and sells it for RM3,000. Neither firm had any inventory at the beginning of
2009. During that year, Cowhide produced enough leather for 20 couches.
Couches, Inc. bought 80% of that leather for RM16,000 and promised to buy the
remaining 20% for RM4,000 in 2010. Couches, Inc. produced 16 couches during
2009 and sold each one during that year for RM3,000. What was the economy's
GDP for 2009?
a. RM48,000
b. RM52,000
c. RM64,000
d. RM68,000

7. Suppose there are only two firms in an economy: Rolling Rawhide produces
rawhide and sells it to Chewy Chomp, Inc., which uses the rawhide to produce and
sell dog chews. With each RM2 of rawhide that it buys from Rolling Rawhide,
Chewy Chomp, Inc. produces a dog chew and sells it for RM5. Neither firm had
any inventory at the beginning of 2008. During that year, Rolling Rawhide
produced enough rawhide for 1000 dog chews. Chewy Chomp, Inc. bought 75%
of that rawhide for RM1500 and promised to buy the remaining 25% for RM500 in
2009. Chewy Chomp, Inc. produced 750 dog chews during 2008 and sold each
one during that year for RM5. What was the economy's GDP for 2008?
a. RM3750
b. RM4250
c. RM5250
d. RM5750

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 8. JR sells RV’s. In 2010 she added RM400,000 to her inventory. RM100,000 of this
addition was from used RV’s she purchased while the remaining RM300,000 was
from her purchases of newly manufactured RV’s. How much of JR’s inventory is
included in 2010 GDP?
a. RM0
b. RM100,000
c. RM300,000
d. RM400,000

9. Disposable income is
a. the total income earned by a nation’s permanent residents.
b. the total income earned by a nation’s residents in the production of good
and services.
c. the income that households and non-corporate businesses receive.
d. the income that households and businesses have remaining after satisfying
their obligations to the government.

10.GDP is equal to
a. the market value of all final goods and services produced within a country
in a given period of time.
b. Y.
c. C + I + G + NX.
d. All of the above are correct.

11.The consumer price index is used to

a. monitor changes in the level of wholesale prices in the economy.
b. monitor changes in the cost of living over time.
c. monitor changes in the level of real GDP over time.
d. monitor changes in the stock market.

12.The inflation rate is defined as the

a. price level in an economy.
b. change in the price level from one period to the next.
c. percentage change in the price level from the previous period.
d. price level minus the price level from the previous period.

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13. In the calculation of the CPI, tea is given greater weight than beer if
a. the price of tea is higher than the price of beer.
b. it costs more to produce tea than it costs to produce beer.
c. tea is more readily available than beer to the typical consumer.
d. consumers buy more tea than beer.

14. For any given year, the CPI is the price of the basket of goods and services in the
a. given year divided by the price of the basket in the base year, then
multiplied by 100.
b. given year divided by the price of the basket in the previous year, then
multiplied by 100.
c. base year divided by the price of the basket in the given year, then
multiplied by 100.
d. previous year divided by the price of the basket in the given year, then
multiplied by 100.

15. Suppose a basket of goods and services has been selected to calculate the CPI and
2002 has been selected as the base year. In 2002, the basket’s cost was RM50; in
2004, the basket’s cost was RM52; and in 2006, the basket’s cost was RM54.60.
The value of the CPI in 2004 was
a. 96.2.
b. 102.0.
c. 104.0.
d. 152.0.

16. Which of the following changes in the price index produces the greatest rate of
inflation: 80 to 100, 100 to 120, or 150 to 170?
a. 80 to 100
b. 100 to 120
c. 150 to 170
d. All of these changes produce the same rate of inflation.

17.Assume an economy experienced a positive rate of inflation between 2003 and 2004
and again between 2004 and 2005. However, the inflation rate was lower between
2004 and 2005 than it was between 2003 and 2004. Which of the following
scenarios is consistent with this assumption?
a. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005.
b. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
c. The CPI was 100 in 2003, 105 in 2004, and 130 in 2005.
d. The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.

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 Table 24-1
The table below pertains to Pieway, an economy in which the typical consumer’s
basket consists of 10 bushels of peaches and 15 bushels of pecans.

Year Price of Price of

Peaches Pecans
2005 RM11 per RM6 per
bushel bushel
2006 RM9 per RM10 per
bushel bushel

18. Refer to Table 24-1. The cost of the basket in 2005 was
a. RM200.
b. RM210.
c. RM240.
d. RM245.

19. Refer to Table 24-1. The cost of the basket in 2006 was
a. RM200.
b. RM210.
c. RM240.
d. RM245.

20. Refer to Table 24-1. If 2005 is the base year, then the CPI for 2005 was
a. 83.3.
b. 100.
c. 120.
d. 200.

-ALL THE BEST-