GABST COLLEGE OF DISTANCE EDUCATION UNIT

MACROECONOMICS (ECON 2072) FINAL EXAM

Name_______________________________ ID.No__________ Department______________Year_____ Term____

Part I: Write True if the statement is correct and False if the statement is incorrect on the space provided (1.5 pt each)

__________ 1. Aggregate supply equals aggregate demand at equilibrium level of national income.
__________ 2. Inflation causes income inequalities in the nation.
__________ 3. It is possible for real GDP to rise more rapidly than nominal GDP; this happens if an economy is experiencing deflation.
__________ 4. It is possible for the CPI to fall over time; this happens if an economy is experiencing deflation.
__________ 5. A country with net exports that are negative is saving more than it is investing.
__________ 6. A recession occurs when real GDP declines.
__________ 7. Net National Product always exceeds a nation's total income because of depreciation and taxes.
__________ 8. For an economy as a whole, income equals expenditure b/c the income of the seller must be equal to the expenditure of the buyer.
__________ 9. Keynesians believe in free- market economy.
__________ 10. Classical economists emphasize that active role should be played by the government to achieve economic stability.
__________ 11. Recovery (expansion) reduced output, income and living standards, and higher unemployment.
__________ 12. The amount of money that people demand is negatively related to the interest rate.

Part II: Choose the best answer from the given alternatives (1.5 pt.each)
______ 1. The branch of economics that studies the whole economy at once is known as
A. Microeconomics B. Macroeconomics
C. Fiscal policy D. Public economics

______ 2. Deflation occurs when:

A. The unemployment rate decreases. B. Prices fall.
C. Prices increase, but at a slower rate. D. Real GDP decreases.

______ 3. An increase in the price of goods bought by firms and the government will show up in:
A. The GDP deflator but not in the CPI. B. The CPI but not in the GDP deflator.
C. Neither the CPI nor the GDP deflator. D. Both the CPI and the GDP deflator

______ 4. In the classical model with fixed income, if households want to save more than firms want to invest, then:
A. Output increases. B. Output falls.
C. The interest rate rises. D. The interest rate falls.

______5. The unemployment rate refers to:

A. The population minus the number of people employed

B. The labour-force participation rate plus the employment rate
C. The proportion of the labour force that is without work and is looking for work
D. The proportion of the population that is not working

_____6. Gross domestic product (GDP) equals the _____of final _____ produced within a country during a given period of time
A. Market value; goods B. Market value; services
C. Market value; goods and services D. Quantity; goods
E. Quantity; goods and services
_____ 7. A business cycle refers to the

A. Continued expansion in Real GDP. B. Recurrent swings (up and down) in Real GDP.

C. Continued decline in Real GDP. D. Period when Real GDP grows at unusually high rates.

______ 8. Since Keynes believed money was trapped in the money market, he thought that to get out of the Great Depression

A. Households had to be convinced to save less. B. Business firms had to be convinced to increase investment.

C. The government had to engage in deficit spending. D. Imports had to stop so as to increase net exports.

______ 9. According to the Keynesian consumption function, an increase in disposable income will result in

A. A decrease in consumption. B. An increase in consumption.

C. A decrease in investment. D. An increase in investment.

______ 10. GDP Deflator is equal to-----------

Nominal GDP Real GDP
A. ×100 B. ×100
Real GDP Nominal GDP

Nominal GNP . Real GNP

C. ×100 D. ×100
Real GNP Nominal GNP

Match- I
_______1. Deficit budget
_______2. GDP
_______3. Monetary Policy
_______4. Revenue Deficit
_______5. Unemployment
_______6. Prof. J. M. Keynes
_______7. Fiscal Policy
_______8. Inflation
_______9. Milton Friedman
______10. Income Policy
______11. Real GDP
______12. Nominal GDP
Part III: Match with best alternatives (1.5 pt.each)
Match- II
A. Show how price are going up
B. How economy use its resource
C. If the receipts of the government are less than its expenditure
D. Deliberate manipulation of government expenditure and tax rates
E. Father of Modern Macroeconomics
F. Monetarist
G. The government effort puts on prices and wages
H. Measures economic growth
I. When revenue expenditure of the government is greater than the revenue receipts
J. Deliberate manipulation of money supply and interest rate
K. That year's output times same year price
L. Base year price times that year's output

Part IV: Fill the space provided (1.5 pt.each)

1. __________________________________ is price index based on the market basket of goods and services purchased by
a typical urban household.
2. ___________________ is social science that seeks to understand the choices people make in using scarce resources to
meet their wants.
3. _______________________ is policy that is concerned with government purchases, taxes, and transfer payments.
4. _______________________ is a weighted average of the prices of all final goods and service produced in the economy.
5. _______________________ is the branch of economics that studies large-scale economic phenomenon, particularly
inflation unemployment and economic growth.
6. _______________________ is the total income earned by a country's residents, including wages, rents, interest
payments, & profits.
WISHES ALL THE BEST
 True/ False
1. True
2. True
3. True
4. True
5. False
6. True
7. False
8. False
9. False
10. False
11. False
12. True
Choice
1. B
2. B
3. A
4. D
5. C
6. C
7. B
8. C
9. B
10. A
MACHING
1. C
2. H
3. J
4. I
5. B
6. E
7. D
8. A
9. F
10. G
11. L
12. K
Short Answers
1. Consumer Price Index
2. Economics
3. fiscal policy
4. GDP deflator
5. Macroeconomics
6. National Income
 True/ False
1. True
2. True
3. True
4. True
5. False
6. True
7. True
8. False
9. False
10. False
11. False
12. True
Choice
1. D
2. A
3. B
4. D
5. C
6. A
7. D
8. A
9. A
10. C
MACHING
1. F
2. J
3. D
4. A
5. L
6. H
7. G
8. B
9. E
10. K
11. I
12. C
Short Answers
1. Inferior goods
2. Utility
3. Market
4. Production
5. isoquant curve
6. Monopolistic competition