MODEL B

1.Which of the following is not a characteristic of commodity money?

a) I don’t know
b) It must be durable
c) It must be set by decree
d) It must have an intrinsic value
e) It must be easily divisible, in order to make small payments

2. When actual output is smaller than potential output:

a) The actual unemployment rate is larger than the natural unemployment rate
b) The actual unemployment rate is smaller than the natural unemployment rate
c) I don’t know
d) The cyclical unemployment rate is smaller than the natural unemployment rate
e) The structural unemployment rate is below the natural unemployment rate

3. Which of the following situations does not refer to the fiscal policy?
a) The evolution of the public debt
b) The evolution of public revenue
c) The evolution of the interest rate
d) I don’t know
e) A 2% increase in the income tax

4. If the economy is producing less than the potential output, the government may
increase ….. to ….. the aggregate demand. This will ….. the budget balance for that
year
a) Taxes, decrease, increase
b) Transfers, increase, increase
c) Transfers, increase, reduce
d) I don’t know
e) Taxes, decrease, decrease

5. Which of the following statement is false?

a) In Spain, the unemployment rate tends to be lower the higher the schooling level of
people
b) I don’t know
c) At the beginning of the 2008 crisis, permanent employment in Spain decreased
d) The different measures of labor underutilization evolve similarly over the business
cycle
e) The percentage of underemployed workers in Spain has increased after the 2008
crisis

6. The short run aggregate supply curve is ……., because in the short-run, nominal
variables, such as the price level, ……….. affect real variables, such as the production
of goods and services in the economy.
a) Vertical, do not
b) Vertical, do
c) Upward sloping, do
d) Upward sloping, do not
 e) I don’t know

7. We know that the GDP deflator in year 1 equals to 105, and the growth rate of real
GDP between year 1 and year 0 is 10%. Suppose that year 0 is the base year, which of
the following statements is true?
a) The GDP deflator in year 0 is 115
b) The inflation rate in year 1 is 15%
c) The growth rate of nominal GDP in year 1 is around 15%
d) The growth rate of nominal GDP in year 1 is around -5%
e) I don’t know

8. Suppose the economy is in long-run equilibrium. If the price of oil falls, in the short,
we can expect the price level to …….., and output to …….
a) Increase, decrease
b) I don’t know
c) Decrease, increase
d) Decrease, decrease
e) Increase, increase

9. What is the contribution of TFP to economic growth if the growth rates of human
capital, GDP and physical capital are, respectively, 2.5%, -3,4% and 1,5%? Assume
that the labor’s share is 0.7.
a) -5,2%
b) -1,2%
c) -5,6%
d) -1,2
e) I don’t know

10. A decrease in the price of imported cars from Germany:

a) I don’t know
b) Decreases the Spanish GDP deflator
c) Decreases both the Spanish CPI and the Spanish GDP deflator
d) Increases the Spanish GDP deflator
e) Decreases the Spanish CPI

PREGUNTAS ABIERTAS

Question 1. Using the data from the following table answer the questions below:

a) Compute the Real GDP per capita. Show your calculations

2016: 1.000.000.000/20.000=50.000
2017: 950.000.000/23.000=41.304,35
2018: 1.200.000.000/25.000=48.000
b) How can we measure the aggregate price level in this economy? Justify your answer.
Calculate the aggregate price level and the inflation rate in each year. Show your
calculations
2016: 875/1000=87,5% Inflation 2016 to 2017: ((94,74/87,5)-1)*100 = 8,27%
2017: 900/950=94,74% Inflation 2017 to 2018: ((83,33/94,74)-1)*100 = -12,04%
2018: 1000/1200=83,33%
In this economy, we can measure the aggregate price level through the GDP deflator
because we don’t have the cost of the market basket, so it’s impossible to calculate the CPI
Question 2. Suppose that the economy is in the long-run equilibrium when consumers
and firms become less optimistic about the future.
a) Explain the short-run effects of this shock
b) Consider the monetary policy. Explain how to implement this policy in order to deal
with the shock.
c) Explain the effects (if any) of the monetary policy on the following macroeconomic
variables: GDP, aggregate price level, unemployment, consumption, private
investment, aggregate demand, public budget balance, money market

MODEL A
1. A fall in the marginal propensity to consume will cause:
a) a reduction in output and reduction in the G multiplier.
b) a reduction in output and an increase in the G multiplier.
c) I don’t know
d) an increase in output and an increase in the G multiplier.
e) an increase in output and a reduction in the G multiplier.

2. We know that the GDP deflator in year 1 equals to 130, and that the growth rate of
real GDP between year 1 and year 0 is 5%. Suppose that year 0 is the base year,
which of the following statements is true?
a) the inflation rate in year 1 is 35%.
b) the growth rate of nominal GDP in year 1 is around 35%.
c) The GDP deflator in year 0 is 135.
d) The growth rate of nominal GDP in year 1 is around 25%.
e) I don’t know

3. An increase in the price of imported cars from Japan:

a) Increase the Spanish CPI.
b) I don’t Know
c) Increases both the Spanish CPI and the Spanish GDP deflator.
d) Decreases the Spanish GDP deflator.
e) Increases the Spanish GDP deflator.

4. When actual output is larger than potential output:

 a) The structural unemployment rate is below the natural unemployment rate.
b) I don’t know.
c) The cyclical unemployment rate is larger than the natural unemployment rate
d) The actual unemployment rate is smaller than the natural unemployment rate
e) The actual unemployment rate is larger than the natural unemployment rate.

5. What is the contribution of TFP to economic growth if the growth rates of human
capital, GDP and physical capital are, respectively, 1.5%, -3.5% and 0.5%? Assume
that the labor’s share is 0.6
a) I don’t know
b) -2.4%
c) -4.6%
d) 2.4%
e) -4.4%

6. Suppose the economy is in long-run equilibrium. If the price of oil increases

substantially, in the short run, we can expect the price level to…………., and output
to……..
a) increase, decrease
b) increase, increase
c) decrease, increase
d) decrease, decrease
e) I don’t know

7. The long run aggregate supply curve is…………, because in the long-run, nominal
variables, such as the price level,........ affect real variables, such as the production of
goods and services in the economy
a) vertical, do
b) vertical, do not
c) I don’t know
d) upward sloping, do
e) upward sloping, do not

8. Which of the following statements is true?

a) In Spain, the unemployment rate tends to be larger the higher the schooling
level of people.
b) At the beginning of the 2008 crisis, permanent employment in Spain
increased.
c) The different measures of labor underutilization evolve differently over the
business cycle.
d) The percentage of underemployed workers in Spain, has decreased after the
2008 crisis.
e) I don’t know

9. When the European Central Bank withdraws money from the economy, the money
supply curves shifts to the……….., causing the equilibrium aggregate price level
to……...
a) left, decrease
 b) right, increase
c) I don’t Know
d) right, decrease
e) left, increase.

10. Which of the following situations does not refer to the monetary policy?
a) I don’t know
b) the evolution of the monetary base
c) an increase in the purchase of public bonds
d) the evolution of the public debt
e) the evolution of the interest rate.
PROBLEM 1
a) Mention 2 factors that cause a negative demand shock. Do these factors cause a
shift or a movement along the aggregate demand curve? For each factor: explain why
it causes a negative demand shock on the aggregate demand of the economy.
CHOOSE ONLY TWO!!

- Changes in expectations: Consumption (C) and planned investment (I) depend on people’s
expectations about the future. If consumers and firms become more pessimistic, aggregate
demand decreases.
- Changes in Wealth: Consumption (C) depends on the value of household assets. If the real
value of households’ assets falls, aggregate demand decreases.
- Size of the existing stock of physical capital: Firms engage in planned investment spending
to add to their stock of physical capital. If the existing stock of physical capital is relatively
big, aggregate demand decreases.
- Government Policies:
o Fiscal Policy: Changes in government spending (G), transfers (Tr) and taxes (T)
affect the aggregate demand (AD): G (direct effect) and Tr and T (indirect effect). If
the government decreases spending or increases taxes, aggregate demand
decreases.
 o Monetary Policy: Changes in the amount of money affect aggregate demand (AD).
If the Central Bank decreases the quantity of money, aggregate demand decreases.

b) Suppose that the economy is in long-run equilibrium when there is a negative

demand shock. What are the effects of the shock in the short-run? Explain and
illustrate with a graph.

A negative demand shock is a shift to the left of the

aggregate demand (AD) curve. It causes the aggregate price
level (APL) and the potential output (Yx) to fall. The
unemployment rises and a recessionary gap is created in
the economy.

c) If the government did not intervene, would the economy return to the long-run
equilibrium? Explain your answer and illustrate it with a graph.

The economy is self-correcting in the long-run, although

most economists think it takes a decade or longer. So,
eventually, the recessionary gap would close on its own
and return to the potential output but at a higher
aggregate price level

PROBLEM 2
Suppose that the economy has experienced a negative demand shock.
a) What type of policy should the central bank use? How can the central bank
implement that policy?
The Central Bank should implement an expansionary monetary policy. It can do it so by:
- increasing the money supply
- Lowering the interest rate
That is because higher investment spending raises income, and higher consumer spending
(via multiplier) increases the aggregate demand and the AD curve shifts to the right

b) What are the effects of the policy in the monetary market? Show them in a graph.

To buy government bonds and public debt is a way

of injecting euros to the market.
c) Explain the effects of the policy on the investment spending, consumer spending,
real GDP, and the aggregate price level. Show the new equilibrium in a graph.

Lower interest rates lead to higher

investment spending, which leads to a higher
consumer spending and that increases GDP
which increases AD. The AD curve shifts to
the right back to the potential ouput but at a
higher aggregate price level.

SINGLE CHOICE QUESTIONS

1. If the economy is in a recession, the Central Bank will ________ its target for the
interest rate by ________ the money supply. Another alternative is that the
Government decides to ________ taxes.
a) Increase, decreasing, increase.
b) Increase, increasing, decrease.
c) Decrease, increasing, decrease.
d) Decrease, decreasing, increase.

2. According to the principle of monetary neutrality:

a) Changes in the monetary supply affect real variables in the long run.
b) Real variables do not affect nominal variables in the long run.
c) Nominal variables are not adjusted for inflation and real variables are adjusted for
inflation.
d) In the long run the only effect of a decrease in the monetary supply is to reduce the
aggregate price level by an equal percentage.

3. Which of the following statements is false?

a) Long-run differences in GDP per capita are explained by differences in the labor
productivity.
b) Before 2008, the growth of real GDP in Spain was accompanied by a positive growth of
the TFP.
c) Labor productivity is the output produced by the average worker.
d) According to the Solow’s model, the contribution of the TFP to the GDP growth is
computed as a residual, once we have subtracted the contribution of physical and human
capital.
4. If the nominal GDP is €1.6 million, and the Real GDP is €1.0 million, the GDP
deflator is:
a) 160
b) 62.5
c) 60
d) 37.5

5. The nominal rate of unemployment around which the unemployment rate fluctuates
is called the ________ rate of unemployment.
a) Cyclical
b) Natural
c) Frictional
d) Structural

6. Which of the following is not included in the M1 measure of the stock of money?
a) Current accounts
b) Coins in circulation
c) Euro bills (billetes) in circulation
d) Savings account

7. Which of the following statements is false?

a) In an expansion, the work of automatic stabilizers increases the budget balance, making
the budget surplus bigger or the budget deficit smaller.
b) Automatic stabilizers cause that the government spending rises when the economy is in
an expansion.
c) The government budget deficit tends to fall when the economy is expanding and tends to
rise when the economy is in a recession.
d) When the government has a deficit, it issues (emite) public bonds to borrow money, and
this will increase the public debt.

8. The Labor Force Survey provides the following data for Spain (in thousands of
people):
Working-Age Population: 38629.1
Not in the labor force: 15901.5
Employed: 18813.3
Employees (ocupados por cuenta ajena): 15690.3
What is the employment rate?
a) 48.70%
b) 82.77%
c) 40.61%
d) 89.32%

9. If the economy suffers a negative demand shock, the government may increase
_________ to _________ the aggregate demand. This will ________ the budget
balance for that year.
a) Transfers, increase, reduce.
b) Taxes, decrease, increase.
c) Transfers, increase, increase.
d) Taxes, decrease, decrease.
10. The Labor Force Survey provides the following data for Spain (in thousands of
people):
Working-Age Population: 38629.1
Not in the labor force: 15901.5
Employed: 18813.3
What is the unemployment rate?
a) 10.13%
b) 69.97%
c) 41.16%
d) 17.22%

11. Suppose the cost of the basket in 2005 was $4,200 and the cost of the basket in
2004 (the base year) was $4,000. Which of the following statements is true?
a) The CPI for 2005 is 105.
b) The inflation rate for 2005 was 5%.
c) The inflation rate for 2004 was 5%.
d) The CPI for 2005 is 200.

12. Suppose a town where there are: 1300 people searching for a job; 400 working-age
people but who do not actively search for a job; and 8700 people who have a job. Now
suppose that 100 people more move to that town. All of them are 16 or more years old
and they are searching for a job. However not all of them finally find a job. If we want
that the final unemployment rate is equal to the initial unemployment rate, how many
new people should find a job?
a) 13 people
b) 87 people
c) 100 people
d) None of the above

13. The short run aggregate supply

curve will shift to the left if:
a) Payroll taxes (cotizaciones a la Seguridad Social) decrease.
b) The aggregate price level falls.
c) A technological progress makes workers more productive.
d) The price of oil increases.

14. An increase in the price of an imported car from Germany:

a) Increases the Spanish CPI.
b) Increases the Spanish GDP deflator.
c) Decreases the Spanish GDP deflator.
d) We don’t have enough information. (taronja)
15. If the aggregate price level falls, people will demand ________ money, causing the
interest rate in the economy to ________.
a) More, increase
b) More, decrease
c) Less, decrease
d) Less, increase

16. Suppose an economy that produces 2 goods, cheese and oranges. The following
table shows the quantity of each good produced each year and the price of the good
(in euros).

Which of the following statements is false?

a) The growth rate of nominal GDP is larger than the growth rate of real GDP.
b) The GDP deflator in 2016 is around 123.1.
c) The inflation rate in 2016 is larger than the growth rate of real GDP.
d) The inflation rate in 2016 is positive and equal to 23.1%.

17. When an economy is in a recession, household incomes tend to decrease, which

results in households paying:
a) More taxes, thus helping stimulate the economy.
b) Fewer taxes, thus deepening (intensificar) the recession.
c) More taxes, thus deepening (intensificar) the recession.
d) Fewer taxes, thus helping stimulate the economy.

18. Gross Domestic Product measures:

a) The total income in the economy, but not the total expenditure on the economy’s output.
b) The total expenditure on the economy’s output, but not the total income in the economy.
c) Both the total income in the economy and the total expenditure on the economy’s output.
d) None of the above.

19. Which of the following statements is false?

a) Aggregate consumption falls during recessions and rises during expansions.
b) Investment spending fluctuations more than GDP over the business cycle.
c) In years of economic boom, unemployment falls and in recessions, employment falls.
d) GDP fluctuates less than consumption over the business cycle.

20. Which of the following statements is false?

a) The higher the reserve ratio, the less of each deposit banks loan out, and the smaller the
money multiplier.
b) If the reserves requirement is 17% an increase in deposits equal to €3500 will increase
the money supply by €20588.24.
c) The lower the reserve ratio, the more of each deposit banks loan out, and the bigger the
money multiplier.
d) If the reserves requirement is 17% an increase in deposits equal to €3500 will increase
the money supply by €4216.87.

TEST 1 (campus)
1. The key difference between a stock and a flow is that a flow is measured…….,
while a stock is measured…….
a) over a single month; over a single year
b) over a single year; over a single month
c) over an interval of time; at a point in time
d) at a point in time; over an interval of time

2. An increase in the price of an imported car from Germany

a) increases the Spanish GDP deflator
b) decreases the Spanish GDP deflator
c) increases the Spanish CPI
d) increases both the Spanish CPI and the Spanish GDP deflator
3. Assume households purchase all greeting cards . In calculating GDP , we will
include the value:
a) of some of the greeting cards and all of the paper
b) of all the paper as well as all the greeting cards produced in the economy
c) of all the greeting cards but of none of the paper
d) of all of the greeting cards and of paper that is added to inventory
4. If the Nominal GDP is €1.6 million, and the Real GDP is €1.0 million, the GDP
deflator is:
a) 37.5
b) 62.5
c) 160 ((1,6/1) x 100)
d) 60
5. Gross domestic product measures
a) both the total income in the economy and the total expenditure on the
economy’s output.
b) the value of final goods and services produced by national workers and firms
c) the value of final and intermediate goods and services produced domestically.
d) the total income in the economy , but not the total expenditure on the
economy’s output
6. Which of the following statements is false?
a) according to national accounting, consumption includes spending done by
households on everything except new house purchases
b) GDP can be computed by adding up the value of all final and intermediate
goods and services produced in the economy
c) aggregate investment does not include purchases of stocks and bonds
d) consumption includes the value of imported consumption goods

TEST U.2 (campus)

1.Whenever the economy is in recession, we can expect:

a. investment to decrease

b. unemployment to decrease

c. incomes to increase

d. all of the above

2. Accumulating more physical capital, human capital, and technological knowledge

are strategies designed to increase:

a. public spending

b. taxes

c. productivity

d. investment

3. Small changes in its growth rate make ________ changes in the GDP per person in
the long term.

a. big

b. equal

c. insignificant

d. small

TEST U.3 (campus)

1. The long run aggregate supply curve is ________, because in the long-run, nominal
variables, such as the price level, ________ affect real variables, such as the
production of goods and services in the economy.
a. vertical, do
b. upward sloping, do
c. upward sloping, do not
d. vertical, do not

2. Suppose the economy is in long run equilibrium. If the stock market crashes, in the
short run, we can expect the price level to ________, and output to ________
a. increase, increase.
b. decrease, decrease.
c. increase, decrease.
d. decrease, increase.

3. The short run aggregate supply curve will shift to the right if:
a. Nominal wages fall.
b. A technological progress makes workers more productive.
c. The price of oil falls.
d. All of the above.

4. When the output gap is positive:

a. The actual unemployment rate is below the natural unemployment rate.
b. The actual unemployment rate is above the natural unemployment rate.
c. The structural unemployment rate is below the natural unemployment rate.
d. The structural unemployment rate is above the natural unemployment rate

5. Suppose the economy is in long run equilibrium. What are the short-run effects of a
decrease in the price of commodities?
a. A lower aggregate price level and a lower output.
b. A higher aggregate price level and a lower output.
c. A higher aggregate price level and a higher output.
d. A lower aggregate price level and a higher output.

TEST 4 CAMPUS
1. which of the following situations does not refer to the fiscal policy?
a) the evolution of the interest rate
b) a decrease in subsidies
c) a 2% increase in the income tax
d) an increase in the tobacco tax

2. If the government cuts taxes by 100€ billion, aggregate expenditure:

a) will increase by 100€ billion right away
b) will increase more then if the government had instead increased spending by
the 100€ billion
c) will decrease
d) none of the above

3. If the economy is facing an inflationary gap, the government may increase…… to…..
the aggregate demand. This will…. the budget balance for that year.
a) transfer, increase, increase
b) taxes decrease, decrease
c) transfer , increase, reduce
d) taxes, decrease, increase

4. If the economy is producing less than the potential output, the government may
increase…. to… the aggregate demand. This will ….. the budget balance for that
year.
a) transfers, increase, increase
b) taxes, decrease, increase
c) taxes, decrease, decrease
d) transfer , increase , reduce

5. Which of the following statements is false?

 a) In a recession, the work of automatic stabilizers reduces the budget balance,
making the budget surplus smaller or the budget deficit bigger
b) the government budget deficit tends to increase when the economy is ina
recession and tends to fall when the economy is expanding
c) when the government has a deficit, it issues public bonds to borrow money,
and this will increase the public debt
d) Automatic stabilizers cause that the government spending falls when the
economy is in a recession
6. If the housing market is booming and, as a result, household’s wealth rises, the
government may deal with that stock by increasing….to …. the aggregate demand.
This will …. the budget balance for that year
a) taxes, decrease,decrease
b) taxes, decrease, increase
c) transfers, increase , reduce
d) transfers , increase, increase
Test 5 campus

1. When the European Central Bank adds more money to the economy, the money
supply curve shifts to the……, causing the equilibrium aggregate Price level to…...
a) Right, decrease

b) Left, increase

c) Left, decrease

d) Right, increase

2. If the economy is in a recession, the ECB may…... its target for the interest rate, in
order to…... aggregate demand

a) Increase, decrease

b) Increase, increase,

c) Decrease, decrease

d) Decrease, increase

3. The set of assets in an economy that people regularly use to buy goods and services
form other people is most commonly called:

a) Financial assets

b) Liquid assets

c) Money

d) Exchange assets

4. In the long run the monetary policy is neutral. This means that:
a) real variables do not affect nominal variables in the long run.
b) changes in the money supply will only change the aggregate price level in the
long run
 c) changes in the money supply will change the unemployment rate in the long
d) in the long run raising the money supply will increase the real GDP

5. Which of the following is NOT a characteristic of commodity money?

a) It must be easily divisible, in order to make small payments
b) It must be set by decree
c) It must have an intrinsic value
d) It must be durable

6. If the aggregate price level falls, people will demand…….. money, causing the
interest rate in the economy to……
a) more, decrease
b) less, decrease
c) less, increase
d) more, increase

PREGUNTES ALEIX

1. An economy that “accumulates human capital is”:

a) increasing the skills workers
b) increasing its population
c) increasing the labor force participation rate
d) hiring (hire=contratar) more workers

2. Which of the following statements is false?

a) labor productivity is the output produced by the average worker.
b) long-run differences in GDP per capita are explained by differences in the labor of
productivity
c) according to Slow’s model, the contribution of the TFP to de GDP growth is
computed as a residual, once we have subtracted the contribution of physical and
human capital
d) Before 2008, the growth of real GDP in spain was accompanied by a positive growth
of TFP.

3. Suppose an economy where the average tax rate is 0.25 and the marginal
propensity to consume is 0.75. The government decides to increase spending by 3
million. What is the effect on the economy’s income? And on the governmental
balance?
a) Income increases by around €6.9 million; change in government balance is around -
€3 million
b) Income increases by around €6.9 million; change in government balance is around -
€1.3 million
c) Income increases by around €5.1 million and government balance does not change
d) Income increases by around €5.1 million; change in government balance is around -
€1.7 million
4. Which of the following statements is true? the economy experiences a negative
demand shock if:
a) firms carry on more investment projects
b) the price of oil rises
c) Nominal wages fall
d) Householder’s wealth fall

5.Which of the following statements is false?

a) GDP can be computed by adding up the value of all final and intermediate goods and
services produced in the economy
b) aggregate investment does not include purchases of stocks and bonds
c) consumption includes the value of imported consumption goods
d) according to national accounting, consumption includes spending done by
householders on everything except new houses purchases

6.We know that the GDP deflator in year 1 is equal to 110, and the growth rate of real
GDP between year 1 and year 0 is 10%. Suppose that year 0 is the base year, which of
the following statements is true?
a) the growth rate of nominal GDP in year 1 is around 20%.
b) the GDP deflator in year 0 is 120.
c) the growth rate of nominal GDP in year 1 is around 0%.
d) The inflation rate in year 1 is 20%.

7.Suppose the CPI at the end of 2013 was 150 and the CPI at the end of 2014 was 165.
Calculate the inflation rate for 2014.
a) 10%
b) 15%
c) 20%
d) 65%

8.Which of the following statements is false?

a) automatic stabilizers cause the total government spending rises when the economy
is in an expansion.
b) in an expansion, the work of automatic stabilizers increases the budget
balance,making the budget surplus bigger or the budget deficit smaller.
c) the government budget deficit tends to fall when the economy is expanding and
tends to rise when he economy is in a recession.
d) when the government has a deficit, it issues (emite) public bonds to borrow money,
and this will increase the public debt.

9.the short-run aggregate supply curve will shift to the left if :

a) the aggregate price level fall
b) Payroll taxes increases
c) A technological progress makes workers more productive
d) the price of oil decreases.

10.Which of the following statements is false?

 a) In the short run, if the aggregate price level falls, investment and consumption rise
because of the interest rate effect and, so, the aggregate demand rises.
b) In the short run, if aggregate prices level rises, aggregate demand shifts to the left
because higher price level reduces the purchasing power of households’ wealth.
c) In the short run, if the aggregate price level rises, the output supplied rises because
of nominal wages are sticky.
d) In the short run, if the aggregate price falls people need to hold less money to
purchase the same amount of goods and services.

11.Which of the following statements is false?

a) Aggregate consumption falls during recessions and rises during expansions
b) In years of economic boom unemployment falls, and in recessions employment falls
c) GDP fluctuates more than consumption over the business cycle
d) Investment spending fluctuates less than GDP over the business cycle

12.Suppose the housing market is falling and, as a result, households’ wealth falls.
The government may deal with that shock by …….. to …….. the aggregate demand.
This will …….. the budget balance for that year.
a) cutting taxes, increase, increase.
b) Increasing transfers, increase, increase.
c) cutting transfers, increase, decrease.
d) cutting taxes, increase, decrease.

13.Suppose an economy that produces 2 goods, cheese and oranges. Below you can
see the quantity (Q) of each good produced each year and the price (P) per unit (in
euros).

2015 (base year)

Cheese: P = 1; Q = 10
Oranges: P = 2; Q = 20

2016:
Cheese: P = 2; Q = 15
Oranges: P = 2; Q = 25

Which of the following statements is false?

a) The inflation rate in 2016 is positive and equal to 19%

b) The GDP deflator in 2016 is around 123,1
c) The growth rate of nominal GDP is larger than the growth rate of real GDP
d) The inflation rate in 2016 is smaller than the growth rate of real GDP

14.Which of the following statements is false?

a) Because growth is a cumulative process, small differences in growth rate of GDP
per capita yield huge differences in the levels of income per capita in long run.
b) For the world as a whole we do not observe convergence in the levels of GDP per
capita.
c) Extreme poverty in the world has been decreasing in the last decades
 d) Among wealthy countries, the countries with the lowest GDP per capita some
decades ago hae had the slowest growth rates of GDP per capita

15.What is the contribution of the technological progress to economic growth if the

growth rates of human capital are, respectively, 2,3%, 2% and 1,8%? Assume that the
capital’s share is 0,3.
a) -2,1%
b) 0,15%
c) 0,05%
d) -0,15%

16.An increase in the price of an imported car from japan:

a) Decrease the spanish GDP deflator
b) Increase both spanish CPI and the spanish GDP deflator
c) Increase the spanish CPI
d) Increase the spanish GDP deflator

17.Which of the following occurs when the price level rises?

a) Consumer feels wealthier, which encourages them to spend more.
b) people need to hold more money, so interest rates falls, making firms borrow and
invest more.
c) More investment projects are profitable
d) People need to hold more money, so interest rate rise, making firms borrow and
invest less.

18. Suppose the economy is in long-run equilibrium. If a housing bubble happens and
wealth increases, in the short run, we can expect the price level to …….., and output
to …….. . In the long run, without any public intervention, we can expect the price to
…….. and output to …….. .
a) Increase, increase, decrease, decrease
b) Increase, increase, increase, decrease
c) Decrease, increase, increase, fall
d) Increase, decrease, decrease, rise

Single-Choice questions
Unit 1

1.- Which of the following variables is a stock variable?

a) The €1000 that Anna receives as interest payments.
b) The €20 that Anna withdraw from her current account to pay for water consumption.
c) The €1000 that Andreu has in his current account.
d) None of the above options is correct.

2.- According to the national accounts, aggregate consumption

a) only includes the value of durable goods and services.
b) includes the value of imported consumption goods.
 c) includes the value of new housing.
d) it does not include the value of imported consumption goods.

3.- Between 1970 and 1990 the Spanish nominal GDP has always been
increasing. This means that:

a) every year between 1970 and 1990 the number of goods produced has been
increasing;
b) every year between 1970 and 1990 prices have been increasing;
c) options a) and b) are both correct.
d) options a) and b) may be false because the evolution of nominal GDP includes both
changes in prices and quantities of the goods considered.

4.- In terms of the Spanish national accounts, the spending in Spain by a

Japanese tourist is considered:
a) consumption expenditure.
b) exports.
c) currency investment expenditure.
d) imports.
5.- If CPI is increasing we can conclude that:
a) Inflation is decreasing.
b) Inflation does not change.
c) Inflation is increasing too.
d) None of the above is necessarily true.

Unit 2

1.- Suppose that the population grows at one percent in the next 20 years, but
aggregate income is growing at the 5% for those years. How much will the GDP
per capita grow in 20 years approximately?
a) 5%
b) 4%
c) 6%
d) We do not have enough information.

2.- Many studies show that the labor’s share of total income is around 0.7 in
developed countries. Using that figure, what is the contribution of TFP to the
growth of a country if the growth rate of GDP, physical capital and human
capital are respectively 3.2%, 2.6%, 1.4%?

a) -0,80%
b) 0,96%
c) 1,44%
d) 2%

Unit 3
 1.- The long run aggregate supply will shift to the right whenever:

a) the price level increases

b) factors of production (such as labor and capital) increase.
c) expenditures (such as consumption and net exports) increase.
d) the prices of inputs used to produce goods and services (such as wages and the
price of oil) decrease

2.- Suppose the economy is in long run equilibrium. If aggregate demand

increases, we can expect that in the short run output will ________, and in the
long run output will ________.

a) decrease, increase
b) decrease, decrease
c) increase, increase
d) increase, return to the natural output

Unit 4

1.- Suppose an economy with the following aggregate consumption function:

C=200+0.75Yd. An increase in disposable income of 200 will cause
consumption to rise by:

a) 150.
b) 200
c) Less than 150.
d) More than 150.

2.- An increase in the marginal propensity to consume will cause:

a) a reduction in output and an increase in the G multiplier.

b) a reduction in output and a reduction in the G multiplier.
c) an increase in output and an increase in the G multiplier.
d) an increase in output and a reduction in the G multiplier.

Unit 5

1.- If the central bank (CB) wants to increase aggregate demand in the
economy, the CB will ________ its target for the interest rate, and to meet that
new target, the CB wil ________ the money supply.
a) increase, increase
b) increase, decrease
c) decrease, increase
d) decrease, decrease

2.- Which of the following occurs when the central bank reduces the reserve
requirement?
a) The money multiplier gets bigger.
b) Banks become more reluctant to lend.
c) The amount of money in the economy is reduced.
 d) Interest rates tend to rise in the economy.

Unit 6

1.- The unemployment that results because the number of jobs available in
some labor markets is insufficient to provide a job for everyone who wants one
is called ________ unemployment.
a) cyclical
b) natural
c) frictional
d) structural

2.- Which of the following statements is true?

a) It is possible for an economy to completely and permanently eliminate
unemployment.
b) It is possible for an economy to eliminate unemployment completely, but
only temporarily.
c) It is impossible for an economy to eliminate unemployment completely.
d) It is possible for an economy to completely and permanently eliminate
unemployment, but only if the government finds a way to avoid recessions
altogether.