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Question 01

Which of the following is not closely related to the calculation of GDP in an economy?

a) The sum of its factor incomes.

b) The sum of its productive assets.

c) The sum of value added.

d) The sum of final sales.

Question 02

The GDP deflator can be used:

a) to reduce the overstatement of economic activity that would occur if we included intermediate production.

b) to correct nominal GDP for the contribution to domestic GDP made by foreign owned factors of production.

c) to decompose a change in nominal GDP into a change in real GDP and an average change in prices.

d) to obtain the factor income flows that result from the economic activity that has produced the GDP.

Question 03

Very low reported per capita income levels in developing economies underestimate true value added and income because:

a) of adjustments in purchasing power between countries.

b) local goods are seldom competitive on international markets.

c) governments are still relatively small in developing economies.

d) non-market activity such as food production within the family unit is not included in measures of per capita income levels.

Question 04

"Absorption":

a) is the sum of private and public spending on goods and services.

b) is the difference between GDP and GNP.

c) is the difference between saving and investment.

d) is the sum of value-added in the economy.

Question 05

Which of following is not a leak from the circular flow diagram of expenditure/income?

a) Taxes.

b) Net imports.

c) Transfers.

d) Saving.

Question 06

The current account surplus(CA=Y-A>0) is equal to the sum of:

a) the government deficit (T-G<0) and the private surplus (S-I>0).

b) the government surplus (T-G>0) and the private surplus (S-I>0).

c) the government deficit (T-G<0) and the private deficit (S-I<0).

d) the government surplus (T-G>0) and the private deficit (S-I<0).

Question 07

One reason that the value of the GDP differs from the value of national income is:

a) indirect taxation.

b) property taxation.

c) corporate taxation.

d) personal income taxation.

Question 08

In time 0, the price of good X is 10 and the price of good Y is 20. In period 2, the price of X has risen to 12 and the price of Y has fallen to 15. In time 0 the market basket of the average consumer consists of 4 units of good X and 1 unit of good Y. In time 1 the market basket of the consumer consists of 3 units of good X and 1 unit of good Y. From the Laspeyres and Paasche price indexes you calculate from these data you conclude:

a) prices have increased on average.

b) prices have decreased on average.

c) because one price has increased and another has decreased, no conclusion can be properly drawn.

d) nothing without having a GDP deflator to adjust nominal expenditures.

Question 09

If the monetary authority of a country buys back its own currency, the transaction would appear in the balance of payments statistics as:

a) a credit item in the current account.

b) a debit item in the current account.

c) a credit item in the official account.

d) a debit item in the official account.

Question 10

A current account imbalance must be matched, or ﬁnanced, one-for-one by either the private ﬁnancial account or:

a) a balance of payments.

b) unilateral transfers.

c) official interventions by the monetary authorities.

d) foreign credits.

Oxford University Press, Online Resource Centre, Chapter 02.

Chapter 02

Instructions