Assignment
Question One
Choose the correct answers
In The General Theory of Employment, Interest, and Money, John Maynard Keynes argued that to eliminate depression governments should spend
A) more to offset insufficient private spending.
B) more to offset excessive private spending.
C) less to offset excessive private spending.
D) less to offset insufficient private spending.
Potential GDP is the
A) the value of production with fully employed resources.
B) current value of production in the economy.
C) value of production when the economy is in a recession.
D) value of production when the economy is at a peak.
A recession is
A) a period during which real GDP increases for at least two successive quarters.
B) the lower turning point of a business cycle.
C) the upper turning point of a business cycle.
D) a period during which real GDP decreases for at least two successive quarters.
Gross domestic product is the total produced within a country in a given time period.
A) market value of all final and intermediate goods and services
B) market value of all goods and services
C) amount of final and intermediate goods and services
D) market value of all final goods and services
Capital
A) includes the plant, equipment, and buildings owned by firms.
B) increases when depreciation increases.
C) does not include semifinished goods used to produce other goods and services.
D) is a flow variable.
Which of the following relationships is correct?
A) Nominal GDP = (GDP Deflator/Real GDP) × 100
B) Real GDP = (Nominal GDP × GDP Deflator)/100
C) GDP Deflator = (Nominal GDP/Real GDP) × 100
D) Real GDP = Nominal GDP × 100
The labor force is the sum of the
A) working-age population and the number of unemployed people.
B) number of employed people and the working-age population.
C) number of employed people and the number of unemployed people.
D) total population and the number of unemployed people.
Unemployment as measured includes the total number of people who
A) have jobs or are currently looking for jobs.
B) are available and looking for work but unable to find employment.
C) would like to have a job but have stopped seeking work.
D) would like to have a full-time job but are working part-time.
Frictional unemployment
A) includes discouraged workers.
B) is voluntary part-time unemployment.
C) is unemployment associated normal labor turnover.
D) is unemployment associated with declining industries.
Recessions and expansions affect most strongly which type of unemployment?
A) frictional unemployment
B) structural unemployment
C) cyclical unemployment
D) seasonal unemployment
The classical dichotomy is a discovery that states
A) real and nominal variables are actually the same thing.
B) when the economy is at full employment, the forces that determine the real variables are independent of those that determine the nominal variables.
C) throughout the business cycle, the forces that determine the real variables are independent of those that determine the nominal variables.
D) only nominal variables cause business cycles.
In a dynamic, ever-changing economy, the full-employment level of economic activity will entail some unemployment because
A) some people are inherently lazy.
B) there is both job search and job rationing.
C) job search is lengthened by meager unemployment insurance benefits.
D) All of the above answers are correct.
In the market for loanable funds, as the interest rate rises the and the .
A) quantity of loanable funds supplied increases; quantity of loanable funds demanded decreases
B) quantity of loanable funds supplied decreases; quantity of loanable funds demanded increases
C) supply of loanable funds increases; demand for loanable funds decreases
D) supply of loanable funds decreases; demand for loanable funds increases
Which of the following is used to calculate the standard of living?
A) real GDP/population
B) ((real GDP in the current year - real GDP in previous year)/real GDP in previous year) x 100
C) the one-third rule
D) real GDP/aggregate hours
Real GDP grows when
I. the quantities of the factors of production grow
II. persistent advances in technology make factors of production increasingly productive
III. human capital grows
A) Only I.
B) Both I and III.
C) Only II.
D) I, II, and III.
An assumption underlying growth accounting is that growth in real GDP per hour of labor is determined by growth in
A) only technological progress.
B) both capital per hour of labor and technological progress.
C) only capital per hour of labor.
D) hours of labor.
The functions of money are
A) medium of exchange and the ability to buy goods and services.
B) medium of exchange, unit of account, and means of payment.
C) pricing, contracts, and means of payment.
D) medium of exchange, unit of account, and store of value.
The definition of M2 includes
A) M1.
B) savings deposits.
C) time deposits.
D) all of the above
Reserve requirements are
A) minimum percentages of deposits that banks must hold as reserves.
B) the minimum amount of an owner's financial resources that must be placed in a depository institution.
C) rules covering the types of deposits that banks may offer.
D) rules covering the types of assets that banks may purchase.
The money multiplier is the ratio of the change in the
A) quantity of money to the change in the monetary base
B) currency drain to the change in the quantity of money.
C) monetary base to the change in the quantity of money
D) desired reserve ratio to the change in the monetary base
In the foreign exchange market, the of one country is traded for the of another country.
A) currency; goods
B) goods; goods
C) currency; currency
D) currency; financial instruments
A country's balance of payments accounts record
A) the country's net indebtedness to foreigners.
B) its international trading, borrowing, and lending.
C) the flow of human and nonhuman resources between it and its trading partners.
D) only its official transactions with other governments.
A country that borrows more from the rest of the world than it lends to it in a year is called a , and a country that lends more to the rest of the world than it borrows from it in a year is called a .
A) borrower; lender
B) importer; exporter
C) net borrower; net lender
D) gross borrower; gross lender
If the economy is at the natural unemployment rate,
A) real GDP > potential GDP.
B) real GDP < potential GDP.
C) real GDP = potential GDP.
D) All of the above can occur when the economy is at the natural unemployment rate.
The supply of real GDP is a function of
A) the total expenditures of consumers, investors and government.
B) the sum of wages, salaries, corporate profits, rents and interest.
C) only the state of technology.
D) the quantities of labor, capital and the state of technology.
The long-run aggregate supply curve is because along it, as prices rise, the money wage rate .
A) vertical; falls
B) vertical; rises
C) upward sloping; falls
D) upward sloping; stays constant
Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of
A) an increase in the price level.
B) a decrease in the price level.
C) an increase in income.
D) a decrease in income.
In short-run macroeconomic equilibrium
A) real GDP equals potential GDP and aggregate demand determines the price level.
B) the price level is fixed and short-run aggregate supply determines real GDP.
C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.
D) real GDP is less than potential GDP.
The Keynesian model of aggregate expenditure assumes that
A) individual firms' prices are flexible but the price level is fixed.
B) both individual firms' prices and the price level are flexible.
C) both individual firms' prices and the price level are fixed.
D) individual firms' prices are fixed but the price level is flexible.
A consumption function shows a
A) negative (inverse) relationship between consumption expenditure and saving.
B) positive (direct) relationship between consumption expenditure and price level.
C) negative (inverse) relationship between consumption expenditure and disposable income.
D) positive (direct) relationship between consumption expenditure and disposable income.
The marginal propensity to consume measures how much
A) disposable income is consumed.
B) disposable income goes to saving.
C) consumption expenditure occurs at the equilibrium income.
D) of a change in disposable income will be consumed.
The multiplier effect occurs because
A) changes in price levels affect our willingness to invest, consume, import and export.
B) an autonomous change in expenditure causes an induced change in consumption expenditure.
C) of government stabilization policies.
D) of income taxes.
The expenditure multiplier equals
A) APC - APS where APC is the average propensity to consume and APS is the average propensity to save.
B) 1/(1 - slope of AE curve).
C) MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume.
D) 1/(slope of AE curve).
Fiscal policy includes
A) only decisions related to government expenditure on goods and services.
B) only decisions related to government expenditure on goods and services and the value of transfer payments.
C) only decisions related to the value of transfer payments and tax revenue.
D) decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.
A government that currently has a budget deficit can balance its budget by .
A) increasing tax revenues by more than it increases outlays
B) increasing both tax revenues and outlays by the same amount
C) decreasing tax revenues by more than it decreases outlays
D) decreasing tax revenues by more than it increases outlays
Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full-employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the government's fiscal policy,
A) aggregate demand will increase.
B) an equilibrium with real GDP less than potential GDP will occur.
C) potential GDP decreases.
D) None of the above answers is correct.
Monetary policy goals include
I. maximum employment.
II. stable prices
III. moderate long-term interest rates.
A) I only.
B) II only.
C) I and II only.
D) I, II, and III.
If a central bank wants to implement a contractionary policy that decreases real GDP, it will conduct an open market operation by securities. Bank reserves will and bank lending will leading to a in the quantity of money.
A) selling; decrease; decrease; decrease
B) purchasing; decrease; decrease; decrease
C) purchasing; decrease; increase; decrease
D) selling; increase; increase; increase
A country has a comparative advantage in the production of a good if it can
A) produce more of the good than another country.
B) produce more of the good most efficiently.
C) produce the good at the lowest opportunity cost.
D) trade off producing the good for another.
Quotas
A) are the same as tariffs.
B) set the number of units of a good that can be imported.
C) are not used by Namibia.
D) set the minimum percentage of the value of a product that must consist of imported components.
Question Two
Assume an economy that is producing only one product and that year 2012 is the base year. Output and price data for a five-year period are as follows. Answer the next question(s) on the basis of these data.
|
Year
|
Units of Output
|
Price per Unit (N$)
|
|
2010
|
300
|
30
|
|
2011
|
400
|
40
|
|
2012
|
600
|
50
|
|
2013
|
700
|
70
|
|
2014
|
800
|
80
|
Calculate the nominal GDP for each year,
Calculate the real GDP for each year,
Calculate GDP deflator for each year,
Calculate economic growth for each year,
Question Three
Given the information in the table calculate the following:
Calculate the total-spending function and equilibrium income. Illustrate this on a graph.
Indicate on the graph the effect of an N$300 million increase in investment spending and comment on the magnitude of change in the equilibrium income relative to the change in investment spending. Calculate the new equilibrium income.
Assume the marginal tax changes to t = 0,35Y. How will this change influence the total spending curve? Illustrate this on your graph.
Question Four
Given the information in the table calculate the following:
|
Year
|
CPI
|
|
2009
|
130
|
|
2010
|
145
|
|
2011
|
134
|
|
2012
|
176
|
|
2013
|
180
|
|
2014
|
150
|
4.1 Calculate the inflation rate for each year.