Masaryk University - Brno
Department of Economics – Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
BPE_MAC1 Macroeconomics 1 – Spring Semester 2011
1
Tutorial Session 1, 04.03.2011, 11:05-11:50 a.m.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. In the circular flow model, for every flow of goods, services, and resources there is a counter-flow of
a. more goods, services, and resources.
b. people from firms to households.
c. people from households to firms.
d. money.
____ 2. In producing a sweater, a man who shears sheep pays a farmer €4 for a sheep’s wool. The shearing shop
sells the wool to a knitting mill for €7. The knitting mill buys the wool and makes it into a fine fabric and
sells it to a sweater-making firm for €13. The sweater-making firm sells the sweater to a clothing store for
€20, and the clothing store sells the sweater, gift wrapped, for €50. What is the contribution to GDP of
the previous sales transactions?
a. €4
b. €44
c. €50
d. €94
____ 3. Which of the following would be counted in France’s GDP?
a. The purchase of an historic chateau
b. The purchase of a haircut
c. The purchase of a €1,000 government savings bond
d. The value generated when Pierre washes his car in his garden
____ 4. If private investment increased by €50 billion while GDP remained the same, which of the following
could have occurred, all else being the same?
a. Consumption spending decreased by €50 billion.
b. Exports increased by €50 billion.
c. Imports decreased by €50 billion.
d. Net exports increased by €50 billion.
____ 5. Assume net exports are €-220, consumption is €5,000, tax revenues are €1,000, government purchases are
€1,500, and 2005 GDP, calculated by the expenditures approach, is €8,000. We can conclude that
a. private investment was €1,940.
b. public investment was €310.
c. private investment was €320.
d. private investment was €1,720.
____ 6. Real GDP is nominal GDP
a. plus depreciation.
b. adjusted for changes in the price level.
c. minus depreciation.
d. minus taxes.
Masaryk University - Brno, Department of Economics - Faculty of Economics and Administration
Lipová 507/41a, Pisárky, Brno
2
____ 7. Which of the following would be most likely to cause GDP to overstate the actual output produced in a
year?
a. increased production in the underground economy
b. a decline in the quality of goods and services produced
c. increased production for home use (non-market production)
d. a decline in population
____ 8. Suppose that population grows by 2 per cent. For the standard of living to rise, which of the following
must occur?
a. Nominal GDP must grow by more than 2 per cent.
b. Real GDP must grow by more than 2 per cent.
c. Real GDP per capita must grow by more than 2 per cent.
d. consumption spending must grow by more than 2 per cent.
____ 9. During recessions, GDP falls and unemployment increases. Why might the actual output produced not
fall as much as officially measured GDP during a recession?
a. There is an increase in involuntary part-time employment, the output from which is not
accounted for in GDP.
b. Workers who became unemployed during the recession may produce goods in the
underground economy.
c. Unemployment benefits to laid-off workers will allow them to purchase nearly as much
output as before.
d. Laid off workers may start their own businesses, but profit income from self-employment
is not accounted for in GDP.
____ 10. Which of the following is a problem with the measurement of GDP?
a. Transfer payments are not included.
b. Production in the underground economy is not counted.
c. Non-market production is not counted.
d. Both b and c are correct.
ID: A
1
Tutorial Session 1, 04.03.2011, 11:05-11:50 a.m.
Answer Section
MULTIPLE CHOICE
1. ANS: D
money.
PTS: 1
2. ANS: C
€50
PTS: 1
3. ANS: B
The purchase of a haircut
PTS: 1
4. ANS: A
Consumption spending decreased by €50 billion.
PTS: 1
5. ANS: D
private investment was €1,720.
PTS: 1
6. ANS: B
adjusted for changes in the price level.
PTS: 1
7. ANS: B
a decline in the quality of goods and services produced
PTS: 1
8. ANS: B
Real GDP must grow by more than 2 per cent.
PTS: 1
9. ANS: B
Workers who became unemployed during the recession may produce goods in the underground economy.
PTS: 1
10. ANS: D
Both b and c are correct.
PTS: 1