Macroeconomics, Masaryk University
Spring 2017
QUIZ 1 06.03.2017
PART I: Multiple Choice Questions [10 points]
1. GDP [1 point]
a. is used to monitor the performance of the overall economy but is not the single best measure of a
society’s economic well-being.
b. is used to monitor the performance of the overall economy and is the single best measure of a
society’s economic well-being.
c. is not used to monitor the performance of the overall economy but is the single best measure of a
society’s economic well-being.
d. is not used to monitor the performance of the overall economy and is not the single best measure of
a society’s economic well-being.
2. For an economy as a whole, [1 point]
a. wages must equal profit.
b. consumption must equal income.
c. income must equal expenditure.
d. consumption must equal saving.
3. Which of the following statements about GDP is correct? [1 point]
a. GDP measures two things at once: the total income of everyone in the economy and the total
expenditure on the economy’s output of goods and services.
b. Money continuously flows from households to firms and then back to households, and GDP measures
this flow of money.
c. GDP is generally regarded as the best single measure of a society’s economic well-being.
d. All of the above are correct.
Macroeconomics, Masaryk University
Spring 2017
4. If an economy’s GDP falls, then it must be the case that the economy’s [1 point]
a. income falls and saving rises.
b. income and saving both fall.
c. income falls and expenditure rises.
d. income and expenditure both fall.
5. In a simple circular-flow diagram, [1 point]
a. households spend all of their income.
b. all goods and services are bought by households.
c. expenditures flow through the markets for goods and services, while income flows through the
markets for the factors of production.
d. All of the above are correct.
6. According to the circular-flow diagram GDP [1 point]
a. can be computed as either the revenue firms receive from the sales of goods and services or the
payments they make to factors of production.
b. can be computed as the revenue firms receive from the sales of goods and services but not as the
payments they make to factors of production.
c. can be computed as payments firms make to factors of production but not as revenues they receive
from the sales of goods and services.
d. cannot be computed as either the revenue firms receive or the payments they make to factors of
production.
7. Suppose that an economy produces 20,000 units of good A which sells at $3 a unit and 40,000 units
of good B which sells at $1 per unit. Production of good A contributes [1 point]
a. 1/3 times as much to GDP as the production of good B.
b. 3/2 times as much to GDP as the production of good B.
c. 3 times as much to GDP as the production of good B.
d. 2/3 times as much to GDP as production of good B.
Macroeconomics, Masaryk University
Spring 2017
8. Which of the following is included in the calculation of GDP? [2 points]
a. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides
within the country.
b. The purchase of a new edition of a foreign textbook that was produced in a different nation.
c. The purchase of ink and paper supplies by a textbook company for the production of new textbooks.
d. The purchase of a used textbook from a friend who took the same class last year.
9. James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives
in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year
in rent. How much do the housing services provided by the two houses contribute to GDP [1 point]
a. $0
b. $10,000
c. $12,000
d. $22,000
Macroeconomics, Masaryk University
Spring 2017
PART II: Miscellaneous [10 points]
1. In the economy of Talikastan in 2015, consumption was 75% of GDP, government purchases
were $200, imports were $50 and 125% of the value of exports, investment was one-sixth of
the value of consumption. What was Talikastan’s GDP in 2015? [2 points]
The table below contains data for the country of Crete for the year 2010.
Total income $5731
Household purchases of durable goods $1108
Household purchases of nondurable goods $702
Household purchases of non-education services $203
Household purchases of education services $302
Household purchases of new housing $816
Purchases of capital equipment $333
Inventory changes $75
Purchases of new structures $267
Depreciation $401
Local government spending on goods and services $236
State government spending on goods and services $419
Federal government spending on goods and services $1182
Transfer payments $707
Foreign purchases of domestically produced goods $217
Domestic purchases of foreign goods $129
2. What was Crete’s GDP in 2010? [2 points]
a. $4623
b. $5731
c. $6037
d. $6839
3. What was Crete’s consumption in 2010? [2 points]
a. $1810
b. $2013
c. $2315
Macroeconomics, Masaryk University
Spring 2017
d. $3131
4. What was Crete’s investment in 2010? [2 points]
a. $675
b. $1090
c. $1491
d. $1793
5. What were Crete’s government purchases in 2010? [2 points]
a. $1130
b. $1601
c. $1837
d. $2544