Here are 15 multiple-choice questions (MCQs) based on the provided content, along with their answers:
1. Which of the following is not a goal of macroeconomics?
a) High economic growth
b) Price stability
c) High personal consumption
d) Fair distribution of income
Answer: c) High personal consumption
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2. Gross Domestic Product (GDP) measures the total value of:
a) All goods and services produced by nationals, regardless of location
b) Only intermediate goods produced domestically
c) Final goods and services produced within a country
d) Goods and services produced abroad but consumed domestically
Answer: c) Final goods and services produced within a country
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3. Which of the following statements is true about Gross National Product (GNP)?
a) GNP includes the value of goods produced domestically by foreign entities
b) GNP is always greater than GDP
c) GNP is the total value of goods and services produced by domestically owned factors of production
d) GNP excludes net factor income from abroad
Answer: c) GNP is the total value of goods and services produced by domestically owned factors of
production
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4. In the product/value added approach of GDP calculation, which of the following is not included?
a) Intermediate goods
b) Final goods
c) Market values of goods
d) Services provided within the country
Answer: a) Intermediate goods
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5. Which of the following formulas is correct for calculating GDP?
a) GDP = GNP - NFI
b) GDP = Personal Income - Net Exports
c) GDP = C + I + G + (X - M)
d) GDP = Total income earned by households minus taxes paid to the government
Answer: c) GDP = C + I + G + (X - M)
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6. What does Net Factor Income (NFI) represent?
a) The difference between personal income and personal taxes
b) The income received from foreign investments minus income paid to foreign investors
c) Government expenditure on goods and services
d) Total domestic consumption minus imports
Answer: b) The income received from foreign investments minus income paid to foreign investors
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7. Which of the following best explains Gross Private Domestic Investment?
a) Spending of households on final consumption goods
b) Government expenditure on education and healthcare
c) Spending of firms on plants, equipment, and inventories
d) Net export of goods and services
Answer: c) Spending of firms on plants, equipment, and inventories
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8. What component is excluded from GDP when using the income approach?
a) Depreciation
b) Corporate profits
c) Transfer payments
d) Rental income
Answer: c) Transfer payments
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9. If GNP is higher than GDP, what can be said about NFI?
a) NFI is positive
b) NFI is negative
c) NFI is zero
d) GDP is incorrectly calculated
Answer: a) NFI is positive
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10. Which of the following represents personal disposable income (PDI)?
a) PI - Personal taxes
b) PI + Personal savings
c) GDP - Corporate profits
d) GNP + Subsidies
Answer: a) PI - Personal taxes
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11. Which of the following is an example of an intermediate good?
a) A car purchased by a household
b) Tires sold to an automobile manufacturer
c) A refrigerator purchased by a company
d) Services provided by a bank to customers
Answer: b) Tires sold to an automobile manufacturer
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12. Which of the following is a limitation of GDP measurement?
a) It includes transfer payments
b) It measures improvements in quality of goods over time
c) It ignores the underground economy
d) It considers only the political boundaries of a country
Answer: c) It ignores the underground economy
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13. Which of the following correctly represents the relationship between GNP, GDP, and NFI?
a) GNP = GDP + NFI
b) GNP = GDP - NFI
c) GNP = GDP / NFI
d) GNP = GDP + Transfer Payments
Answer: a) GNP = GDP + NFI
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14. National Income (NI) is calculated by subtracting which of the following from Net National Product
(NNP)?
a) Corporate profits
b) Personal taxes
c) Indirect business taxes
d) Social security contributions
Answer: c) Indirect business taxes
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15. What is the term for income earned by persons or households?
a) National Income (NI)
b) Gross National Product (GNP)
c) Personal Income (PI)
d) Personal Disposable Income (PDI)
Answer: c) Personal Income (PI)
Here are 15 multiple-choice questions based on the information you provided, along with their answers:
1. Which of the following is subtracted from Gross National Product (GNP) to calculate Net National
Product (NNP)?
A. Social security contributions
B. Capital consumption allowance
C. Indirect business taxes
D. Personal taxes
Answer: B. Capital consumption allowance
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2. National Income (NI) is calculated by subtracting which of the following from Net National Product
(NNP)?
A. Corporate income tax
B. Personal savings
C. Indirect business tax
D. Retained corporate profit
Answer: C. Indirect business tax
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3. Personal Income (PI) does not include which of the following?
A. Corporate income tax
B. Retained corporate profits
C. Social security contributions
D. Transfer payments
Answer: B. Retained corporate profits
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4. What is the formula for calculating Personal Disposable Income (PDI)?
A. PI - Personal taxes
B. NI - Indirect business tax
C. NI - Capital consumption allowance
D. PI + Personal taxes
Answer: A. PI - Personal taxes
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5. The difference between nominal GDP and real GDP is primarily due to:
A. Inflation adjustments
B. Changes in the quantity of goods produced
C. Depreciation
D. Government subsidies
Answer: A. Inflation adjustments
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6. In the year 2018, the nominal GDP of a country was $1,500, and the real GDP (using 2017 as the base
year) was $625. What was the GDP deflator for 2018?
A. 100
B. 200
C. 240
D. 150
Answer: C. 240
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7. The Consumer Price Index (CPI) measures the:
A. Change in prices of all goods produced domestically
B. Change in prices of imported goods
C. Average change in prices of a basket of goods purchased by consumers
D. Change in government expenditure
Answer: C. Average change in prices of a basket of goods purchased by consumers
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8. One key difference between CPI and GDP deflator is that:
A. CPI includes imported goods
B. GDP deflator includes a fixed basket of goods
C. CPI measures prices of all goods and services produced
D. GDP deflator does not include government spending
Answer: A. CPI includes imported goods
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9. The highest point in the business cycle is referred to as:
A. Trough
B. Recession
C. Peak
D. Expansion
Answer: C. Peak
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10. Which of the following phases of the business cycle is characterized by low output and high
unemployment?
A. Boom
B. Peak
C. Expansion
D. Trough
Answer: D. Trough
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11. A brief period of unemployment due to people voluntarily switching jobs is called:
A. Cyclical unemployment
B. Structural unemployment
C. Frictional unemployment
D. Seasonal unemployment
Answer: C. Frictional unemployment
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12. Unemployment caused by a mismatch between job seekers' skills and the skills required for available
jobs is known as:
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment
Answer: B. Structural unemployment
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13. The unemployment that occurs during a recession due to a decrease in demand is called:
A. Cyclical unemployment
B. Frictional unemployment
C. Structural unemployment
D. Seasonal unemployment
Answer: A. Cyclical unemployment
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14. Which of the following is included in the natural rate of unemployment?
A. Cyclical unemployment
B. Frictional unemployment
C. Cyclical and structural unemployment
D. All types of unemployment
Answer: B. Frictional unemployment
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15. When the economy is at full employment, the unemployment rate is equal to:
A. Zero unemployment
B. Structural unemployment
C. Natural rate of unemployment
D. Cyclical unemployment
Answer: C. Natural rate of unemployment
Here are 15 multiple choice questions based on the information provided:
Inflation
1. Which of the following is a correct definition of inflation?
A) A one-time increase in the price of a specific good.
B) A sustained increase in the general price levels of commodities.
C) A decrease in the overall demand for goods and services.
D) An increase in the value of money over time.
Answer: B) A sustained increase in the general price levels of commodities.
2. What is the formula for calculating the rate of inflation?
A) * 100
B) * 100
C) * 100
D) * 100
Answer: A) * 100
3. Which of the following causes "demand-pull" inflation?
A) An increase in the cost of production.
B) A rapid increase in demand for goods and services that exceeds supply.
C) A reduction in aggregate demand.
D) A decrease in wages.
Answer: B) A rapid increase in demand for goods and services that exceeds supply.
4. Which of the following is an example of cost-push inflation?
A) Increased consumer spending.
B) Lower interest rates.
C) Increase in the cost of wages or inputs.
D) A fall in aggregate demand.
Answer: C) Increase in the cost of wages or inputs.
5. What does the Fisher equation state?
A) I = r + П
B) I = r - П
C) I = r * П
D) I = r/П
Answer: A) I = r + П
Trade Deficit and Budget Deficit
6. A budget deficit occurs when:
A) Government revenue exceeds spending.
B) Government spending exceeds revenue.
C) Exports exceed imports.
D) Imports exceed exports.
Answer: B) Government spending exceeds revenue.
7. Which of the following best describes the trade deficit?
A) When a country exports more than it imports.
B) When a country imports more than it exports.
C) When government spending is greater than tax revenue.
D) When government borrowing increases.
Answer: B) When a country imports more than it exports.
8. Which of the following is NOT a consequence of inflation?
A) Reduction in the real value of money.
B) Lower nominal interest rates.
C) Higher nominal interest rates.
D) Redistribution of wealth between debtors and creditors.
Answer: B) Lower nominal interest rates.
9. What is the relationship between savings, investment, and the trade balance?
A) S − I = NX
B) S + I = NX
C) S = NX + I
D) NX − S = I
Answer: A) S − I = NX
10. Which of the following is TRUE about a trade surplus?
A) It occurs when the value of imports exceeds the value of exports.
B) It occurs when the value of exports exceeds the value of imports.
C) It occurs when savings exceed investment.
D) It occurs when investment exceeds savings.
Answer: B) It occurs when the value of exports exceeds the value of imports.
Macroeconomic Policy Instruments
11. Monetary policy primarily involves:
A) Controlling taxes and government spending.
B) Managing money supply, lending rates, and interest rates.
C) Increasing aggregate demand through public works.
D) Influencing trade policies with other nations.
Answer: B) Managing money supply, lending rates, and interest rates.
12. Which of the following is a function of fiscal policy?
A) Setting interest rates.
B) Regulating the money supply.
C) Managing government spending, taxation, and borrowing.
D) Reducing inflation by controlling prices.
Answer: C) Managing government spending, taxation, and borrowing.
13. Which of the following fiscal policy functions aims at stabilizing economic growth?
A) Distribution
B) Allocation
C) Stabilization
D) Development
Answer: C) Stabilization
14. Which principle of the tax policies in Ethiopia aims at discouraging the consumption of substances
hazardous to health?
A) Promoting saving and investment.
B) Introducing taxes that enhance economic growth.
C) Introducing taxes that help implement social policies.
D) Ensuring a modern and efficient tax system.
Answer: C) Introducing taxes that help implement social policies.
15. Which of the following is the main goal of development under fiscal policy?
A) Stabilizing the national currency.
B) Increasing external borrowing.
C) Promoting public goods and correcting market distortions.
D) Enhancing foreign exchange reserves.
Answer: C) Promoting public goods and correcting market distortions.
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These questions cover key concepts related to national income accounting, GDP, the business cycle,
unemployment, and price indices.
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