MID-TERM MACROECONOMICS (HKII – 2023-2024)

1. Goods that go into inventory and are not sold during the current period are:
a) counted as intermediate goods and so are not included in current period GDP.
b) counted in current period GDP only if the firm that produced them sells them to another
firm.
c) included in current period GDP as inventory investment.
d) included in current period GDP as consumption.

2. When an American household purchases a bottle of Italian wine for $100,

a) U.S. consumption does not change, U.S. net exports decrease by $100, and U.S.
GDP decreases by $100.
b) U.S. consumption does not change, U.S. net exports increase by $100, and U.S.
GDP increases by $100.
c) U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S.
GDP does not change.
d) U.S. consumption increases by $100, U.S. net exports do not change, and U.S. GDP
increases by $100.

3. Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of
groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in
2006, then what is the price of the 1970 bag of groceries in 2006 dollars?
a) $5.39
b) $25.00
c) $29.11
d) $37.11

4. Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index
was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is
a) $39,097.74.
b) $43,062.50.
c) $68,900.00.
d) $108,062.50.

5. If the economy is initially at long-run equilibrium and aggregate demand declines, then
in the long run the price level:
a) and output are higher than in the original long-run equilibrium.
b) and output are lower than in the original long-run equilibrium.
c) is lower and output is the same as the original long-run equilibrium.
d) is the same and output is lower than in the original long-run equilibrium.

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6. Refer to Figure 1.1. The shift of the short-run aggregate-supply curve from AS1 to AS2
a) could be caused by an outbreak of war in the Middle East.
b) could be caused by a decrease in the expected price level.
c) causes the economy to experience an increase in the unemployment rate.
d) causes the economy to experience stagflation.

7. Refer to Figure 1.1. Point B represents

a) a short-run equilibrium, and a long-run equilibrium,
b) a short-run equilibrium but not a long-run equilibrium.
c) a long-run equilibrium but not a short-run equilibrium.
d) neither a short-run equilibrium nor a long-run equilibrium.

8. Houscholds' consumption is their expenditure in the. for final goods and services
produced
a) Domestical country, domestically and in abroad
b) Domestical country, domestically
c) Domestical and abroad country, domestically and in abroad
d) Domestical and abroad country, domestically

9. If: S= -200+0.1Yd; T = 100. When Government purchases increase to 200, the output will
increase:
a) 144
b) 2000
c) 288
d) All are wrong

10. Suppose that: AE = 1800 + 0.5Y; T = 0.25Y; I = 400; G = 500; X = 400: M = 0.1Y.
Consumption function is:
a) C = 500 + 0.6Y

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 b) C = -500 + 0.4Y
c) C = 500 + 0.5Y
d) C= -500 + 0.5Y

11. With the data in question 10, marginal propensity to consume is:
a) MPC = 0.6
b) MPC = 0.4
c) MPC = 0.8
d) MPC = 0.2

12. With the data in question 10, the equilibrium output of the economy is:
a) Y = 3600
b) Y = 1250
c) Y = 4000
d) Y = 2500

13. With the data in question 10, the net export is:
a) NX = 40
b) NX= -40
c) NX = 0
d) NX = 150

14. With the data in question 10. From the outcome of question (12), to reach the potential
output Y* = 4000, the government should:
a) Increase their purchase, ∆G = 200
b) Decrease their purchase, ∆G = 200
c) Increase their purchase, ∆G = 750
d) Decrease their purchase, ∆G = 750

15. A professional gambler moves from a state where gambling is illegal to a state where
gambling is legal. Most of his income was, and continues to be, from gambling. His move
a) necessarily raises GDP.
b) necessarily decreases GDP.
c) doesn't change GDP because gambling is never included in GDP.
d) doesn't change GDP because in either case his income is included.

16. Which of the following is included in U.S. GDP?

a) the value of production by an American working in Morocco
b) the value of production by a Moroccan working in the U.S.
c) Both (a) and (b) are correct.
d) Neither (a) nor (b) is correct.

17. Which factor makes the price level to decrease and the output to increase?
a) SRAS curve shifts to the right
b) SRAS curve shifts to the left
c) AD curve shifts to the right

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 d) AD curve shifts to the left

18. If you were a borrower, which option among the following choices would you like to
choose the most:
a) Norminal interest rate is 7% and the inflation rate is 3%
b) Norminal interest rate is 5% and the inflation rate is 0%
c) Norminal interest rate is 8% and the inflation rate is 4%
d) Norminal interest rate is 7% and the inflation rate is 10%

19. In 2007, Corny Company grows and sells $2 million worth of corn to Tasty Cereal
Company, which makes corn flakes. Tasty Cereal Company produces $6 million worth of
corn flakes in 2007, with sales to households during the year of $4.5 million. The unsold
$1.5 million worth of corn flakes remains in Tasty Cereal Company's inventory at the end
of 2007. The transactions just described contribute how much to GDP for 2007?
a) $4.5 million
b) $6 million
c) $6.5 million
d) $8 million

20. In the short run, an increase in government expenditures

a) raises the price level, but not real GDP.
b) raises real GDP, but not the price level.
c) raises real GDP and the price level.
d) raises neither real GDP nor the price level.

21. Which of the following is not a question that macroeconomists address?

a) Why is average income high in some countries while it is low in others?
b) Why does the price of oil rise when war erupts in the Middle East?
c) Why do production and employment expand in some years and contract in others?
d) Why do prices rise rapidly in some periods of time while they are more stable in other
periods?

22. Inputs of the macroeconomies system do not include:

a) Fiscal policy
b) Monetary policy
c) Real GDP
d) a and b are correct

23. The consumer price index is used to

a) Track changes in the level of wholesale prices in the economy
b) Monitor changes in the cost of living
c) Monitor changes in the level of real GDP
d) Track changes in the stock market

24. Which of the following would increase output in the short run?
a) an increase in stock prices makes people feel wealthier

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 b) government spending increases
c) firms chose to purchase more investment goods
d) All of the above are correct.

25. Which of the following would cause stagflation?

a) aggregate demand shifts right
b) aggregate demand shifts left
c) aggregate supply shifts right
d) aggregate supply shifts left

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