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MCQ TUT 2

Which one of the following does NOT represent a key macroeconomic variable?

A. The unemployment rate.


B. The inflation rate.
C. Gross Domestic Product (GDP).
D. Income distribution.
E. The population growth rate.
If we were to add up the value of output of all firms in the economy, we would:

A. obtain GDP at factor cost.

B. obtain GDP at market prices.

C. obtain GDP using the income method.

D. overestimate the value of production taking place in the economy.


underestimate the value of production taking place in the economy

Questions (a) and (b) are based on the table below, which describes the process by which a loaf of
bread is made available to a consumer as a final good.

Price (R) of a

loaf of bread

Farmer sells wheat to miller 5,00


Miller sells flour to baker 6,00
Baker sells bread to grocer 10,00
Grocer sells bread to consumer 12,00

Question (a)
The total value of a loaf of bread is:

A. R7,00
B. R12,00
C. R4,00
D. R33,00
E. R10,00

Question (b)
The value added by the grocer equals:

A. R12,00
B. R10,00
C. R2,00
D. R5,00
E. R4,00
Nominal GDP calculated at market prices differs from nominal GDP at factor cost. Which of the
following items would account for the difference?

A. Depreciation on capital equipment.


B. Inflation.
C. Interest on loans.
D. Indirect taxes and subsidies.
E. Net incomes from abroad.

GDP at ________ prices will usually be greater than GDP at ________ prices because of ________.

A. constant; current; inflation


B. current; constant; inflation
C. constant; current; depreciation
D. current; constant; depreciation
current; constant; deflation

If South Africas GDP is greater than its GNI, then the income earned by foreign investors and foreign
workers in South Africa is ________ the income earned by South Africans who have invested, or who
are working, abroad.

A. greater than
B. added to
C. subtracted from
D. less than
E. deflated by
To derive GDP at market prices from Gross Domestic Expenditure, we must:

A. subtract spending on exports and add spending on imports.


B. subtract spending on imports and add spending on exports .
C. subtract spending on intermediate goods and add spending on exports.
D. subtract spending on exports and add spending on intermediate goods.
subtract spending on net exports

Consumption expenditure 10 500


Government expenditure 3 000
Depreciation 500
Exports 1 200
Imports 1 000
Gross capital formation (investment) 2 200
The value of Gross Domestic Expenditure is:

A. 15 900
B. 15 200
C. 15 400
D. 18 400
E. 15 700
In a country with a population of 50 million people, there are 20 million children under the age of 15
years, 16 million employed, 9 million pensioners, 4 million unemployed and 1 million people who are
physically unable to work. The unemployment rate in this country equals:

A. 8%
B. 10%
C. 13,3%
D. 20%
E. 25%
The inflation rate is measured by:

A. the ratio of current year CPI to base year CPI.


B. the percentage change in the CPI from one year to the next.
C. the percentage change in GDP from one year to the next.
D. the ratio of current year CPI to the next years CPI.
the ratio of current year PPI to the next years PPI

The current account of the balance of payments records:

A. all sales and purchases of goods and services as well as income flows to and from the rest
of the world.
B. the value of exports, but not imports.
C. the change in the countrys gold reserves.
D. all purely financial flows in and out of the country.
E. all of the above.

Discussion Questions

Explain briefly what the national accounts are

Who compiles the South African national accounts?

Define gross domestic product (GDP) and briefly explain the significance of each element of the
definition

Mention two ways in which the national accountants try to avoid double counting.

List and briefly explain the three different approaches to estimating total production and income in
the economy
Briefly explain the differences between measurement at market prices, basic prices and factor cost
(or income)

Explain the difference between nominal values and real values. How does this relate to purchasing
power?

Explain the difference between gross national income (GNI) and gross domestic product (GDP).

Explain the difference between expenditure on gross domestic product (GDP) and gross domestic
expenditure (GDE).

How is the unemployment rate estimated?

Define the consumer price index (CPI).

List the five basic steps in constructing the CPI.

Explain, in simple terms, what the balance of payments means

How is the trade balance calculated?

List and briefly explain three possible measures of the equality or inequality of the distribution of
income

List and briefly explain the key elements of the financial account of the balance of payments

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