Which of the following statements is TRUE of a country’s Gross Domestic Product? (A) It is always smaller than Gross National Product. (B) It is always larger than Net Domestic Product. (C)v* It reflects the total market value of all final goods and services produced in an economy in a given year. Itreflects the total market value of all goods and services purchased in an economy in a given year. (@) In the expression “GDP is the market value”, ‘market value’ means the per unit price of the tax imposed perunitprice of the subsidy granted price at which the inputs’ were purchased (D) price persons are willing to pay for the goods (A) (B) (© Item 3 refers to the following information. Consumption spending Government spending = $500 Investment spending Net export What is the value of aggregate demand? (Ay $1100 (B) $1300 () $1700 (D) $2300 02216010/CAPE 2011 ECA pawl. S$ Expenditure and ‘Savings 4, 9 un iT dP. Item 4 refers to the following diagram which shows the savings function. ‘National Income Which of the following represents the marginal propensity to save? MT (A) = * VT VT ve) our MT O or @ Nt oT The present level of national income is $75 million but the full employment level of national income is $85 million. If the multiplier is 2.5, by how much should government spending be increased in an attempt to raise national income to the desired level? (A) $ 1.6 million (B) $ 2.5 million MO) § 4 million () $10 million GO ON TO THE NEXT PAGE [cane-3- 6. - The consumption function is given as C=a+ bY. In this equation ‘b’ represents (A) autonomous investment (B) autonomous consumption (C) marginal propensity to save ,AD) marginal propensity to consume Item 7 refers to the following diagram which shows the income expenditure model. Aggregate expenditare 7. What does RS represent? (A) Autonomous saving M(B) The inflationary gap (C) The deflationary gap {D) Autonomous investment 8 Which of the following BEST defines ‘real national income"? (A) The actual GDP in any given year (B) _ Themoney value of national income (C) GDP minus net property income from abroad - — AD) ‘National income adjusted for inflation 02216010/CAPE 2011 10. MW. In Country X, the year 2010 is used as'the base year for measuring real GDP. What is the value of the price index in the year 2010? 2) 0 (B) 10 vc) 100 (D) 150 The underground economy may BEST be described as (A) the production of intermediate goods (B) those activities which are heavily taxed (©) economic activities that foster growth VAD) economic activities that are hidden from the government “As wages increase, the number of workers willing to work also increases.” This statement explains why the aggregate supply curve for labour is upward sloping aggregate demand curve for labour is downward sloping equilibrium wage rate is maintained at $5000.00 equilibrium national output is maintained by 20 000 workers (A) VB) © () GO ON TO THE NEXT PAGE.Item 12 refers to the diagrams below showing Equilibrium National Income (¥,)- © ¥ ay AE Aggregate ‘Aseregate Expenditare xpenditare (AE) (ae) Ye Ye Real National Income Real National Income y an ™ ZA AE Aggregate Aceregate Expenditure: Expenditure (AE) oc) Ye Ye Real National Income Real National Income 12. Which of the diagrams above represents a recessionary gap? (A) I AB) re «© um @) wv 13. The classical economists believed that the existence of unemployment had to be voluntary because (A) governments usually step in with measures designed to reduce unemployment (B) _ those persons who are unemployed are so because they refuse to be self-employed - (C) the possibility of emigration allows those persons who cannot find jobs to leave the labou market AD) market forces will always clear the labour market, therefore those persons without job: have chosen to be out of the labour market GO ON TO THE NEXT PAGE 02216010/CAPE 2011