EMBA Macroeconomics, Practice MCQs 1st quiz

1. Identify which of the following variables are stocks and which flows
i. Money supply; ii. imports iii. bank loan; iv. inventories; v. wealth; vi. population.
a. ii, iii, and v are flows.
b. ii, iv and vi are stocks
c. i, ii and v are flows
d. All variables are stocks except for ii.
2. Which of the following is the correct definition of GDP?
a. The value of all intermediate goods and services produced for the marketplace during a
given time period within a country's borders.
b. The value of all final goods and services produced for the marketplace during a
given time period within a country's borders.
c. The value added by all final goods and services produced for the marketplace during a
given time period within a country's borders.
d. The value of all final goods and services produced by a country’s nationals during a
given time period within a country's borders.
Answer questions 3 and 4 based on the following information
Robotland is a country which has no government and no interaction with the rest of the world. It produces only
two goods: (i) Screws which are used as intermediate goods by car firms and also final consumer goods by
Robot households; and (ii) Cars which are a capital good for firms and also a consumer good for households.
Cars are perfectly durable and do not depreciate. The table below gives industry-wise figures for Robotland for
2088 AD.
Production in Robotland in 2088 AD (All figures are in 1000s of Robotland $)
Industry Gross Value of Sales To Sales to Increase in Wages, Rent,
Output Households Firms Inventories Interest Paid
Screws 200 100 100 -- 100
Cars 300 150 150 20 80
Note that, as a general rule, cash outlays by firms on investment goods are not counted as a current cost of
production of firms.

3. Calculate Robotland’s GDP in 2088 by the expenditure method and also the value of its
components. Robotland’s GDP and its components are:
a. GDP = 500, C =200, I = 300
b. GDP = 420, C=250, I = 170
c. GDP = 420, Value of Cars = 220, Value of Screws = 200
d. None of the above
4. Suppose that prices of Screws and Cars were $20 and $2000 per unit respectively in 2088 AD.
Assume that in 2089 AD the price and quantity of screws was 20% higher than in 2088 and
 that of cars was 10% higher compared to 2088. Calculate the GDP deflator for 2089 (round
off all fractions and consider only integer values). The GDP deflator is
a. 1.142
b. 114.2
c. 114
d. 1
5. Which of the following is not an identity in the Keynesian Cross model of a closed economy?
a. Leakages = injections
b. actual savings + taxes = government expenditure + actual investment
c. Income (or GDP) = Planned expenditure
d. Consumption expenditure = Disposable income minus savings
6. In a Keynesian Cross model of a closed economy, C = 100+0.8(Y-T), I0 = G0 = T0 = 100,
where C, I and G are Consumption, Investment and Government expenditure, Y = Income or
GDP and T = taxes.
a. The income multiplier with respect to increased government expenditure is 5.
b. The consumption multiplier with respect to increased government expenditure is 4.5.
c. The balanced budget multiplier for consumption is 1
d. The income multiplier with respect to increased taxes is (-)4.5.
e. Both (b) and (d)
7. In a Keynesian Cross model of a closed economy with exogenous government spending, taxes
and planned expenditure and consumption expenditure linearly related to disposable income,
an increase in the marginal propensity to consume will
a. Cause equilibrium consumption expenditure to increase and equilibrium savings to also
increase.
b. Cause equilibrium consumption expenditure to increase and equilibrium savings to
decrease.
c. Cause equilibrium consumption expenditure to increase without changing
equilibrium savings.
d. Either (a), (b) or (c) can be true depending on the numerical values of the model.