Chapter 15 Self-test questions

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An economy is made up of three firms. Firm A mines a raw material, it pays £200 to its workers and it sells £200 worth of output to firm B and £300 worth to firm C (it has no other sales or costs). Firm B makes a consumer good and sells £400 worth, paying £200 to its workers. Firm C also makes a consumer good, selling £600 worth and paying its workers £200. There are no transactions between firms B and C. What is the value of GDP?

£1200 correct incorrect

£800 correct incorrect

£1000 correct incorrect

£700 correct incorrect

£2000 correct incorrect

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The income-based measure of GDP at market prices is made up of:

Gross value added of companies, plus net income from overseas. correct incorrect

Wages, plus dividends, plus profits, plus income taxes. correct incorrect

Operating surplus, compensation of employees and mixed incomes correct incorrect

Personal disposable income, plus profits of companies correct incorrect

Company gross revenue, plus household gross income correct incorrect

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The following are all macroeconomic issues except

Business cycles correct incorrect

Growth in the manufacturing sector correct incorrect

Economic Growth correct incorrect

Inflation correct incorrect

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A difference between microeconomics and macroeconomics is ____________

Microeconomics considers individual consumers but macroeconomics looks at the household correct incorrect

Microeconomics is interested in individual markets for goods but macroeconomics deals with aggregations of markets like total consumption correct incorrect

Both (a) and (b) correct incorrect

Neither (a) nor (b) correct incorrect

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In the UK, the two standard measures of the price level are _______

Retail price index and consumer price index correct incorrect

Deficit and inflation correct incorrect

GDP multiplier and implicit deflator correct incorrect

Inflation and interest rates correct incorrect

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A budget deficit implies ____________.

deflation correct incorrect

A reduction in the national debt correct incorrect

The government is broke correct incorrect

The government's expenditure exceeds its revenue correct incorrect

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During recessions; deficits usually ____________.

increase correct incorrect

fall correct incorrect

Turn to surplus correct incorrect

None of the above correct incorrect

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When interest rates are high, ____________

There is likely to be a tight monetary policy in operation correct incorrect

Investments from firms will likely drop correct incorrect

Aggregate demand in the economy falls correct incorrect

All of the above correct incorrect

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Productivity growth indicates ____________

high interest rates correct incorrect

Increase in output from the same level of inputs correct incorrect

Increase in inputs leading to greater output correct incorrect

Increase in inputs but not output correct incorrect

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Actual GDP minus Potential GDP gives

GDP per capita correct incorrect

surplus correct incorrect

GDP gap correct incorrect

deficit correct incorrect