test macro

Macroeconomics Test
Time Allotted: 1:10
Total Mark: 20%
Part One: choose Test I (1% each)
1. Which school of thought argue in favor of government intervention in the economy
a) Classicals.
b) Keynesians.
c) Neo-classicals.
d) None of the above
2. Physiocrats argue that economic growth in the country is the result of
a) Agriculture
b) Industrial revolution
c) Service sector
d) Trade
3. Identify the odd one
a) Gross domestic product is not a measure of the nation’s economic well-being
b) GDP includes goods and services currently produced
c) GDP includes only the value of final goods since the value of intermediate goods
is already included in the prices of the final goods
d) Items are included in a nation’s GDP if they are produced domestically,
regardless of the nationality of the producer
e) None of the above
4. According to classical inflation is the result of
a) Increase in nominal wage
b) Increase(excess) in money supply
c) Increase in interest rate
d) A and B are answers
e) None of the above.
5. ………. is the market value of all final goods and services measured using current price.
a) Nominal GDP
c) Real GDP
b) GDP deflator
d) Consumer price index
6. It is an official measurement of the flow of income and product in a given economy
a) National income accounting
b) Net factor income
c) Circular flow of income
d) None of the above
7. It is a market in which households spends their income earned in the factor market on
goods and services produced by firms
a) Factor market
c) product market
b) Money market
d) all of the above are answers
8. It is the more or less regular pattern of economic activity around the path of trend
a) Business law
c) okun’s law
b) Recovery period
d) contractionary period
e) Business cycle
9. Which sources of inflation predicted that different factors which increase cost of
production (increases price of input) and other structural bottle neck cause firms to
reduce the supply of goods and services below existing demand and resulted in inflation.
a. Cost push inflation
c. supply side inflation
b. Demand pull inflation
d. demand side inflation
e. A and C are answers
10. ………………. arises due to technological change in economy and wage rigidity
a. Frictional unemployment
b. Structural unemployment
c. Cyclical unemployment
d. Disguised unemployment
Part two: discussion
1. Clearly explain the basic difference between Real GDP and Nominal GDP? (2%)
2. Briefly explain the difference between Keynesians and classical school of thought? (2%)
3. List and explain the Economic cost (burdens) of inflation? (2%)
Part Three: Work out (4%)
1. Consider an economy that produces and consumes bread and automobiles. In the
following table are data for two different years
Price of
Quantity of
Price of
Quantity of bread
50,000 birr
10 birr
60,000 birr
20 birr
a. Using the year 2000 as the base year, compute the following
1. Nominal GDP for 2000 and 2010?
2. Real GDP for 2010?
3. GDP (GDP deflator) for 2010?
b. How much have prices risen between year 2000 and year 2010?