University of the Witwatersrand
School of Economic and Business Sciences
Economics 1B (ECON1014/15)
Macroeconomics, Test 1 Semester 1
Date: 28 March 2023
Duration: 60 minutes + 5 minutes reading time
Question paper to be handed out when all students are seated, cover page (page 1) face-up. Students
may not read any of the questions until the chief invigilator announces the start of the test.
Please carefully read the instructions on the following page!
Instructions
1.
The test consists of 20 MCQs
2.
You get 5 marks for a correct MCQ answer and 0 marks for not answering the question or
incorrectly answering the question.
3.
In deciding how long to spend on each MCQ question, consider the mark allocation as a
rough guide: 5 marks = 3 minutes.
4.
I suggest that you read through the entire paper and complete the questions you think are
easy before attempting the questions which you think are difficult.
5.
If you make a mistake on your MCQ card do not erase it. Ask for a new MCQ card. Erasing
can cause errors in the MCQ card marking process. Any errors due to an erased answer will
not be corrected for.
6.
On the MCQ card please make sure that your student number is filled in at the appropriate
section (bottom left box).
7.
Please start at Number 1 on the MCQ card and not at 101!
8.
Good luck!
Eg: 1 2 3 4 5 6 7
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MULTIPLE CHOICE QUESTIONS
1. Suppose that nominal GDP is R5,000 billion in Year 1 and R5,885 billion in Year 2. Suppose
further that CPI is 110 in Year 2. Which of the following options is correct if Year 1 is the base
year? (Round off if necessary)
A. Output has decreased by 10%.
B. Output has increased by 7%.
C. The change in output is uncertain.
D. Output increased by 4%.
2. GDP can be measured by the
A. total value of all intermediate goods produced in the economy.
B. net national product plus investment.
C. total value of all sales in the economy.
D. total market value of final goods and services produced in the economy.
3. Use the following table to answer the question below.
Compensation of employees
Net interest
Rental income
Dividends
Proprietor's income
Indirect taxes
Subsidies
Depreciation
2,500
-50
10
-100
3,000
400
50
510
Using the income approach, GDP is:
A. 5,360.
B. 5,710.
C. 6,220.
D. 6,521.
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4. Which one of the following is considered to be an unemployed person (using the narrow
definition of unemployment)?
A. A school leaver with a Matriculant certificate going to study full time for the year.
B. A mother choosing part-time work.
C. A person who is not working but is planning to start a business in the four weeks
preceding the survey interview.
D. A person who has taken early retirement at the age of 60.
5. A sudden unexpected deflation will most likely result in:
A. workers being worse off due to lower nominal wages earned.
B. lenders increasing their purchasing power from the loan repayment.
C. A permanently higher level of potential GDP.
D. higher usage of scarce resources.
Use the following information to answer questions 6 and 7.
Total population
People younger than 16 and older than 65
People aged 16–65 who are not part of the labour force
Discouraged work seekers
Employed
Unemployed
43,900
7,480
15,030
5,000
10,670
5,720
6. What is the participation rate? (Round off if necessary.)
A. 76.62%.
B. 52.16%.
C. 24.31%.
D. 34.9%.
7. What is the unemployment rate according to the broad definition? (Round off if necessary.)
A. 28.2%.
B. 50.1.
C. 38.1%.
D. 65.41%.
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Use the following information to answer questions 8 and 9.
Item
Magazines
Movie tickets
Pizzas
Quantity
(2013)
40
50
10
Price (2013)
R50
R60
R100
Quantity
(2014)
45
20
12
Price (2014)
R45
R80
R105
The year 2013 is the reference and base period.
8. Based on the table above, the cost of the CPI basket in 2013 is
A. R 6,850.
B. R 6,000.
C. R4,650.
D. 17,550.
9. Based on the table above, the CPI for 2014 is (round off if necessary):
A. 77.5.
B. 100.
C. 107.5.
D. 114.17.
10. To measure the change in the standard of living, it is best to use the growth rate
A. from the Rule of 70.
B. of the population.
C. of real GDP per person.
D. of the price level.
11. The production function is a relationship between the amount of labour employed and
A. the wage rate paid to the workers.
B. all other resources at different levels of employment.
C. the maximum quantity of nominal GDP that can be produced.
D. the maximum quantity of real GDP that can be produced.
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12. A decrease in the number of officially recognised holidays in a country results in a
A. rightward shift of the labour supply curve and a shift in the production function.
B. leftward shift of the labour demand curve.
C. leftward shift in the labour supply curve and a movement along the production function.
D. rightward shift of the labour supply curve and a movement along the production
function.
Use the diagram below to answer question 13.
Real GDP
D
E
PF1
PF0
C
B
A
Labour
13. What is most likely to have caused a movement from D to E?
A. An increase in the number of working-age South Africans emigrating to other countries.
B. A decrease in the stock of capital after a natural disaster.
C. Eskom’s load-shedding results in grid failure and all businesses without backup power
are forced to shut down for months.
D. A and B are correct.
14. Which one of the following statements suggests an upward shift in the aggregate production
function?
A. By providing faster computers, firms increase labour productivity.
B. Workers work more hours due to higher demand for goods and services.
C. The working-age population decreases.
D. Continuous load-shedding prevents workers from completing a full day’s work.
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15. Use the following information to answer the question below.
Year
Real GDP (Rands)
2021 (Base
Year)
5,000
2022
2023
8,000
9,000
The growth rate of real GDP for 2023 is (round if necessary):
A. 11.11%.
B. 12.5%.
C. 37.5%.
D. 80%.
16. Suppose that there is persistently high inflation over the next few years. Assume that there are
no changes in the nominal interest rate. Which one of the following statements is correct?
A. Firms decrease demand for loanable funds.
B. Firms decrease the supply of loanable funds.
C. Firms increase the quantity demanded for loanable funds.
D. Firms increase the supply of loanable funds.
17. Refer to the diagram below, to answer the question that follows:
Real
interest
rate
SLF0
C
SLF1
D
A
B
DLF0
DLF1
Loanable funds
If household wealth falls, we can expect a change from:
A. D to C.
B. A to D.
C. A to B.
D. D to A.
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18. If GDP is 15,000, with a positive trade balance of 800, a government expenditure of 1,100, and
household savings of 1,700, investment of 1,400, taxation is ___.
A. 1,600.
B. 3,000.
C. 800.
D. 13,300.
19. The supply curve for loanable funds will shift to the right if:
(i)
(ii)
(iii)
you win the Lotto.
the value of your investments decreases due to a financial crisis.
you are worried about your job security.
A. Only (ii) is correct.
B. Only (iii) is correct.
C. Only (ii) and (iii) are correct.
D. (i), (ii), and (iii) are correct.
20. Which of the following transactions will be counted as part of this year's GDP?
A. The purchase of Vodacom shares.
B. The value of all unemployment benefits paid to unemployed workers.
C. Buying a 3-month-old car from your uncle.
D. None of the above.
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