ECO401- Economics 9th july page 3

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Question No: 29 ( Marks: 1 ) - Please choose one
If disposable income increases from $5 trillion to $6 trillion and as a result, consumption expenditure increases from $7 trillion to $7.8 trillion, the Marginal Propensity to Consume is:

► 1.0.
► 0.8.
► 5/7 = 0.71.
► 6/7.8 = 0.77.

Question No: 30 ( Marks: 1 ) - Please choose one
The slope of the consumption function (or line) is the:

► Average propensity to save.
► Average propensity to consume.
► Marginal propensity to save.
► Marginal propensity to consume.

Question No: 31 ( Marks: 1 ) - Please choose one
Suppose that your income increases from $100,000 to $150,000 and your consumption increases from $80,000 to $120,000. Your Marginal Propensity to Save (MPS) is:

► 0.2.
► 0.4.
► 0.6.
► 0.8.

Question No: 32 ( Marks: 1 ) - Please choose one
The unemployment rate is equal to:

► Number of employed / labour force x 100.
► Number of unemployed / labour force.
► (Number of unemployed / labour force) x 100.
► None of the given options.

Question No: 33 ( Marks: 1 ) - Please choose one
The traditional Phillips Curve shows the:

► Inverse relationship between the rate of inflation and unemployment rate.
► Inverse relationship between the nominal and real wage.
► Direct relationship between unemployment and demand-pull inflation.
► Tradeoff between the short run and long run.

Question No: 34 ( Marks: 1 ) - Please choose one
Deflation is:

► An increase in the overall level of economic activity.
► An increase in the overall price level.
► A decrease in the overall level of economic activity.
► A decrease in the overall price level.

Question No: 35 ( Marks: 1 ) - Please choose one
Is Grosss Domestic Product (GDP) an accurate measure of a country’s well being?
► Yes, it is the best measure of national well being.
► Yes, provided we use real GDP and not nominal GDP.
► Uncertain, depending on whether GDP is rising or falling.
► No, it is not.

Question No: 36 ( Marks: 1 ) - Please choose one
Real Gross Domestic Product (GDP):

► Is nominal GDP adjusted for changes in the price level.
► Is also called nominal GDP.
► Measures GDP minus depreciation of capital.
► Will always change when prices change.

Question No: 37 ( Marks: 1 ) - Please choose one
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the exogenous model predicts that output will grow and the new steady state will approach:

► A higher output level than before.
► The same output level as before.
► A lower output level than before.
► The Golden Rule output level.

Question No: 38 ( Marks: 1 ) - Please choose one
A currency appreciation:

► Reduces aggregate demand and increases aggregate supply.
► Reduces both aggregate demand and aggregate supply.
► Increases aggregate demand and reduces aggregate supply.
► Increases both aggregate demand and aggregate supply.

Question No: 39 ( Marks: 1 ) - Please choose one
M1 component of money supply consists of:


► Paper currency and coins.
► Paper currency, coins and check writing deposits.
► Paper currency, coins, check writing deposits and savings deposits.
► Paper currency, coins, check writing deposits, savings deposits and certificates of deposits.

Question No: 40 ( Marks: 1 ) - Please choose one
Personal income:

► Is income received by individuals during a given year.
► Is the income individuals have available for spending during a given year.
► Equals national income minus indirect taxes.
► Is the sum of wages plus interest received by individuals during a given year.

Question No: 41 ( Marks: 1 ) - Please choose one
Real Gross National Product (GNP) is best defined as:

► The pound value of all final goods and services produced in the economy during a particular time period and measured in current prices.
► The pound value of all goods produced for final consumption by households in a particular year and measured in constant prices.
► The current pound value of all new and used goods produced and sold in the economy during a particular time period.
► The market value of all final goods and services produced by the economy during a given time period, with prices held constant relative to some base period.

Question No: 42 ( Marks: 1 ) - Please choose one
Which of the following statements describes the difference between nominal and real Gross Domestic Product (GDP)?
► Real GDP includes only goods; nominal GDP includes goods and services.
► Real GDP is measured using constant base-year prices; nominal GDP is measured using current prices.
► Real GDP is equal to nominal GDP less the depreciation of the capital stock.
► Real GDP is equal to nominal GDP multiplied by the CPI.

Question No: 43 ( Marks: 1 ) - Please choose one
If we compare Gross Domestic Product (GDP) with Gross National Product (GNP) then:

► GNP = GDP – Net income from abroad.
► GNP = GDP + Net income from abroad.
► GNP = NNP – Net income from abroad.
► GNP = NNP + Net income from abroad.

Question No: 44 ( Marks: 1 ) - Please choose one
Gross domestic product (GDP) is the market value of:

► All transactions in an economy during one-year period.
► All goods and services exchanged in an economy during one-year period.
► All final goods and services exchanged in an economy during one-year period.

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