PRACTISE TEST
OLIMPIADE SAINS NASIONAL (ECONOMICS)
C.7.
1. The “net” in the term “net domestic investment” means that:
a. resales of existing capital equipment are not counted
b. investment by foreigners in the US is not counted
c. investment to replace capital that was used up in the production of the year’s output is not counted
d. depreciation must be added to gross investment
2. If gross investment exceed depreciation: a. the nation’s capital stock will expand b. net investment will be negative
c. net investment will exceed gross investment
d. the nation’s capital stock will shrink
3. “The market value of all final goods and services produced within a nation in a given years.” This best describes:
a. Net domestic product b. Gross domestic product c. National income d. Personal income
4. The XYZ Corporation raised $ 50 million in the sale of common stock last year. It spent $ 30 million on new plant and equipment, $ 15 million on replacing equipment that had worn out during the previous year, and $ 5 on a new advertising campaign. XYZ’s:
a. Gross investment was $50 million b. Net investment was $45 million c. Gross investment was $45 million d. Net investment was $35 million
5. ABC Company had net investment of $ 20 million and gross investment of $ 25 million last year while paying $ 3 million in indirect business taxes. Its depreciation last year was: a. $ 17 million c. $ 6 million
b. $ 22 million d. $ 5 million
6. Last year nominal GDP increased by 8% while real GDP increased by 10%. From this, we can conclude that:
a. net investment was positive last year b. the price level increased last year c. the price level decreased last year d. unemployment increased last year
7. Refer to the following diagram
After 1996:
a. the price index is less than 100
b. real GDP is growing faster than nominal GDP
c. the price level is falling d. the price index exceeds 100
8. GDP :
a. includes the value of both market and non market transactions
b. corrects for improved product quality over time
c. corrects for improved productivity that results in increased leisure time
d. does not include transactions conducted “of-the-books”
9. Real GDP is found by:
a. adding depreciation to nominal GDP b. adjusting nominal GDP by the GDP price
index
c. adding up the dollar value of all transactions in the economy in a given year
d. excluding exports and imports from nominal GDP
10. In calculating GDP:
a. both exports and imports are added b. neither exports nor imports are added c. exports are added and imports are
subtracted
d. imports are added and exports are subtracted
income accountants would add gross investment of:
a. $95 billion c. $ 110 billion b. $100 billion d. $ 125 billion
12. In calculating GDP, the value of net exports is : a. included, because exports reflect U.S.
production while imports do not
b. included, because exports reflect U.S. production and imports reflect U.S consumption
c. excluded, because exports reflect a flow of products outside the U.S and imports reflect a flow of money outside the US d. excluded, because neither exports nor
imports reflect U.S consumption
13. Suppose nominal GDP in the base year was $380 billion. Five years later, nominal GDP was $480 and the price deflator was 120. Over those five years, real GDP.
a. increased by $20 billion b. increased by $96 billion c. increased by $80 billion d. did not change
14. In order from largest to smallest, the components of US expenditures are :
a. consumption, net exports, gross investment, government purchases
b. government purchases, gross investment, consumption, net exports
c. consumption, government purchases, gross investment, net exports
d. consumption, government purchases, net exports, gross investment
15. If business firms draw down their inventories this year:
a. net investment will be negative
b. this will have no impact on measured GDP c. the drop in inventory must be subtracted in
measuring GDP
d. the drop in inventory must be added back in measuring GDP
16. The Census Bureau’s Retail Trade Survey is a source of data for which component(s) of GDP?
a. Consumption only b. Investment only c. Net exports only
d. Both consumption and investment
17. In a given year, a country’s exports total $25 billion and its imports are $27 billion. Its net exports are:
a. $52 billion c. $ 2 billion b. $2 billion d. $ 26 billion
18. True or false: GDP can be found either by adding up total expenditures on U.S production or by adding the incomes received by U.S citizens.
a. True b. False
19. True or false: If the GDP price index is 150 and nominal GDP is $600, real GDP is $400.
a. True d. False
20. GDP includes
a. all government spending at all levels b. all government spending at all levels
except the local level
c. government purchases at all levels and federal spending on transfer payments d. government purchases at all levels, which
excludes transfer payments
21. GDP excludes expenditures for: a. additions to inventories b. new housing
c. government purchases of military equipment
d. corporate stock
22. The “G” term in C + Ig + G + Xn includes all of
the following except:
a. state government purchases of new computers
b. social security checks received by retirees c. salaries received by members of the
military
d. local government expenditures for new school construction
23. A nation’s capital stock was valued a $400 billon on January 1st and $420 billion on
December 31st.If consumption of private fixed
capital was $15 billion during the year: a. net investment was $35 billion b. net investment was $5 billion c. gross investment was $20 billion d. gross investment was $35 billion
24. Refer to the following data:
Personal consumption expenditures $ 4500 Gross private domestic investment $ 800 Consumption of fixed capital $ 150 Government purchases $ 950
Exports $ 65
Imports $ 85
Net domestic product in this economy is a. $6,080 c. $ 6,295
b. $6,230 d. $ 6,270
25. The income approach to GDP sums the total income earned by resource suppliers and adds:
b. net investment and deprecation
c. deprecation, indirect business taxes, and net factor income earned abroad
d. net transfer payments, deprecation, and net factor income earned in the U.S
26. Refer to the following data: Year Units of
Output Price perunit
1 4 $3
2 5 $4
3 8 $5
4 9 $6
5 10 $7
This economy produces only one product; price and output data are shown for a five-year period. Year 3 is the base year. The price index for year 4 is:
a. 80 b. 120 c. 20% d. 1,2
27. Refer to the following data: Year Units of
Output Price perunit
1 4 $3
2 5 $4
3 8 $5
4 9 $6
5 10 $7
This economy produces only one product; price and output data are shown for a five-year period. Year 3 is the base year. Real GDP in year 5 is:
a. $40 b. $ 50 c. $ 56 d. $ 70
28. In a given year, nominal GDP inceased by 12% while the GDP price deflator rose from 150 to 156. Over this period, real GPD:
a. remained constant b. rose by approximately 6% c. rose by approximately 8% d. rose by approximately 12%
29. The change in real GDP is not an accurate measure of the change in economic welfare because:
a. improvements in product quality are overstated
b. expenditures for personal services are excluded
c. the price level changes over time d. some production creates pollution
30. True or false: If imports exceed exports, the “net exports” term in GDP is prositive.
a. True b. False
PRACTISE TEST
OLIMPIADE SAINS NASIONAL (ECONOMICS)
C.8.
1. Answer the next question (s) on the basis of the following information about a hypothetical economy:
Full-time employed = 750
Part-time employed = 150
Unemployed = 100
Discouraged workers = 50 Members of underground economy = 30 Refer to the above information. If the members of the underground economy are presently counted as part of the unemployed when in fact they are employed, the official unemployment rate is overstated by:
a. 0 percentage points b. 3 percentage points c. 5 percentage points d. 7 percentage points
2. Inflation:
a. reduces both the purchasing power of the dollar and one’s real income
b. reduces the purchasing power of the dollar and increases one’s real income
c. reduces both the purchasing power of the dollar but may nave no impact on one’s real income
d. increases the purchasing power of the dollar and reduces one’s real income
3. The war in Iraq sent oil prices spiraling upwards, resulting in an increase in the overall price level. This is an example of which type of inflation?
a. Cost-pull c.
Demand-pull
b. Cost-push d.
Demand-push
4. Refer to the following table
Year Alta (real GDP)
Zorn
(real GDP) (PopulatAlta ion)
Zorn (populati
on)
1 $2,000 $150,000 200 500
2 2,100 152,000 202 505
3 2,200 154,00 210 508
Real per capita GDP:
a. grew faster in Alta between years 1 and 2 than it did between years 2 and 3
b. grew faster in Zorn than in Alta between years 1 and 2
5. If a nation’s real GDP is growing at 2% per year, its real output will double in approximately:
a. 50 years e. 35
years
b. 40 years d. 33
years
6. Which of the following is correct?
a. The teenage unemployment rate is substantially higher than the adult rate b. The female unemployment rate is
substantially higher than the adult rate c. The unemployment rate for those with a
college degree and those with only a high school education are roughly the same d. The unemployment rates for blue-collar
workers and white-collar workers are roughly the same
7. Orlando has just finished school and is waiting to report to his new job at the beginning of the month. Orlando is considered to be :
a. structurally unemployed b. frictionally unemployed c. cyclically unemployed d. employed
8. Last year the price index rose from 150 to 156 and Joni’s nominal income rose by 2%. Joni;s real income:
a. fell by about 4% b. fell by about 2% c. increased by about 2% d. increased by about 4%
9. True or false: individual business cycles vary substantially in duration and intensity:
a. True b.
False
10. At the deepest point of the Great Depression, most unemployment consisted of:
a. structural unemployment b. cyclical unemployment c. frictional unemployment d. search unemployment
11. Who is most likely to be hurt by unanticipated inflation?
a. A creditor b. A debtor
c. A union worker with a COLA in her contract
d. A homeowner with a $200,000 mortgage
12. Carlos is an unemployed software designer. In his area, the software industry is in decline but
there are many jobs in the real-estate sector. Carlo’s unemployment is best classified as: a. cyclical unemployment
b. demand-deficient unemployment c. structural unemployment
d. frictional unemployment
13. True or false: Unemployment in the U.S. has been scientifically higher than in France, the U.K., and Germany over the past several years.
a. True
b. False
14. Assume that Okun’s law applies and the following information is relevant:
Natural rate of unemployment = 5% Actual rate of unemployment= 8%
Which of the following statements is correct? a. This economy is operating at a point on its
production possibilities curve b. There is positive GDP gap of 3% c. There is a negative GDP gap of 3% d. GDP is $30 billion below its potential
15. Unanticipated inflation:
a. arbitrarily redistributes income from creditors to debtors
b. invariably leads to unemployment c. reduces the real incomes of all workers d. has the same consequences as
anticipated inflation
16. In 2003, Maxine’s nominal income increased by 3% while the price level rose by 1%. Consequently, Maxine’s real income:
a. rose by approximately 4% b. fell by approximately 1% c. rose by approximately 2% d. fell by approximately 2%
17. Cost of living adjustments (COLAs):
a. are typically ineffective against unanticipated inflation
b. are often used to protect union workers against unanticipated inflation
c. are the basis for Okun’s law
d. are effective protection against demand-pull inflation but not cost-push inflation
18. Consider the following groups of individuals:
1. Workers employed full-time 2. Workers employed part-time 3. Officially unemployed workers 4. Discouraged workers
The labor force consists of: a. group 1 only
c. groups 1, 2 and 3 only d. groups 1, 2, 3 and 4 only
19. Suppose the total population is 200 million workers, 100 million of whom are in the labor force 80 million people are employed full time and another 16 million are employed part time; 5 million are “discouraged workers.” The unemployment rate is:
a. 21% b. 20% c. 11% d. 4%
20. In the nation of Zorn, GDP has double in the past 14 years. Over this time period, its annual rate of growth was approximately:
a. 2% b. 4% c. 5% d. 7%
21. Real GDP was $5,000 billion in year 1 and $5,200 billion in year 2. The approximate rate of economic growth from year 1 to year 2 was:
a. 0.2% c.
4%
b. 0.4% d.
$200 billion
22. If the population is 300 million, the labor force is 150 million, and there are 141 million workers employed, the unemployment rate is: a. 4% b. 6% c. 9% d. 12%
23. Kyle’s employer relocated his company form Seattle to Chicago, but Kyle and his co-workers opted to stay in Seattle rather than undergoing a costly relocation. Kyle’s unemployment is best characterized as:
a. Frictional c.
Cyclical
b. Natural d.
Stuctural
24. If the natural rate of unemployment is 5.5% and the actual unemployment is best characterized as :
a. 1% b. 2% c. -1% d. -2%
25. The CPI is currently 126; a year ago it was 120. The rate of inflation over the past year was:
a. 5% b. 6% c. 7% d. 8%
26. If the annual inflation rate is 4%, the price level will double in approximately:
a. 10 years c. 17
yaers
b. 12 years d. 25
years
27. Suppose your nominal income is increasing by 4% per year while the inflation rate is 2% per years. If these rates continue, your real income will double in approximately:
a. 12 years c. 25
years
b. 14 years d. 35
years
28. A worker protected by a contractual COLA a. cannot be fired
b. will receive automatic wage increases based on the rate inflation
c. must be recalled from layoff before other workers can be hired
d. is protected against anticipated inflation but not unanticipated inflation
29. Borrowers will most likely benefit when there is an:
a. anticipated increase in the CPI b. anticipated decreases in the CPI c. unanticipated increase in the CPI d. unanticipated decreases in the CPI
30. True or false: Cyclical unemployment arises in part from a desire by workers to move from low-paying, low-productivity jobs to paying higher productivity jobs to higher-paying, higher productivity jobs.
a. True b. False
PRACTISE TEST
OLIMPIADE SAINS NASIONAL (ECONOMICS)
C.9
1. Which of the following is a correct statement? All else equal:
a. a decrease in the real rate of interest will reduce the level of investment
b. a decrease in the real rate of interest will interest the level of investment
c. an increase in business taxes will increase the level of investment
d. an increase in the level of current disposable income will decrease the level of investment
2. If the slope of the consumption line is.8: a. the MPC is. 8
b. the MPS is. 8 c. the MPC is. 1/.2 d. the MPS is. 1/.2
3. If the MPC is. 63, the multiplier is: a. 1 / .63
b. 1 .37
a. investment spending will decrease
b. the investment demand curve will shift upward
c. the investment demand curve will shift to the left
d. the investment demand curve will shift to the right
5. If Margy’s MPC is .9, this means that she will: a. spend 90 cents out of every additional
dollar of disposable income
b. spend 90% of her total disposable income c. spend all her disposable income when her
disposable income is $9000
d. save 10% of her total disposable income
6. If the MPC is constant for every level of disposable income:
a. the consumption schedule will be a straight, upward-sloping line through the origin
b. the APC will also be constant c. the MPS will also be constant
d. the APC will increase as income increases 7. Answer the next question on the basis of
the following data:
D C
$ 0 $ 5
10 12
20 19
30 26
Refer to the data. At a disposable income of $50, the average propensity to consume is: a. .7 b. .6 c. .4 d. .8
8. The multiplier is equal to all of the following expect:
a. 1 / (1 - MPC) b. 1 / (APC – 1) c. 1 / (MPS)
d. change in real GDP / initial change in spending
9. The multiplier process suggests that:
a. any initial drop in the price level causes a proportionately larger increase in consumption spending
b. any initial increase in disposable income cause a larger increase in investment spending
c. any initial increase in the interest rate will cause a larger increase in the money supply
d. any initial increase in aggregate expenditures will cause a larger increase in GDP
10. Answer the next question on the basis of the following data:
D C
$ 0 $ 5
10 12
20 19
30 26
40 33
50 40
Refer to the data, the multiplier for this economy is:
a. 7 b. 2/3 c. 3 1/3 d. 2
11. If consumption and disposable income are equal at a particular level of income:
a. the MPC must be one at this point b. the MPS must be zero pat this point c. the APC must be less than one at this
point
d. saving must be zero at this point
12. Suppose that for the entire economy, no investment projects will yield an expected real return of more than 12%. However, $10 billion worth of projects will yield expected real returns of 9% to 12%; an additional $10 billion will yield expected real return of 6% to 9%; an additional $10 billion will yield expected real returns of 3% to 6%; an additional $10 billion will yield expected real returns of 0% to 3%. If the real rate of interest is 6%, desired investment spending will be:
a. $0 billion b. $10 billion
13. Which one of the following is not predicted to shift the consumption schedule upwards? a. An increase in disposable income b. An increase in household wealth c. A reduction in real interest rates d. A reduction in taxes
14. The investment demand curve will shift to the left if:
a. the interest rate decreases b. the interest rate increases
c. expected returns on investment increase d. business taxes increase
15. Use the following diagram for this question
C
on
su
m
pt
io
n
Disposable Income 0
C2
Which of the following might have caused the shift from consumption schedule C1 to
schedule C2?
a. An increase in disposable income b. An increase in household wealth c. An increase in household debt d. An increase in taxes
16. Increase in disposable income tend to: a. reduce the MPC
b. increase the MPC c. reduce the APC d. increase the APC
17. Assume the MPC is ¾. If investment spending falls by $10 billion, the level of GDP will: a. fall by $40 billion
b. fall by $30 billion c. fall by $10 billion d. fall by $7.5 billion
18. Answer the next question on the basis of the following data:
D C
$ 0 $ 5
10 12
20 19
30 26
40 33
50 40
Refer to the data, the MPS is:
a. decreasing as disposable income increases
b. 0 c. .05 d. .3
19. The multiplier effect magnifies:
a. changes in consumption spending only b. changes in investment spending only c. changes in net export spending only d. any change in aggregate spending
20. All else equal, the larger the MPC: a. the larger the MPS
b. the smaller the APC
c. the smaller the slope of the consumption schedule
d. the larger the multiplier
21. The consumption schedule is:
a. an inverse relationship between consumption and the price level
b. a direct relationship between consumption and disposable income
c. an inverse relationship between consumption and saving
d. an inverse relationship between consumption and the tax rate
22. A household’s disposable income increases from $50,000 to $60,000 and its consumption increases from $45,000 to $52,000. consequently, we can conclude:
a. the MPC is $7000
b. the slope of the consumption schedule is .9
c. the MPS is .3
d. he consumption schedule must have shifted upwards
23. Along a particular saving schedule, each change in disposable income of $15 billion generates an additional $3 billion in saving. There fore:
a. the MPS is .3 b. the MPS is .2 c. the APC is .8
d. the slope of the consumption schedule is .7
24. Following the stock market collapse of 2000, there was a significant drop in the value of household wealth. As a result of the wealth effect:
a. the saving schedule shifted upward b. the consumption schedule shifted upward c. the marginal propensity to save increased d. the marginal propensity to consume
increased
25. Answer the next question on the basis of the following data:
D C1 C2
$ 0 $ 5 $15
10 12 22
20 19 29
30 26 36
40 33 43
50 40 50
Refer to the data. Suppose the consumption schedule shifts form C1 to C2. as a result: a. the MPC and the APC stay the same at
every level of income
b. the MPC remains the same but the APC is higher at every level of income
c. the MPC and the APC are both higher at every level of income
d. the APC remains the same but the MPC is higher at every level of income
26. Prior to the second Iraq war in 2003, there was a drop in both consumer and firm optimism about the future of the economy. This change likely:
a. shifted the consumption schedule down and caused a movement up and to the left along the investment demand curve b. shifted the consumption schedule down
c. shifted the investment demand curve to the left and caused a movement down and to the left along the consumption schedule d. caused a movement down and to the left
along the consumption schedule and a movement up and to the left along the investment demand curve
27. In general, the greater the MPS:
a. the steeper the consumption schedule b. the lower the multiplier
c. the greater the change in GDP for any given change in spending
d. the greater the APC
28. True or false : The higher the expected real rate of return on investment, the more investment is likely to occur.
a. True
29. If an initial $20 billion dollar increase in investment spending creates $15 billion of new spending in the second round, the multiplier is: a. 2 b. 3 c. 4 d. 5
30. The value of the multiplier will increase if: a. the APC decreases
b. the MPC decrease
c. the consumption schedule shifts upward d. the MPS decreases
PRACTISE TEST
OLIMPIADE SAINS NASIONAL (ECONOMICS)
C. 10.
1. In a private closed economy:
a. saving always equals planned investment b. saving always equals actual investment c. unintended changes in inventories are
always zero
d. saving always equals the accrual change in inventories
2. At equilibrium real GDP in a private closed economy:
a. saving equals the actual change in inventories
b. the slope of the aggregate expenditures line is 1
c. real GDP equals aggregate expenditures d. planned saving equals unplanned
investment
3. The change in GDP associated with a change in government spending is:
a. equal to the change ion government spending
b. smaller than--and opposite in sign to--that associated with an equal change in taxes c. smaller than--and of same sign as--that
associated with an equal change in net export
d. larger than--and opposite in sign to--that associated with an equal change in taxes 4. If the MPC is .8, a $100 billion increase in
government spending will:
a. increase GDP by $500, the same as would a $100 billion decrease in taxes
b. increase GDP by $500, more than would a $100 billion decrease in taxes
c. increase GDP by $500, if accompanied by a $100 billion increase in taxes
d. have no impact on GDP, if accompanied by a $100 billion increase in taxes
5. A lump-sum tax increase will:
a. shift the aggregate expenditures line upward by the amount of the tax increase
b. shift the aggregate expenditures line downward by the amount of the tax increase c. shift the aggregate expenditures line
downward by the amount less the tax increase
d. no affect the aggregate expenditures line 6. Answer the next question on the basis of the
following information for a private open economy. the letters Y, C, Ig, X and M stand for
GDP, consumption, gross investment, exports, and imports respectively. All figures are in billion of dollars.
C = 22 + .8 Y Ig = 65
X = 14 M = 11
The equilibrium level of GDP for this economy is: a. $450 b. $420 c. $400 d. $224
7. If the MPC is .75 and the economy has a recessionary gap of $10 billion, then equilibrium GDP is:
a. $10 billion below the full-employment GDP b. $10 billion above the full-employment GDP c. $40 billion below the full-employment GDP d. $40 billion above the full-employment GDP 8. Use the following table for the next
question. All figures are in billions of dollars.
GDP C S I g
$100 $150 $50 $70
200 210 10 70
300 270 30 70
400 330 70 70
500 390 110 70
600 450 150 70
Refer to the table. Assuming no government, the equilibrium level of GDP in this closed economy is:
a. $200 billion c. $400 billion b. $300 billion d. $500 billion
9. Use the following table for the next question. Initially, government spending and taxes are zero. All figures are in billions of dollars.
GDP C S I g
$100 $150 $50 $70
200 210 10 70
300 270 30 70
400 330 70 70
500 390 110 70
600 450 150 70
700 510 190 70
Refer to the table. If government spending rises to$80 and taxes remain at zero, equilibrium GDP will be:
a. $300 billion c. $500 billion b. $400 billion d. $600 billion
10. Assume the MPC is 2/3. If government spending decreases by $6 billion, equilibrium GDP will:
a. fall bay $2 billion b. fall bay $18 billion c. fall bay $6 billion d. fall bay $4 billion
11. If inventories are unexpectedly declining at the current level of GDP:
a. GDP exceeds the level of current expenditures
b. GDP is at its equilibrium level
c. current expenditures exceed the level of GDP and GDP will fall
d. GDP is below its equilibrium level
12. Use the following diagram of a private economy to answer the following question.
Refer to the diagram. If exports are $40 billion and imports are $60 billion, equilibrium GDP is: a. $60 billion c. $120 billion
b. $100 billion d. $160 billion
13. True or false: According to Say’s Law. Demand cerates its own supply.
a. True b. False
14. Answer the next question on the basis of the following information for a private open economy:
C = 50 + .75 Y Ig Ig = 50
X X = 30 M M = 20
In equilibrium, the level of saving is: a. $20 b. $30 c. $50 d. $60
15. A simultaneous and equal increase in government spending and taxes will:
a. have no impact on GDP
b. help to relive an inflationary gap c. increase GDP
d. decrease GDP
16. Answer the next question on the basis of the following information for a private open economy:
Refer to the table. The after-tax MPC in the economy is:
a. .5 c. .75
b. .67 d. .8
17. Answer the next question on the basis of the following information for a private open economy:
Refer to the table. The equilibrium level of GDP in this economy is:
a. $150 b. $200 c. $250 d. $300
18. All else equal, the government spending multiplier:
a. equal the tax multiplier
b. equal the investment multiplier c. is less than the tax multiplier d. is less than the net export multiplier 19. Net exports will be positive:
a. at the equilibrium level of GDP
b. whenever GDP is below its equilibrium level c. whenever GDP exceeds its equilibrium level d. if exports exceed imports
20. Answer the new question on the basis of the following information for an open economy:
Real GDP Consumption (after taxes)
Gross investment
Net exports
Government purchases
0 $-40 $40 $+15 $25
50 0 40 +15 25
100 40 40 +15 25
150 80 40 +15 25
200 120 40 +15 25
250 160 40 +15 25
300 200 40 +15 25
Real GDP Consumption
C = 50 + .6 (Y – T) Ig = 50
Xn = 30
G = 60 T = 50
Refer to the above information. The equilibrium level of GDP is:
a. $300 b. $360 c. $380 d. $400 21. Assume the level of investment is independent
of the level of GDP. If the interest rate rises, the investment schedule will:
a. not be affected b. shift to the left c. shift downward d. shift upward
22. Answer the next question on the basis of the following data for a private closed economy. the letters Y, C, and I are used to represent GDP, consumption, and investment respectively.
GDP
(Y) Consumption(C) Investment (I)
0 $60 $70
100 120 70
200 180 70
300 240 70
400 300 70
500 360 70
Refer to the table. At the $400 level of GDP, there will be:
a. no unplanned change in inventories b. an unplanned increase in inventories of
$30
c. an unplanned decrease in inventories of $30
d. an unplanned increase in inventories of $70
23. When planned injections of investment, government spending, and exports equal leakages of saving, taxes, and imports:
a. aggregate expenditures will equal GDP b. consumption plus injections will be greater
than aggregate expenditures c. net exports will be zero
d. output will be below its equilibrium level 24. An increase in investment spending will:
a. decrease the interest rate
b. increase GDP, causing an upward shift of the consumption schedule
c. increase the size of the trade deficit d. increase equilibrium GDP
25. All else equal, if domestic consumers decide to purchase more foreign produced goods:
a. aggregate expenditures and GDP will both increase
b. aggregate expenditures and GDP will both decrease
c. exports will also rise, offsetting the increase in imports
d. the multiplier will increase
26. Suppose the economy is suffering a recessionary gap. A deprecation of the nation’s currency will:
a. increase net exports and reduce the size of the recessionary gap
b. decrease net exports, further increasing unemployment
c. increase net exports, further increasing unemployment
d. cause cost-push inflation
27. A given decrease in lump-sum taxes will have a larger impact on real GDP the:
a. smaller the MPC b. smaller the MPS
c. smaller the size of the recessionary gap d. greater the APC
28. The level of GDP will rise if:
a. investment plus saving plus exports exceeds consumption
b. saving plus imports plus consumption exceeds GDP
c. investment plus net exports exceeds the government’s deficit
d. investment plus government spending plus exports exceeds saving plus taxes plus imports
29. If the MPC is .75, government could eliminate a $60 recessionary gap by:
a. increasing government spending by $240 b. reducing lump-sum taxes by $80
c. reducing lump-sum taxes by $60 d. balancing its budget
30. If the economy has a $20 billion recessionary gap and the MPC is 2/3, the equilibrium level of GDP is:
a. $13 billion below its full-employment potential
b. $20 billion below its full-employment potential
c. $40 billion below its full-employment potential
d. $60 billion below its full-employment potential
PRACTISE TEST
OLIMPIADE SAINS NASIONAL (ECONOMICS)
C. 11
1. If aggregate demand and aggregate supply
b. real GDP will fall and the price level will decrease
c. the price level will fall but real GDP may either increase or decrease
d. real GDP will fall but the price level may or may not increase
2. A firm may pay an above-market efficiency wage:
a. to relieve a surplus in the labor market b. to improve work effort and reduce
production costs
c. to improve work effort, even though the higher wage increases production costs d. to compensate workers for high risk on the
job
3. An increase in the price level will: a. increase net export
b. reduce the value of household debt and increase investment
c. increase production cost and reduce aggregate supply
d. reduce the purchasing power of household wealth and reduce consumption
4. Answer the next question using the following graph:
Refer to the graph. The shift form AD1 to AD2
may have been caused by: a. a reduction in the price level b. a reduction in aggregate supply c. a decline in personal taxes
d. a decrease in government spending 5. Answer the next question using the following
diagrams.
Which of the above diagrams best portrays the effects a significant decrease in energy prices? a. A b. B c. C d. D
6. Answer the next question using the following graph:
Refer to the graph. Suppose aggregate demand falls from AD1 to AD2. initially, this will
cause output to:
a. fall to Q2 and the price level to P2
b. fall to Q2 but the price level to remain at P1
c. fall to Q3 but the price level to remain at P1
d. remain unchanged but the price level will fall to P2
7. The short-run aggregate supply curve:
a. assumes that wages and salaries fully match any change in the price level b. is vertical at the full-employment level of
output
c. shows the amount of real output supply by increasing the price of exported resources d. becomes increasingly flatter as output
expands
8. Other things equal, depreciation of the dollar will:
a. increase U.S. aggregate demand by increasing net exports
b. decrease U.S. aggregate demand by reducing net exports
c. increase U.S. aggregate supply by increasing the price of exported resources d. increase U.S. aggregate supply by
reducing the price of imported resources 9. If the is a high cost to firms of changing prices
and communicating these changes to customers:
a. the aggregate supply curve will be relatively steep
b. the aggregate demand curve will be relatively steep
d. the prices level may remain constant when aggregate demand decreases
10. True or false: Changes in the value of stocks and bonds shift the economy’s aggregate demand curve.
a. True b. False
11. Answer the next question on the basis of the following aggregate demand and supply schedules for a hypothetical economy:
Amount of real output demanded
Price (index value)
Amount of real output supplied
$200 300 $600
300 250 500
400 200 400
500 150 300
600 100 200
Refer to the above data. If the full employment level of output is $500:
a. this economy has a negative GDP gap b. this economy has a positive GDP gap c. the government could achieve the full
employment level of output by increasing taxes
d. this economy would move toward full employment if its currency appreciated
12. A leftward shift of the aggregate supply curve would illustrate:
a. demand-pull inflation b. an inflationary gap c. a positive GDP gap d. cost-push inflation
13. At very levels of output, the aggregate supply curve is relatively:
a. flat, because firms are reluctant to give workers raises when output is so low b. flat, because firms can expand output with
relatively little increase in production costs c. steep, because increasing output will
cause relative large increases in production costs
d. steep, because increasing output will cause aggregate demand to increase 14. If real output per unit of input rises by 10%:
a. measured productivity will increase b. per-unit production costs will rise
c. the aggregate supply curve will shift to the left
d. the price level will tend to increase
15. The aggregate demand curve slopes downward to the right:
a. because a lower domestic price level reduces net exports
b. because of the income and substitute effects of lower prices
c. at low prices, but not at high prices
d. because a lower price level reduces the demand for money, which lowers the interest rate and increases investment 16. Suppose that real domestic output in an
economy is 200 units, the quantity of inputs is 50, and the price of each input is $20. The level of productivity is:
a. 1/5 b. 2,5 c. 4 d. 10
17. Use the following graph to answer the next question:
Refer to the graph. Cost-push inflation is best illustrated by the shift from:
a. AD0 to AD1
b. AD1 to AD1
c. AS0 to AS1
d. AS1 to AS0
18. All else equal, depreciation of the dollar will shift:
a. both aggregate demand and aggregate supply to the left
b. both aggregate demand and aggregate supply to the right
c. aggregate demand to the left and aggregate supply to the right
d. aggregate demand to the left and aggregate supply to the left
19. If real output increases and the price level remains stable, it is likely that:
a. both aggregate demand and aggregate supply have decreased
b. aggregate demand has increased and aggregate supply has decreased
c. aggregate demand has decreased and aggregate supply has decreased
d. both aggregate demand and aggregate supply have increased
20. An increase in the incomes of U.S trading partners would shift the U.S.:
a. aggregate demand curve to the right b. aggregate demand curve to the left c. aggregate supply curve to the right d. aggregate supply curve to the left
b. increases the supply of money, reducing the interest rate
c. increases consumer incomes
d. causes consumers to buy more lower-priced goods, substituting away from higher-priced goods
22. An increase in the demand for money caused by an increase in the price level will:
a. increase the interest rate, reduce investment, and shift the aggregate demand curve to the left
b. increase the interest rate, reduce investment, and decrease the quantity of real output demanded
c. increase the interest rate, increase investment, and shift the aggregate supply curve to the right
d. increase the interest rate, increase investment, and shift the aggregate demand curve to the right
23. The initial impact of an increase in businesses taxes is:
a. a reduction in real output and a higher price level
b. a reduction in real output and a lower price level
c. a reduction in real output and either a higher or lower price level
d. an increase in real output and a lower price level
24. Higher prices of imported resources will
a. move the economy downward and to the right along the aggregate demand curve b. make the aggregate demand curve steeper c. shift the aggregate supply curve the left d. shift the aggregate demand curve the left 25. Answer the next question on the basis of
the following aggregate demand and
Refer to the above data. The equilibrium price level and quantity of real domestic out put will be:
a. 250 and $500 b. 150 and $500
c. 250 and $300 d. 200 and $400
26. Answer the next question on the basis of the following aggregate demand and supply schedules for a hypothetical economy:
Amount of real
Refer to the above data. Suppose the MPC is .75 and government spending increases by $50. he new equilibrium price level would be: a. 300 b. 250 c. 200 d. 150
27. Demand-pull inflation is associated with: a. a movement upward and to the left along
the aggregate demand curve
b. a leftward shift aggregate supply curve c. a leftward shift aggregate demand curve d. a rightward shift aggregate demand curve 28. A reduction in aggregate demand is:
a. likely to cause a reduction in the price level b. unlikely to cause a reduction in the price
level because of the interest rate effect c. unlikely to cause a reduction in the price
level because of efficiency wages and menu cost
d. likely to cause a reduction in aggregate supply
29. If the multiplier is 4, a $100 increase in net exports will:
a. shift the aggregate demand curve to the right by $400, increasing equilibrium real GDP by $400
b. shift the aggregate demand curve to the right by $400, but increase equilibrium real GDP by less than $400
c. shift the aggregate demand curve to the left by $400, reducing equilibrium real GDP by $400
d. shift the aggregate supply curve to the right by $400, but increase equilibrium real GDP by less than $400
30. True or false: A reduction in consumer taxes shifts the aggregate demand curve to the right. a. True
b. False
