Answer the following multiple-choice questions. Which of the answers are correct?

1.1 The meaning of the word "economic" is most closely associated with the word... Choose the correct answer below.

a. Scarce

b. Opportunity cost

c. Unlimited

d. Free

1.2 Which of the following is not included in GDP?

a. Capital goods such as machinery

b. The value of domestically produced services

c. Imports

d. Prostitution

1.3 Often market systems fail to provide adequate protection for the environment. This is primarily due to ....

a. the fact that we treat environment as a common resource.

b. information asymmetry in the free market

c. Monopolistic and Oligopolistic nature of the market.

d. the fact that government is run by politicians and not by angels.

1.4 An effective competition policy should be able to prevent collusive behaviour and anti-competitive practices. Form the list below which of the practices are considered anti-competitive?

a. Predatory pricing

b. Selling product or providing a service above equilibrium price

c. Charge discriminatory prices or operate discriminatory trading conditions

d. Moral hazard

1.5 According to the income approach, GDP is broadly equal to:

a. The sum of all the wages paid in the economy, plus the sum of all operating surpluses generated by enterprises (that is, the sum of profits, rents, interest payments), plus taxes minus subsidies

b. The sum of all wages plus financial returns paid within a year in the economy, plus taxes minus subsidies

c. The sum of all assets minus liabilities of the economy

d. The sum of all the wages paid in the economy, plus taxes minus subsidies

1.6 Oceanic GDP at market prices by category of expenditure: 2004. Consumption expenditure $706; Government final spending $246; Remittance $10; Gross capital formation $194; Exports of goods and services $289; Imports of goods and services $328; Taxes $34. Total GDP is equal to..

a. GDP: $1073

b. GDP: $1107

c. GDP: $1154

d. GDP: $1142

1.7 Which component of GDP constitutes the largest share of GDP in Oceanic in 2004?

a. Consumption

b. Export

c. Imports

d. Gross capital formation

1.8Suppose the aggregate demand and short-run aggregate supply schedules for Utopia economy whose potential output (i.e GDP at full employment) equals $2,700 are given by the table below. State the short-run equilibrium level of real GDP and the price level. Hint: Use excel to draw aggregate demand curve, short-run supply curve, and long-rung supply curve (potential output).

a. Price level 0.8; real GDP 2500

b. Price level 1; real GDP 2000

c. Price level 0.8; real GDP 2100

d. Price level 0.9; real GDP 2250

1.9 Characterize the current economic situation Utopia, Is there an inflationary or a recessionary gap? If so, how large is it?

a. No gap because short run equilibrium is equal to potential output

b. Recessionary gap of 700

c. Recessionary gap of 450

d. Inflationary gap of 450

1.10 Which of the macroeconomic policy actions below Utopia government must employ to close the gap?

a. Utopia government must increase consumption, investment to close gap

b. Utopia must do nothing as there is no recessionary or inflationary gap

c. Utopia government must increase imports to close the gap.

d. Utopia government must increase taxes to close the gap

1.11 Suppose the Utopia government wants to shift the total GDP beyond the current potential output of 2700, which of the supply-side policies should it employ?

a. Extract more of the domestic natural resources

b. Increase the labour unions membership

c. Increase the quantity of money

d. Reduce labour force

1.12 ........ acts as a signal to buyers and to sellers and helps direct them to take actions (expand or contract demand or supply) which bring about an equilibrium (balance) in the market.

a. Quantity

b. Demand

c. Price

d. Equilibrium quantity

1.13 For growth to be sustained over the long term, there must be an increase in potential output.From the list below which factor is the main determinant of potential output.

a. Increases in the quantity of resources: capital, labour, land and raw materials

b. Fiscal policy and Monetary policy

c. Transfer payments: old age pension and orphans grant

d. Aggregate demand: consumption, investment and exports

1.14 The table below represents the Namibia Consumer Price Index Basket Weights. What are the main three drivers of inflation in Namibia?

a. Food and Non-Alcoholic Beverages; Transport; Housing, Water, Electricity, Gas and Other fuels

b. Housing, Water, Electricity, Gas and Other fuels

c. Housing, Water, Electricity, Gas and Other fuels; Alcoholic Beverages and Tobacco; Health

d. Miscellaneous Goods and Services, Communication, Education

1.15 Table shows NCPI: All-Items Index, monthly and annual percentage changes (Dec 2012 =100). Calculate month-on-month inflation for November 2017 and December 2017.

a. 0.23% and 0.15%

b. 23.1% and 15.2%

c. 0.39% and 0.38%

d. 2.3% and 1.5%

1.16 There are various costs of inflation. What are the costs associated with having to adjust price lists or labels?

a. Redistribution costs

b. Demand-Push Inflation costs

c. Menu-costs

d. Shoe Leather costs

1.17 The appropriate macroeconomic policies to tackle inflation in the short to medium term is...

a. Monetary Policy

b. Supply side policy

c. Fiscal Policy

d. Competition Policy

1.18 When the price of olive oil goes up, what probably happens to the demand for corn oil?

a. Demand for olive oil will decrease

b. Demand and supply for oil will be in equilibrium

c. Demand for corn oil remains the same

d. Demand for corn oil will increase

1.19 Study the figure below and choose which panel show an increase in quantity demanded compared with an increase in demand.

a. Panel A and B

b. Panel A

c. Panel D

d. Panel C

1.20 Free riders enjoy the benefits of a public good without paying a share of the costs, because goods are nonexcludable. Which option below gives the list of non-excludable goods and services.

a. Wifi, CNN, Apple digital music

b. Carrots at Fruit and Veg shop, Jeans and Contact lenses

c. Tuna fishes in the sea, National Park in the city Centre, express highway

d. None of the above

1.21 Which one of the following best describes the opportunity cost to society of building a new school?

a. The money that was spend on building the school

b. The increase tax to pay for the school

c. The other goods that could have been produced with the resources used to build the school

d. The running cost of the school when it is opened

1.22 The diagram below shows an example of markets and resource allocation at a price where demand exceeds supply. From the list below choose how resources mighty be allocated in a situation where excess demand exists?

a. By making trade-offs

b. demand and supply

c. Black market

d. Rationing

1.23 The diagram below shows demand and supply of a dozen bagels per month in a market of bagels. At a price of $1.50 per dozen, how many bagels are demanded and supplied per month?

a. Dozen of bagels demanded= 8 and Dozen of bagels supplied =8

b. Dozen of bagels supplied =4 and Dozen of bagels demanded =12

c. Dozen of bagels demanded =3.50 and Dozen of bagels supplied =4

d. Dozen of bagels demanded=4 and Dozen of bagels supplied = 10

1.24 What is the equilibrium price of bagels? What is the equilibrium quantity per month?

a. Equilibrium quantity = 2.50 and Equilibrium Price =8

b. Equilibrium price =2.50 and Equilibrium quantity =8

c. Equilibrium Price = 2.00 and Equilibrium quantity =9

d. Equilibrium Price = 2.00 and Equilibrium Quantity =12

1.25 Below is the demand and supply schedules from the market of gasoline (in 000 gallons). At a price of $3 per gallon, would there be a surplus or shortage of gasoline? How much would the surplus or shortage be?

a. No shortage because number of gallons demanded is equal to number of gallons supplied

b. Surplus, 4000 gallons per month

c. Surplus, 2000 gallons per month

d. shortage, 4000 gallons per month

1.26 At a price of $6 per gallon, would there be a surplus or shortage of gasoline? How much would the surplus or shortage be?

a. Shortage, 4000 gallons

b. Shortage, 5000 gallons

c. Surplus, 2000 gallons

d. Surplus, 3000 gallons

1.27 Suppose the quantity demanded increased by 2,000 gallons per month at each price. At a price of $3 per gallon, how much would the surplus or shortage be?

a. No shortage or surplus because amount of gallons supplied has increased.

b. Surplus, 5000 gallons

c. Surplus, 4000 gallons

d. Shortage, 2000 gallons

1.28 What does Gross Domestic Product (GDP) measure?

a. The economic transactions of an economy with the rest of the world during a period of time.

b. The value of the final goods and services produced within a country during a given period of time.

c. The value of the financial assets and liabilities of the economy.

d. The value of all financial transactions that the economy performs during a period of time.