INSTRUCTION: ANSWER ALL QUESTIONS [2 Marks each]

1.Macroeconomics is mostly focused on:

A.the individual markets within an economy.

B.only the largest industries in the economy.

C.the economy as a whole.

D.why businesses fail.

2. The business cycle depicts:

A.fluctuations in the general price level.

B.the phases a business goes through from when it first opens to when it finally closes.

C.the evolution of technology over time.

D.the swings (ups and downs) in economic activities.

3. The term "recession" describes a situation where:

A.inflation rates exceed normal levels.

B.the level of output produce in the economy is declining.

C.an economy's ability to produce is destroyed.

D.government takes a less active role in economic matters.

4. Unemployment describes the condition where:

A.equipment and machinery are going unused.

B.a person cannot get a job, but is willing, able and is actively seeking for one.

C.a person does not have a job, regardless of whether or not they want one.

D.any resource sits idle.

5. Inflation is defined as:

A.an increase in the overall level of prices.

B.the rate of growth in nominal GDP.

C.a situation where all prices in the economy rise simultaneously.

D.the growth phase of the business cycle

6. Which of the following is an example of a supply shock?

A.A surge in consumer optimism prompts increased buying of goods and services.

B.A surprise tax rebate from the government gives people more money to spend.

C.A dramatic increase in energy prices increases production costs for firms in the economy.

D.Government increases spending on education

7. Which of the following is a final good or service?

A.a haircut

B.fertilizer purchased by a farm supplier

C.diesel fuel bought for a delivery truck

D.Chevrolet windows purchased by a General Motors assembly plant

8. Tom Atoe grows tomatoes for home consumption. This activity is:

A.excluded from GDP in order to avoid double counting.

B.excluded from GDP because an intermediate good is involved.

C.productive but is excluded from GDP because no market transaction occurs.

D.included in GDP because it reflects production.

9. Which of the following transactions would be included in GDP?

A.Mary buys a used book for $5 at a garage sale.

B.Nick buys $5000 worth of stock in Microsoft.

C.Olivia receives a tax refund of $500.

D.Peter buys a newly constructed house

10.The given inflation rates is 7%. According to Rule 70, how many years it takes for the inflation rates to double?

Answer:.............................................................

11.Inflationis said to reduce the value of money. Given Ynominal =$10,000, and theCPIchanges infrom 115 to 120. Find the Yreal.

Answer:..........................................................

12.Cyclical unemployment occurs at the ............................stage of the business cycle.

13.What type of unemployment that occurs at full-employment stage?

Answer: .......................................

14.If real GDP for 2003 is $6400 billion and real GDP for 2004 is $6720 billion (in 2003 dollars), then the growth rate of real GDP is............................

The country of Old Jersey produces milk and butter, and it has published the following macroeconomic data, where quantities are in gallons and prices are dollars per gallon.