Macroeconomics Worksheet

PART ONE: TRUE or FALSE

1. GDP is the measure of average output of a country per person

2. GNP is defined as the aggregate monetary value of all final goods and services
produced in a country during a year.
3. RGDP is the value of all final goods produced during a given time period based on
the prices of selected base year

4. In calculating GDP from the expenditure side, economists add imports to other aggregate
expenditure components.
5. The Phillips curve captures the inverse relationship between economic growth and
unemployment, all else held constant.
6. Both New Keynesian and new classicals economists rely on microeconomic foundations
(optimization behavior of agents) for their macroeconomic thoughts.

PART TWO: Multiple choices questions

1. Macroeconomics is the study of

A. An individual building blocks in the economy

B. The relationship between individuals in the economy

C. Household purchase decisions

D. All of the above.

E. None of the above

2. Of the following one is not the key macroeconomic goal;

a. Avoiding high unemployment

b. Avoiding excessive inflation/deflation

c. Full employment and price stability

d. Avoiding a prolonged deep recession.

e. None of the above

3. What is/are the main roots for the development of macroeconomics?

a. The weakness of classical models during the Great Depression

b. The occurrence of Great Depression
c. The work of John Maynard Keynes
d. All of the above

4. __________is the amount of disposable income that is left over and above
consumption expenditure.
a. Personal income
b. Disposable income
c. National income
d. Personal saving

5. The accounting framework used in measuring current economic activity is called

A) the U.S. expenditure accounts.

B) the national income accounts.

C) the flow of funds accounts.

D) the balance of payments accounts.

6. The three approaches to measuring economic activity are the
A) cost, income, and expenditure approaches.
B) product, income, and expenditure approaches.
C) consumer, business, and government approaches.
D) private, public, and international approaches

7. The value of a producer's output minus the value of the inputs it purchases from other
producers is called the producer's
A) surplus.
B) profit.
C) value added.
D) gross product.
7. According to Keynesians’ thought, a nation can minimize the unemployment
problem during recission by:
A. Increasing government expenditure on goods and services

B. Increasing government’s tax revenue by levying higher tax rate

C. Decreasing government expenditure on goods and services

D. Doing nothing and allowing the economy to make self-correcting system

E. All of the above

8. Which of the following is included in U.S. GDP?
A) The sale of a new car from a manufacturer's inventory
B) The purchase of a watch from a Swiss company
C) The sale of a used car
D) A newly constructed house
10. Intermediate goods are
A) capital goods, which are used up in the production of other goods but were produced in earlier periods.
B) final goods that remain in inventories.
C) goods that are used up in the production of other goods in the same period that they were produced.
D) either capital goods or inventories.
11. Marvin's Metal Company produces screws that it sells to Ford, which uses the screws as a component of its
cars. In the national income accounts, the screws are classified as
A) inventory.
B) final goods.
C) capital goods.
D) intermediate goods.
12. GDP differs from GNP because
A) GDP = GNP - net factor payments from abroad.
B) GNP = GDP - net factor payments from abroad.
C) GDP = GNP - capital consumption allowances.
D) GNP = GDP - capital consumption allowances.
13. If an American construction company built a road in Kuwait, this activity would be
A) excluded from U.S. GNP.
B) fully included in U.S. GDP.
C) included in U.S. GNP only for that portion that was attributable to American capital and labor.
D) included in U.S. GDP but not in U.S. GNP.

Based on the following table answer question No 14 up to 19 (Use 2012 as reference year)

14. What is the NGDP and RGDP of 2013 respectively.

A. 46,200 and 46,200 C. 52,00 and 46,200

B. 58,300 and 52,000 D. 51,400 and 50,000
15. What is the NGDP and RGDP of 2014 respectively

A. 46,200 and 46,200 C. 58,300 and 52,000

B. 52,00 and 46,200 D. 51,400 and 50,000
16. What is the inflation rate from 2012 to 2013 and from 2013 to 2014?
A. 102.8 and 112.1 C. 112.1 and 100
B. 2.8 and 9.2 D. 100.0 and 9.1
17. What is GDP deflator of 2013?
A. 102.8 C. 112.1
B. 100 D. 9.1
18. What is GDP deflator of 2014?
A. 112.1 C. 100
B. 102.8 D. 9.1
19. What is GDP deflator and inflation rate for 2012?
a. 0 and 9.1 C. 112.1
B. 9.1 and 2.8 D. It cannot be determined
20. Which of the following is an example of frictional unemployment?
a. Kebede loses his job as a steel worker because the economy is in a downturn.
b. Sara graduates with her master’s degree in Accounting and finance and is
searching for a job.
c. Abebe has decided to retire after 35 years of working at the state prison.
d. Chala quits his job to volunteer for the Red Cross.
e. Alemitu loses her job as a newspaper editor because the publication has gone
digital.

21. Jack quits his job in New York and moves to California. After two months he finds a job.
This is an example of ____ unemployment.
a. cyclical d. frictional
b. structural e. seasonal
c. natural

22. Daniel loses her job when the factory in her local area closes. She is unable to find
another factory job. This is an example of _ unemployment.
a. cyclical d. frictional
b. structural e. seasonal
c. natural

23. Anything that lengthens the job search process ____________ unemployment.
a. increases structural d. increases cyclical
b. increases frictional e. decreases structural
c. decreases frictional

24. Abrham, Solomon, and Daniel work as engineers in Addis Ababa. The demand for
engineers starts to decline as their company’s profits start to decrease during a
recession. As a result, Daniel and Solomon are laid off from their jobs. Daniel and
Solomon would be classified as
a. Frictionally unemployed. d. overemployed.
b. Discouraged workers. e. cyclically unemployed.
c. Structurally unemployed.
25. During healthy economic periods, only unemployment exist(s).

a. frictional and structural d. structural

b. cyclical e. structural and cyclical

c. frictional

26. An unemployment rate that is above the natural rate indicates unemployment,
and we say that the economy is producing at output level.
d. cyclical; more than the full-employment
e. cyclical; the full-employment
f. cyclical; less than the full-employment
g. frictional; more than the full-employment

Use the following table to answer the following questions:

Group # in Millions

Relevant population 215

Employed 138
Unemployed 9

27. According to the table, the number of people NOT in the labor force is equal to
a. 138 million. d. 147 million.
b. 215 million. e. 68 million.
c. 77 million.
28. According to the table, the labor force participation rate is
a. 64.2 percent. d. 31.6 percent.
b. 68.4 percent. e. 6.1 percent.
c. 35.8 percent.
29. Which of the following equations represents the labor force?
a. (number of unemployed / labor force) × 100
b. (unemployed + employed)
c. (number of employed / labor force) × 100
d. (number of unemployed / relevant population) × 100
e. (labor force / relevant population) × 100
30. Which of the following is/ are not included in the measurement of GDP?
a. Value of households’ consumption expenditure
b. Public Transfer payments
c. Value of newly produced final goods
d. Government’s expenditure on final goods and services
e. All of the above
31. A full-time student who is not working is categorized as
a. Unemployed C. Not in the labor force
b. Employed D. A discouraged worker

32. Suppose the total market value of all final goods and services produced in
Ethiopia in 2021 is 500 Birr and the total market value of final goods and
services sold is 450 Birr. We can conclude that:
a. GDP in 2021 is 450 Birr
b. GNP in 2021 is 450 Birr
c. GDP in 2021 is 500 Birr
d. Inventories in 2021 fell by 50 Birr
e. All of the above
33. Which of the following could be causes of demand-pull inflation?
a. An increase in personal income tax rate
b. Appreciation of domestic currency against the foreign currency
c. Reduction of personal income tax rate
d. Rise in cost of raw materials
e. All of the above
34. If intermediate goods were included in GDP:
a. GDP would then have to be deflated for changes in the price level
b. Nominal GDP would exceed real GDP
c. GDP would be overstated
d. GDP would be understated
e. All of the above
35. An increase in the price of goods bought by firms and the government will
show up in:
a. The GDP deflator C. Both the CPI and the GDP deflator
b. The CPI D. Neither the CPI nor the GDP deflator

Use the following information to answer questions 36-37. The statistics be

in millions of Birr.

36. The gross domestic product (GDP) for the above economy is (in million Birr):
a. 100 C. 120
b. 450 D. 80
e. None of the above
37. Disposable income of such a hypothetical economy become million Birr
a. 70
b. 60
c. 100
d. D. 170
e. None of the above

38. In some grounds the GDP statistics is criticized because GDP tends to:
a. overstate economic welfare because it does not include certain
nonmarket activities such as the productive work of housewives
b. understate economic welfare because it includes expenditures
undertaken to correct pollution
c. understate economic welfare because it does not take into account
informal economic activities
d. overstate economic welfare because it does not reflect improvements in
product quality
e. all of the above
39. Suppose in a hypothetical economy the number of employed workers (E) is
190 million, and the number of unemployed workers (U) is 10 million.
Moreover, the job finding rate (f) is 0.09 and the rate of job separation (s)
is 0.01. then
a. The natural rate of unemployment is less than the current
unemployment rate
b. The current unemployment rate is 10%
c. The natural rate of unemployment is 5%
d. The natural rate of unemployment is greater than the current
unemployment rate
e. None of the above
40. Assume Mr. X lost his job six months ago, and he has been actively looking for a
new job ever since. Then Mr. X would be considered as:
a. Unemployed C. A discouraged worker
b. Out of the labor force D. None of the above
Part three: try to attempt the following question accordingly

1. Consider a macroeconomy that produces two goods (X and Y)

Quantity Price (in Birr)
Product 2021 2022 2021 2022
X 5 6 20 25
Y 5 4 10 15
a. Calculate nominal and real GDP for 2021and 2022 using 2021 as the
base year. What is the GDP deflator in 2021 and 2022? What is the
corresponding inflation rate? (3pts)
b. Assume that the typical consumer’s basket of goods is given by the
quantities in
2021. Calculate the CPI for 2021 and 2022, as well as the CPI inflation rate
(2pts).
c. Argue that whether there exists improvement in real output from 2021 to
2022 (hint: use the data of real GDP from part a and compute the growth
rate of real output) (1pts)

2. Consider the following hypothetical details of spending in a given country.

➢ Interest Income = 150,000
➢ Wages = 67,000
➢ Gross Private Investment =124,000
➢ Business profits = 200,000
➢ Rental Income = 75,000
➢ Exports = 27,000
➢ Imports = 9,000
➢ Government Purchases = 156,000
➢ Personal Consumption = 304,000
➢ Net Factor Income = 12,000
A. Calculate the GDP of the country using Expenditure approach. (Hint: Use this formula
GDP = C+I+G+X-M)

B. Calculate the GNP of the country using the Expenditure approach.