Choose the correct answer for each question.

1. Which one of the following is a major macroeconomic objective of the government?

   1.   ?    Sustained economic growth
   2.   ?    Low and stable inflation
   3.   ?    High levels of employment
   4.   ?    All of the above

2. Which of the following categories would be included as part of gross domestic fixed capital investment in the UK economy?

   1.   ?    An increase in the value of business inventories (stocks)
   2.   ?    An increase in the rate of capital depreciation
   3.   ?    An increase in new commercial and residential property investment spending
   4.   ?    An increase in current government spending on the National Health Service

3. Which of the following statements is correct?

   1.   ?    Gross investment equals net investment minus depreciation
   2.   ?    Gross investment plus net investment equals depreciation
   3.   ?    Net investment equals gross investment minus depreciation
   4.   ?    Net investment minus depreciation equals gross investment

4. Which of the following items of expenditure are counted as part of government spending in the UK national income accounts?

   1.   ?    Grants made to students in full-time education
   2.   ?    Expenditure on the wages and salaries of teachers in state schools
   3.   ?    Interest payments on government debt
   4.   ?    Payments of the state pension to claimants

5. For the year 2001, in the British economy the percentages of consumption spending, gross investment, government purchases, and net exports (X-M) as a share of GDP were approximately as follows:

   1.   ?    68%, 17%, 18%, and –3%.
   2.   ?    40%, 25%, 20% and 15%
   3.   ?    75%, 10%, 15% and 5%
   4.   ?    64%, 30%, 8% and -2%

6. Per capita GDP is a baseline measure of the standard of living. It equals

   1.   ?    GDP divided by the total number of people employed in the economy + the unemployed
   2.   ?    GDP divided by the number of taxpayers
      
   3.   ?    GDP divided by the total population
   4.   ?    GDP divided by the adult population (aged 16+)

7. What is the difference between GDP and GNP?

   1.   ?    GNP measures output produced by both foreign and domestic factors of production within an economy
   2.   ?    GDP measures output produced by domestically-owned factors of production within the economy and in other countries.
   3.   ?    GDP measures output produced by all factors of production, foreign and domestic, within an economy
   4.   ?    GDP measures output produced by all factors of production, foreign and domestic, within an economy

8. Which one of the following is the best guide to the likely trend rate of economic growth for a country? An increase in

   1.   ?    Consumer Spending
   2.   ?    Net Exports
   3.   ?    Labour and Capital Productivity
   4.   ?    Government Spending on Welfare

9. Investment is a ___________of spending that ______________ the _____________ of capital

   1.   ?    flow; increases; stock
   2.   ?    flow; adds to; flow
   3.   ?    stock; decreases; stock
   4.   ?    stock; increases; flow

10. Real GDP is not a good indicator of economic welfare because it __________

    1.   ?    Excludes the value of income and spending in the shadown "black" economy
    2.   ?    Does not include the external costs and benefits created by externalities
    3.   ?    Measures the value of time spent working in producing goods and services but not the value of leisure time
    4.   ?    All of the above

11. In a small regional farming sector in a given year, farmers sell potatoes to factories for £10m Factories then manufacture and sell frozen chips and crisps to supermarkets fo £17m. Supermarkets sell these frozen chips and crisps to consumers for £21m
    
    From this information we can conclude that

    1.   ?    The value added by the factories is £11m during the year
    2.   ?    The value added by the farmers is £12m during the year
    3.   ?    The total value added is £48m
    4.   ?    The total value added is £21m

12. In country X in a given year the money value of national output is estimated to be £300m at current prices. If the GDP deflator (index of prices) is found to be 120, then real national output measured at constant base year prices will be

    1.   ?    £200m
    2.   ?    £250m
    3.   ?    £300m
    4.   ?    £320m

13. The chart below shows the annual rate of growth for the UK and the USA for each year since 1990
    
    
    
    From the data shown in the chart we can deduce that

    1.   ?    The United States has grown faster than the UK throughout the period since 1990
    2.   ?    The United States has a higher standard of living than the UK
    3.   ?    The United States experienced a recession in 2001
    4.   ?    The UK experienced a slowdown in 2001 and 2002

14. The chart below shows the annual growth of output in the UK manufacturing and service industries
    
    
    
    From the information we can conclude that

    1.   ?    Manufacturing industry exports more of its output than the service industries
    2.   ?    Manufacturing industry has experienced a recession in each year since 1994
    3.   ?    The service sector has grown at a constant rate from 1994 - 2002
    4.   ?    Manufacturing industry suffered a recession in 2001-2002