Test bank Chapter one

wallsgloomyManagement

Oct 28, 2013 (3 years and 7 months ago)

183 views

Test bank


Chapter one


1.

Which of the following in is
true

of the
Production Possibilities frontier (PPF) for a closed
economy?


a.

A high rate of investment guarantees a strong outwards movement of the PPF over
time

b.

A country can p
roduce outside the PPF

c.

At the frontier investment is made possible by saving

d.

The economy may consume out
side the PPF if households
save

more out of their
incomes
.


2.

Using a simple PP
F,

a country that saves and invests 50% of its income is likely to find
a
ll
but one

of the following:



e.

Citizens have a poor current standard of living.

f.

The sacrifices made today are too great in relation to the benefits in the future.

g.

Additional capital goods have a high opportunity cost.

h.

Economic growth will be slow.



3.

The
P
PF

shows the combinations of investment and consumption goods which may be
produced with a country’s fixed resources.
Which is
not true
?


a.

more investment goods should allow more consumption in the future

b.

with trade, an economy may consume beyond
the PPF

c.

po
ints inside the
PPF

represent an
in
efficient use of resources

d.

with trade, an economy may
produce

beyond
the PPF


4.


In a closed economy it must be true

that


a.

the

economy is always on the PPF
.

b.

it is possible to reach a point beyond the PPF
.

c.

national saving
equals national investment
.

d.

i
nvestme
nt will always cause the PPF to

move out
.


5.

Com
petitive markets
,

in

theory
,

ensure
all but which one

of the following


a.

that the economy is always on the

PPF
.

b.

that the outp
ut is produced using technically
efficient

meth
ods
.

c.

that the economy is all
ocatively
efficient and produces what consumers demand
.

d.

that out
put is fairly distributed
.


6.

The macroeconomy is
comprised of four major markets
.
Whic
h is
not
true
?


a.

All these markets are in
ter
dependent
.

b.

Eac
h has its own
demand a
nd supply, equilibrium price and quantity
.

c.

The market for dairy products is one of these market
s
.

d.

The market for labour and the g
oods market are closely related
.




7.

In the circular flow of income
which is not true
?



a.

Money travels to households in exchange

for goods.

b.

Households supply land, capital and labour to firms.

c.

Money is a
stock,
income is a
flow.

d.

The monetary value of t
otal output
equals that

of total income




8.

If the terms of trade of a country like New Zealand fall, it may be that


e.

export prices h
ave risen less quickly than import prices
.

a.

the price of a critical import has fallen
.

b.

overseas trading partners have experienced a boom which has increased demand for primary
produce
.

c.

all of the above
.


9.

Which of the following statements is
not true

concern
ing New Zealand’s cycles of business
activity
?


a.

Improving terms of trade have caused boom conditions in the past
.

b.

Two consecutive quarters of negative growth constitute a depression
.

c.

Short ter
m growth is often high but long
-
term trend growth has been low
.

d.

Recovery and boom are often accompanied by speculation in real estate
.


10.


The balance of trade is


a.

influenced by the exchange rate and the terms of trade

b.

Is the difference between national income and national expenditure

c.

Is repres
ent
ed by exports minus imp
orts

(X
-
M)

d.

All of the above


11.

Which of the following counts as part of investment in GDP calculations?


a.

Expenditures by government on parliamentarians.

b.

The eastern highway in Auckland built by a public/private partnership.

c.

Purchases of Auckland Airport shar
es by investors.

d.

Increases in term deposits.



12.


Which one of the following would not be directly included in GDP?



a.

The production of kiwifruit for export.


b.

The purchase by public hospitals of sticking plaster.


c.

Sales of lambs to the freezing work
s.


d.

Consumer expenditures on haircuts.


13.

Which of the following does not count as investment in GDP calculations:



a.

Expenditure by firms on new typewriters to replace worn
-
out equipment.


b.

The increase in savings held in investment accounts at the b
anks.


c.

The purchase of new homes.


d.

The increase in unsold stocks of wool.


14.

The following represent payments to people:



(i)

The profits of a dealer in used furniture.


(ii)

The money an architect gets from selling his car.


(iii)

Student Tertiary Al
lowances.


(iv)

Lecturers’ salaries.


Which combination would represent payments all of which would be included in national income
statistics?



a.

(i) and (ii)


b.

(i), (ii) and (iv)


c.

(iii) and (iv)


d.

(i) and (iv)


15.

Conceptually GDP can be measured by

all but which one of the following:



a.

The sum of total sales of all firms


b.

The sum of all the factor payments


c.

The sum of C + I + G plus the difference between exports and imports


d.

The total of value added by all firms



16.


In the circular flow

model of economic activity which of the following are all flows?


a.

Changes in unsold goods, Investment, overseas debt

b.

Saving, Balance of Payments Current Account Deficit, net exports

c.

Money, national output, net taxes

d.

Wealth, GDP, government sp
ending



17.


New Zealand’s Gross Domestic Product (GDP) is all but which one of the following?


a.

The annual sum of final output produced domestically

b.

Gross National Expenditure plus the balance of trade

c.

The annual sum of all goods and services availa
ble to New Zealanders

d.

Gross National Product (GNP) less net international investment income