1.

National income is primarily calculated by:

a) Adding up all government expenditures
b) Summing the value of all final goods and services produced in an economy
c) Measuring the savings of households
d) Evaluating only net exports

2. Which of the following is not a component of GDP?

a) Consumption
b) Investment
c) Net imports
d) Government spending

3. In the business cycle, the period where economic activity is at its lowest is called:
a) Peak
b) Trough
c) Expansion
d) Contraction

4. A decrease in aggregate demand is most likely to:

a) Increase inflation
b) Decrease unemployment
c) Lower GDP
d) Improve the trade balance

5. In a labor market, if the wage rate is above equilibrium, this will result in:
a) Full employment
b) Unemployment
c) Labor shortage
d) None of the above

6. Inflation measures:
a) The total value of goods and services produced in a year
b) The rate at which the general level of prices for goods and services is rising
c) The change in exchange rates over time
d) The relationship between interest rates and bond prices

7. Unemployment that occurs because workers are searching for jobs that best suit their skills is
called:
a) Structural unemployment
b) Frictional unemployment
c) Cyclical unemployment
d) Seasonal unemployment

8. The Phillips Curve illustrates the trade-off between:

a) Inflation and unemployment
b) GDP growth and interest rates
c) Aggregate demand and supply
d) Government spending and taxation
9. Which of the following describes monetary neutrality?
a) Changes in the money supply affect real variables like output
b) In the long run, changes in the money supply do not affect real variables
c) The central bank has no role in controlling inflation
d) Money has no value unless backed by gold

10. A country with a trade surplus:

a) Exports more than it imports
b) Imports more than it exports
c) Has a balanced trade account
d) Has no foreign debt

11. Fixed exchange rate systems require:

a) Central bank intervention to maintain currency value
b) No government involvement
c) Frequent changes in currency value
d) Flexible adjustment based on market forces

12. Aggregate supply in the short run is:

a) Vertical
b) Upward sloping
c) Downward sloping
d) Horizontal

13. Fiscal policy involves:

a) Adjusting interest rates
b) Changing tax rates and government spending
c) Controlling the money supply
d) Managing exchange rates

14. Which of the following is considered expansionary monetary policy?

a) Increasing taxes
b) Raising interest rates
c) Reducing the money supply
d) Lowering interest rates

15. If a country’s currency depreciates:

a) Exports become more expensive for foreign buyers
b) Imports become cheaper for domestic buyers
c) Exports become cheaper for foreign buyers
d) The country’s trade balance will worsen

16. The Marginal Propensity to Consume (MPC) is used to calculate:

a) Aggregate demand
b) The multiplier effect
c) GDP growth
d) National income
17. When aggregate demand increases beyond the economy's potential output, the result is:
a) Full employment
b) Demand-pull inflation
c) Cost-push inflation
d) Deflation

18. Open economies are characterized by:

a) No international trade
b) Only exporting goods and services
c) Both exporting and importing goods and services
d) Fixed exchange rates

19. The role of government in macroeconomics includes:

a) Controlling all prices in the economy
b) Managing fiscal and monetary policies to stabilize the economy
c) Ensuring that markets always operate at equilibrium
d) Setting currency exchange rates

20. In the context of ethics and social responsibility, an organization should:

a) Maximize profits regardless of societal impact
b) Only focus on its shareholders’ interests
c) Evaluate the effects of its decisions on society and act responsibly
d) Avoid interdisciplinary thinking to reduce complexity

21. If the velocity of money is constant, and the money supply increases, what will likely happen
in the long run?
a) Real GDP will increase
b) Prices will increase
c) The unemployment rate will fall
d) Interest rates will decrease

22. Crowding out refers to:

a) The government borrowing reducing private investment
b) Increased government spending boosting private investment
c) Tax reductions leading to increased consumer spending
d) Central bank actions lowering inflation

23. A decrease in the unemployment rate is typically associated with:

a) A decrease in inflation
b) A rise in inflation
c) A reduction in GDP
d) A balanced trade deficit

24. Floating exchange rates are determined by:

a) Central bank policies
b) Market forces of supply and demand
c) Fixed international agreements
 d) Gold reserves held by the country

25. What is one way to correct a trade deficit?

a) Increase government spending
b) Depreciate the country’s currency
c) Raise interest rates
d) Increase imports

26. The multiplier effect implies that:

a) Government spending leads to equal increases in GDP
b) An initial spending increase leads to a larger increase in GDP
c) Taxes reduce GDP by the same amount collected
d) Inflation grows exponentially over time

27. If a country is experiencing stagflation, it is facing:

a) High unemployment and low inflation
b) Low unemployment and high inflation
c) High inflation and high unemployment
d) High GDP growth and deflation

28. Which of the following can shift the long-run aggregate supply curve?
a) A decrease in taxes
b) An increase in technology
c) A change in consumer expectations
d) An increase in the money supply

29. The interest rate is determined in the short run by:

a) Fiscal policy decisions
b) The loanable funds market
c) Central bank money supply decisions
d) The trade balance

30. If a country experiences hyperinflation, the likely cause is:

a) Over-regulation of its financial markets
b) A dramatic reduction in the money supply
c) Excessive growth in the money supply
d) Trade balance surplus

Open-Ended Questions (10 Questions)

31. Explain how the components of GDP (C, I, G, NX) influence economic growth.
32. Discuss the impact of inflation on savings, investments, and purchasing power.
33. How does unemployment affect the overall economy, and what policies can reduce it?
34. Compare fixed and floating exchange rate systems, highlighting their advantages and
disadvantages.
35. Evaluate the role of fiscal policy during a recession. Provide examples.
36. What are the key factors that influence aggregate demand and supply in an open economy?
37. Analyze the relationship between monetary policy and inflation control.
38. Describe the Phillips Curve and discuss its relevance in modern macroeconomic policy.
39. Explain how ethical and socially responsible decisions by businesses can influence economic
development.
40. Provide an example of how an interdisciplinary approach to macroeconomics supports better
decision-making in business and government.

Calculation-Based Questions (15 Questions)

41. Calculate nominal GDP for an economy where the quantity of goods produced is 10,000 units,
and the average price per unit is $50.
42. If the real GDP of a country in 2023 is $2 trillion and the GDP deflator is 120, calculate the
nominal GDP.
43. A country’s MPC is 0.75. Calculate the value of the spending multiplier.
44. The CPI in 2023 is 110, and in 2022 it was 100. Calculate the inflation rate.
45. Calculate the unemployment rate if the labor force is 200 million and 20 million are unemployed.
46. Given a trade balance where exports are $500 billion and imports are $700 billion, calculate the
trade deficit.
47. If the velocity of money is 6 and the money supply is $2 trillion, calculate the nominal GDP.
48. Calculate the real exchange rate if the nominal exchange rate is 1.2 (foreign/domestic), the foreign
price level is 150, and the domestic price level is 100.
49. A government increases its spending by $200 billion, and the multiplier is 4. Calculate the total
change in GDP.
50. Calculate the real interest rate if the nominal interest rate is 5% and the inflation rate is 2%.
51. If nominal wages increase by 4% and inflation is 3%, calculate the real wage growth.
52. The reserve ratio is 10%. Calculate the maximum possible increase in the money supply if the
central bank injects $100 million.
53. An economy’s investment is $300 billion, government spending is $200 billion, and private
consumption is $1 trillion. If exports are $500 billion and imports are $600 billion, calculate GDP.
54. Calculate the GDP deflator if nominal GDP is $5 trillion and real GDP is $4 trillion.

Calculation-Based Questions (15 Questions)

55. Calculate nominal GDP for an economy where the quantity of goods produced is 10,000 units,
and the average price per unit is $50.
56. If the real GDP of a country in 2023 is $2 trillion and the GDP deflator is 120, calculate the
nominal GDP.
57. A country’s MPC is 0.75. Calculate the value of the spending multiplier.
58. The CPI in 2023 is 110, and in 2022 it was 100. Calculate the inflation rate.
59. Calculate the unemployment rate if the labor force is 200 million and 20 million are unemployed.
60. Given a trade balance where exports are $500 billion and imports are $700 billion, calculate the
trade deficit.
61. If the velocity of money is 6 and the money supply is $2 trillion, calculate the nominal GDP.
62. Calculate the real exchange rate if the nominal exchange rate is 1.2 (foreign/domestic), the foreign
price level is 150, and the domestic price level is 100.
63. A government increases its spending by $200 billion, and the multiplier is 4. Calculate the total
change in GDP.
64. Calculate the real interest rate if the nominal interest rate is 5% and the inflation rate is 2%.
65. If nominal wages increase by 4% and inflation is 3%, calculate the real wage growth.
66. The reserve ratio is 10%. Calculate the maximum possible increase in the money supply if the
central bank injects $100 million.
67. An economy’s investment is $300 billion, government spending is $200 billion, and private
consumption is $1 trillion. If exports are $500 billion and imports are $600 billion, calculate GDP.
68. Calculate the GDP deflator if nominal GDP is $5 trillion and real GDP is $4 trillion.
69. A Phillips Curve scenario shows inflation increasing by 2% while unemployment drops by 1%.
Calculate the sacrifice ratio.
70. A Phillips Curve scenario shows inflation increasing by 2% while unemployment drops by 1%.
Calculate the sacrifice ratio.