Macroeconomic
Theory and Policy
ECO𝟐𝟎𝟐Y
MICHAEL HO
Test 1 – Solutions
OCTOBER 𝟐𝟓, 𝟐𝟎𝟐𝟓
START TIME: 𝟏𝟏 AM
DURATION: 𝟕𝟓 MINUTES
IMPORTANT:
(i) A zero will be assigned if any page is separated from this test.
(ii) You must ensure your handwriting is legible and only non-programmable
calculators are allowed.
(iii) You must put all your answers to multiple-choice questions in the last page with
the bubble sheet provided or a 5-mark penalty will be imposed.
(iv) You may answer all questions in point form, but only in the designated space or
page(s).
Question 𝟏 –𝟐𝟎 𝟐𝟏 𝟐𝟐
(a) 4 4
(b) 40 7 8
(c) 12 Total
Sub-Total 𝟒𝟎 𝟏𝟏 𝟐𝟒 𝟕𝟓
, Answer all multiple-choice questions (2 marks each) and put all your answers in the last
page with the bubble sheet provided or a 5-mark penalty will be imposed.
1. Inflation represents ________.
(A) an increase in output (B) an increase in the aggregate price level
(C) a recession (D) an increase in the unemployment rate
(E) none of the above
2. Some economists believe that the source of European high unemployment in the
past two decades is
(A) labor market rigidities. (B) tight monetary policy.
(C) tight fiscal policy. (D) financial crisis.
(E) none of the above
3. Which of the following explains the relatively high growth rate of output in China
since 1980?
(A) Accumulation of capital. (B) Technological progress.
(C) A transition from central planning to a market economy. (D) All of the above.
(E) None of the above.
4. Suppose nominal GDP increased in a given year. Based on this information, we
know with certainty that ________.
(A) real output has increased
(B) the price level (GDP deflator) has increased
(C) either real output or the price level (GDP deflator) have increased
(D) real output and the price level (GDP deflator) have both increased
(E) real output has increased and the price level has decreased
5. Suppose you are provided with the following data for your country for a particular
month: 200 million people are working, 20 million are not working but are looking
for work, and 40 million are not working and have given up looking for work. The
official unemployment rate for that month is ________.
(A) 7.7% (B) 9.1% (C) 10% (D) 23% (E)
30%
6. During the late 1990s, Japan experienced reductions in the GDP deflator. Given
this information, we know with certainty that ________.
(A) real GDP fell during these periods
(B) real GDP did not change during these periods
(C) the overall price level in Japan decreased during these periods
(D) both real GDP and the overall price level decreased during these periods
(E) none of the above
Theory and Policy
ECO𝟐𝟎𝟐Y
MICHAEL HO
Test 1 – Solutions
OCTOBER 𝟐𝟓, 𝟐𝟎𝟐𝟓
START TIME: 𝟏𝟏 AM
DURATION: 𝟕𝟓 MINUTES
IMPORTANT:
(i) A zero will be assigned if any page is separated from this test.
(ii) You must ensure your handwriting is legible and only non-programmable
calculators are allowed.
(iii) You must put all your answers to multiple-choice questions in the last page with
the bubble sheet provided or a 5-mark penalty will be imposed.
(iv) You may answer all questions in point form, but only in the designated space or
page(s).
Question 𝟏 –𝟐𝟎 𝟐𝟏 𝟐𝟐
(a) 4 4
(b) 40 7 8
(c) 12 Total
Sub-Total 𝟒𝟎 𝟏𝟏 𝟐𝟒 𝟕𝟓
, Answer all multiple-choice questions (2 marks each) and put all your answers in the last
page with the bubble sheet provided or a 5-mark penalty will be imposed.
1. Inflation represents ________.
(A) an increase in output (B) an increase in the aggregate price level
(C) a recession (D) an increase in the unemployment rate
(E) none of the above
2. Some economists believe that the source of European high unemployment in the
past two decades is
(A) labor market rigidities. (B) tight monetary policy.
(C) tight fiscal policy. (D) financial crisis.
(E) none of the above
3. Which of the following explains the relatively high growth rate of output in China
since 1980?
(A) Accumulation of capital. (B) Technological progress.
(C) A transition from central planning to a market economy. (D) All of the above.
(E) None of the above.
4. Suppose nominal GDP increased in a given year. Based on this information, we
know with certainty that ________.
(A) real output has increased
(B) the price level (GDP deflator) has increased
(C) either real output or the price level (GDP deflator) have increased
(D) real output and the price level (GDP deflator) have both increased
(E) real output has increased and the price level has decreased
5. Suppose you are provided with the following data for your country for a particular
month: 200 million people are working, 20 million are not working but are looking
for work, and 40 million are not working and have given up looking for work. The
official unemployment rate for that month is ________.
(A) 7.7% (B) 9.1% (C) 10% (D) 23% (E)
30%
6. During the late 1990s, Japan experienced reductions in the GDP deflator. Given
this information, we know with certainty that ________.
(A) real GDP fell during these periods
(B) real GDP did not change during these periods
(C) the overall price level in Japan decreased during these periods
(D) both real GDP and the overall price level decreased during these periods
(E) none of the above
