Question

Please give a brief justification for the correct answer you select:

1. Macroeconomics is concerned with

1. Only long-run trends in economic activity.
2. Only short-run fluctuations in the business cycle.
3. Both long-run trends and short-term fluctuations in economic activity.
4. Only with changes in overall price level.

2. Which one of the following is not a reason for a country collecting national income statistics?

1. to calculate changes in the cost of living
2. to estimate the rate of economic growth
3. to calculate changes in the standard of living
4. to compare standards of living between countries

3. An example of a transfer payment is:
   1. An interest payment on a General Motors’ bond
   2. The added value of stock from the time it was bought to the time it was sold
   3. A Social Security retirement benefit
   4. The salary paid to a member of the armed forces

4. The service a baby-sitter performs when she stays at home with her baby brother

      while her parents are out and she is not paid for it, is excluded from the National

      Income because:

A)   This is a nonmarket transaction

B)    This is a nonproduction activity

C)   This is a noninvestment transaction

D) Double counting would be involved

5. Which of the following represents a leakage from the circular flow?
   1. Exports
   2. Investment
   3. Interest paid on bank loans
   4. Imports

6. Which of the following would NOT be counted in 2003’s GDP?

1. The value of a 2001 car you purchase from a car dealer in 2003.
2. The 2003 salary of a used car salesperson.
3. The commissions earned by a real estate agent in selling houses built prior to 2003.
4. The value of a computer manufactured in 2003 but not sold in 2003.

Answer 1

Question 1) option C

Macroeconomics is concerned with analysing the changes in macroeconomic variables  like employment , aggregate expenditure , inflation etc both in the long run and short run since it is the analysis of short run which allows us to form policies/ expectation about long run .

Question 2) option A

Collection data on income of  nation would not enable us to calculate the changes in the cost of living

Question 3) option C

Transfer payments are on sided transaction . Social  security retirement benefits are transfer payment as the individual receives the payment from the government but does not provide any services in return .

Question 4 ) option A

Since the services of a house member are employed to do a work in the house , the transaction does not enter the market and is therefore not included in gdp calculation .

Question 5) option D

Imports represent a leakage from the system as income earned at home is spent on goods produced abroad rather than on goods produced at home  representing a leakage from the income flow.

Question 6) option A

Value of car produced in 2001  will not be included in 2003 gdp calculation as the value of car would have been included in 2001 , the year it was produced . Inclusion of its value in 2003 would lead to double counting