EC102 Quiz 1 (Lecture 1)

LT 2018

(due by 9 PM Sunday, 14 January 2018)

Question 1.
Which of the following statements about GDP and Real GDP are correct?
a) GDP is the value of all goods produced by the economy in a given period

b) We are interested in GDP growth because it tells us how the cost of living
changes from one period to another.
c) Real GDP eliminates the undue influence of inflation by using constant base-
year prices

d) Real GDP eliminates the undue influence of inflation by using the prices of
a base-country

Question 2.
The Economist has been publishing the Big Mac Price Index since 1986. The
index keeps track of the average price of a hamburger sold in different coun-
tries. For example, the average price of a Big Mac in America in 2015 was
4.93; inChinaitwasonly2.68 at market exchange rates. The graph below shows
the relation between GDP per person and the Big Mac prices (all converted into
US dollars) across countries in 2014. The relation is very similar in all other
years.

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Given the graph above, which of the following statements is correct?
a) Big Macs tend to be more expensive in rich countries

b) There are opportunities for arbitraging (buying at a low price, selling at a

high price) Big Macs across countries
c) We can compare the output of Big Macs across countries by computing the
local-currency market value of all the Big Macs produced, and multiply by
the market exchange rate

d) In poor countries PPP consumption of Big Macs exceeds nominal consump-

tion

Question 3.
According to graphs available at www.gapminder.org (click on GAPMINDER
TOOLS. You can change the Y-axis variable by clicking on the Y-axis label,
then use Search) there is a positive correlation

a) Across countries between GDP per capita and life expectancy in 2015
b) Over time between GDP per capita and life expectancy (in most countries)
c) Across countries and over time between GDP per capita and infant mortality
d) Across countries and over time between GDP per capita and the adult liter-
acy rate
e) Across countries and over time between GDP per capital and CO2 emissions
per capita

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Question 4.
Which of the following statements about growth are correct?

a) GDP per person has been stagnant for most of human history and significant
growth is a recent phenomenon
b) The average British resident today almost certainly lives in greater comfort
than an aristocrat in the early 18th century

c) Some African countries have measured GDP per capita that are lower than
Britain’s 1,000 years ago
d) Growth in GDP per capita is always positive

Question 5.
Which of the following would be possible solutions to the shortage of non-
renewable resources?
a) Substitution towards renewable resources

b) Increase efficiency in the use of non-renewable resources

c) Recycling of non-renewable resources
d) Hold GDP at current levels