ESCP Torino Macroeconomics BIM 2

Some practice multiple choice questions

1. Which of the following are injections to the circular flow of money in
an economy

A Government welfare benefits paid to citizens (e.g.

unemployment benefit)

B Company Profits Tax proceeds

C Inward flows to the economy of loanable funds from abroad

D Imports of goods and services from abroad

2. In a particular economy A we know that GDP was €100bn for 2020.

We also know that residents of this economy A have earned €15bn
from abroad through their work or investments outside of the country
in 2020; and that residents of other countries have earned €10bn in
2020 in country A. From this information it follows that GNI in
country A in 2020 was

A €85bn

B €90bn

C €105bn

D €115bn

3. PPP (Purchasing Power Parity) exchange rates should be used when we

want to compare

A Average labour productivity across countries

B Real standard of living across countries

C Labour productivity in a given country over time

D When estimating the value of exports of a given economy

 4. The following equations have been estimated for an economy that is
currently far from being at full employment
Consumption function C = 0,75Yd +400 where Yd=disposable income
1
T= Y Im = 0,4Y I = 800 G = 900 X = 600
3
C=consumption, T=total tax yield; Im=Imports; I=Investment;
G=Government spending; X=Exports; Y = real GDP

The level of equilibrium income in this economy will be

A 2700

B 3000

C 4154

D 5400

5. If the old classical Quantity Theory of Money holds true for an

economy and if over time the full employment output of the economy
is growing at a rate of 3% per annum then for price inflation to be 2%
per annum over time the money supply Ms will need to grow at an
annual rate of

A 1%

B 2%

C 4%

D 5%

6. If after the Central Bank increases the cash base of an economy by

€1million it observes a total money supply increase of €50million then the
minimum cash reserve ratio of the banks must be approximately
A 1%
B 2%
C 5%
D 20%