Quiz:1 Sections D & E and PGP Finance-03

Question 1) The value of which of the following is counted in the India’s gross domestic
product?
A. Childcare a father provides for his child
B. An automobile produced in Sweden by an Indian firm
C. Clean air
D. A service produced in the India and sold in Europe
E. Medical services not provided due to preventative health care

Question 2) Which of the following best explains why transfer payments are not included in
the calculation of gross domestic product?
A. Recipients of transfer payments have not produced or supplied goods and services in
exchange for these payments.
B. Transfer payments are a government expenditure, and government expenditures are
excluded from gross domestic product.
C. Transfer payments are used to pay for intermediate goods, and intermediate goods are
excluded from gross domestic product.
D. Recipients of transfer payments are usually children, and income earned by children is
excluded from gross domestic product.
E. Recipients of transfer payments are sometimes not citizens of the India.

Question3)
If the nominal gross domestic product (GDP) of the nation of Ferrara increased in 2022
relative to the previous year, it must be true that in Ferrara in 2022:
A. The real GDP have increased
B. Neither the price level nor the real GDP has increased.
C. The price level decreased by a larger percentage than did the real output
D. The price level increased by a smaller percentage than did real output.
E. The price level and/or the real output has increased.

Question 4) If real gross domestic product is increasing at 6 percent per year and nominal
gross domestic product is increasing at 5 percent per year, which of the following is
necessarily true?

A. Unemployment is decreasing.
B. The economy is in a recession.
C. The economy is in an expansion.
D. The price level is decreasing.
E. The price level is increasing.

Question 5)
Assume that the nominal interest rate is 8 percent. Borrowers and lenders expect the rate of
inflation to be 3 percent, and the growth rate of real gross domestic product is 4 percent. The
real interest rate is

A. 5%
B. 3%
 C. 2%
D. 7%
E. None of the above

Question 6)
Which of the following is not in the labor force?

A. Charles, who wants to work but has given up looking for work until the weather
improves.
B. Mary, who works part-time but wishes for work full time.
C. John, who has a graduate degree but is working as a waiter.
D. Carl, who does not have work but applied for work at a local factory
E. Melissa, who just graduated from business school and is currently seeking
employment as an accountant.

Question 7) Suppose that the CPI price index rises from 100 to 200 in the year 2020, keeping
the base-year 2011-12. From this information we may conclude that:

A. Each person’s real income remains the same.

B. Consumer incomes are doubled.
C. The prices in an average consumer’s market basket are doubled.
D. All consumer goods prices are doubled.
E. All prices in the economy are fallen half

Question 8) The major difference between real and nominal gross domestic product (GDP) is
that GVA at basic prices:
A. includes government transfer payments
B. holds price level constant
C. includes net taxes and subsidies
D. measures only the value of all goods and services that are consumed
E. measures the value of all production by nationals regardless of location

Question 9) Which of the following statements best exemplifies the concept of structural
unemployment?

A. New entrants into the labor force have trouble finding jobs.
B. Workers leave their current jobs to find better jobs.
C. Workers are laid off because aggregate demand has declined
D. Workers are fired because consumers have reduced their total expenditures.
E. Workers are not able to find job because their skills are no longer in demand or
obsolete.

Question 10) When an individual who was unemployed finds work, which of the following is
true?
A. The unemployment rates falls and the labor force participation rate falls.
B. The unemployment rate falls and the labor force participation rate increases.
 C. The number of discouraged workers falls and the labor force participation rate
increases.
D. The unemployment rate falls and the labor force participation rate remains unchanged.
E. The population increases and the labor force participation rate increases.

Question 11) Which of the following will add to unemployment in a country?

A. Radha quits her job as a teacher to go to law school.
B. John, a chef, is demoted from being a chef to being a waiter in a restaurant.
C. Amir, having looked for work for two months, quits looking and decides to vacation.
D. Dinesh, with a large family to support, has his hours of work cut from 40 to 20 per
week.
E. Nafisa, finishes nursing school, and begins to look for full time work.

Question 12) While the producer is calculating the intermediate cost of the input, he should
calculate
A. At the time of purchase of the intermediate input from the seller
B. At the time of using the intermediate input for production of final output using
basic prices
C. The average cost of the inventory required till the input is used in the production
of final output
D. The highest price experienced during the purchase and use in the production of
final goods
E. At the time of using the intermediate input for production of final output using
purchaser’s prices.

Question 13) Which of the following will increase the investment component of GDP, as
measured from the final goods approach, in a particular time period?
A. Shoes produced and sold to the government for use by the military.
B. New automobiles purchased by citizens.
C. Shoes produced within the country but not sold during the financial year.
D. Transfer of funds from a parent to a child for educational expenses.
E. Selling of canned soup from a firm’s inventory.
Question 14) GDP deflator can be calculated using
A. Market basket approach using selected commodities at current year and at base year
B. Market value of all goods and services at current year and Market value of all goods
and services at base year price
C. Market value of all goods and services at current year and Market value of all goods
and services at previous year price
D. Market value of all goods and services at current year and Market value of non-
volatile commodities which are measured at a base-year
E. Market value of market basket at current year price and Market value of all goods
and services at previous year price
Question 15) Natural rate of unemployment which is around 6% contains all except of the
forms of unemployment
A. Seasonal Unemployment
B. Frictional Unemployment
C. Structural Unemployment
D. Cyclical unemployment
E. Real wage unemployment

Answer Key
1) D
2) A
3) E
4) D
5) A
6) A
7) C
8) C
9) E
10) D
12) E
13) C
14) B
15) D