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08-Al-Econ-Macro-Past Paper

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08-Al-Econ-Macro-Past Paper

    2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

    Unit 1 National Income Accounting

    1. Which of the following are included in the national income of Hong Kong? (1) government spending on public assistance.

    (2) commission from the sale of second-hand cars.

    (3) salaries of the employee of the Jockey Club.

    (4) receipts form the sale of stocks and shares.

A. (1) and (2) only

    B. (1) and (4) only

    C. (2) and (3) only

    D. (3) and (4) only (90-01)

    Refer to the following national income statistics of a hypothetical economy.

     ($ billion)

     Consumers’ expenditure 1150

     Government final consumption 380

     Gross domestic fixed capital formation 340

     Value of physical increase in stocks and work in progress 30

     Exports of goods and services 550

     Imports of goods and services 540

     Net property income from abroad 10

     Taxes on expenditure 300

     Subsidies on production units 40

     Capital consumption 220

2. The gross national product at market prices is

    A. $1 880 billion.

    B. $1 920 billion.

    C. $2 140 billion.

    D. $2 400 billion. (91-11)

3. The difference between national income at market prices and national income at factor cost is

    A. $220 billion.

    B. $260 billion.

    C. $300 billion.

    D. $340 billion. (91-12)

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2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

    4. Below are the national income statistics of an economy in a certain year:

     $ million

     Wages 60

     Rent 50

     Depreciation 30

     Interest 25

     Expenditure taxes 20

     Dividend 15

     Subsidies 11

     Retained profits 10

     Profits tax 8

    The amount of national income at factor cost is

    A. $159 million.

    B. $160 million.

    C. $168 million.

    D. $177 million. (92-14)

5. Which of the following items should be excluded from GNP at market prices in order to calculate

    disposable personal income?

    (1) indirect business taxes

    (2) income tax

    (3) retained earnings

    (4) transfer payments

    (5) subsidies

A. (1), (2) and (3) only

    B. (1), (2) and (4) only

    C. (1), (3) and (5) only

    D. (2), (4) and (5) only (93-01)

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    2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

6. Consider a closed economy with expenditure given by:

     C = 1,000 (Consumption)

     I = 400 (Investment)

     G = 200 (Government Expenditure)

     Ta = 100 (Tax)

     Tr = 50 (Transfer Payment)

    The gross national product of the economy is

    A. 1,450

    B. 1,500

    C. 1,550

    D. 1,600 (94-29)

7. Which of the following statements is/are correct?

    (1) Gross national product (GNP) is always larger than net national product. (2) GNP is always larger than gross domestic product (GDP). (3) GNP at current market prices is always larger than GNP at constant market price.

A. (1) only

    B. (1) and (2) only

    C. (1) and (3) only

    D. (1), (2) and (3) (95-01)

8.

    GDP Components $ billion

    Private consumption expenditure 20

    Gross domestic fixed capital formation 8

    Government consumption expenditure 10

    Capital consumption allowances 2

    Indirect taxes 3

    Subsidies 4

    Net export o goods and services -3

    Net income from abroad 6

    Refer to the above table. The GNP at factor cost (in billion $) is A. 36.

    B. 41.

    C. 42.

    D. 44. (95-02)

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    2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

    9. Which of the following transactions is regarded as investment in the national income accounts?

    thA. The Hong Kong Cultural Centre buys a painting of the 18 century for $5 million.

    B. You buy 10,000 shares of Hong Kong Telecom stock.

    C. Your father buys a newly constructed flat for $7 million.

    D. All of the above. (96-05)

    10. Suppose gross national product increases but gross domestic product falls. Then the net income

    from abroad

    A. is negative.

    B. is positive.

    C. increases.

    D. decreases. (96-06)

11. Real gross domestic product is NOT a good measure of the welfare of a country because it does not

    take into account

    (1) the population size.

    (2) non-market transactions.

    (3) the change in the price level.

A. (1) and (2) only

    B. (1) and (3) only

    C. (2) and (3) only

    D. (1), (2) and (3) (96-28)

12. Study the following information of an economy:

     $ million

     Consumption expenditure 2,000

     Indirect tax 1,200

     Gross domestic fixed capital formation 1,000

     Depreciation 300

     Gross national product 6,300

     Subsidies 200

    What is the net national product at factor costs?

    A. $3,300m

    B. $4,300m

    C. $5,000m

    D. $7,100m (97-27)

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2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

13. Gross Domestic Product (GDP) Complements $ billion

     Private consumption expenditure 50

     Government consumption expenditure 30

     Net domestic fixed capital formation 20

     Increase in inventory 5

     Depreciation 10

     Indirect taxes 4

     Subsidies 3

     Net exports 15

     Net profit 12

     Profits tax 6

Refer to the above table. The GDP at factor cost (in billion $) is

    A. 119

    B. 123

    C. 129

    D. 150 (98-24)

14. Refer to the table below.

     Gross Domestic Product (GDP) Complements $ billion

     Private consumption expenditure 160

     Government consumption expenditure 60

     Gross domestic fixed capital formation 20

     Increase in inventory 5

     Depreciation 4

     Indirect taxes 8

     Subsidies 2

     Net exports of goods and services 40

     Net income from abroad -10

    The net national product at factor cost (in billion $) is A. 265

    B. 275

    C. 277

    D. 285 (00-07)

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    2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

15. Country X imports workers from other countries but does not export any workers to other countries.

    Suppose the gross domestic product (GDP) of country X is $280 billion. If imported workers earn $80 billion and they remit $60 billion of their income to their home countries, the GNP (in billion $)

    of country X is

    A. 140

    B. 200

    C. 220

    D. 260 (00-25)

16.

    Gross National Product (GNP) Components $ billion

    Private consumption expenditure 30

    Gross domestic fixed capital formation 10

    Government consumption expenditure 12

    Capital consumption allowances 4

    Indirect taxes 2

    Subsidies 3

    Net exports of goods and services -6

    Net income from abroad -4

    Refer to the above table. The GNP at factor cost (in $ billion) is A. 42

    B. 43

    C. 46

    D. 50 (01-07)

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    2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

17. Refer to the table below:

Gross National Product (GNP) Components $ billion

    Private consumption expenditure 100

    Government consumption expenditure X

    Gross domestic fixed capital formation 40

    Increase in inventory 10

    Depreciation 20

    Net exports 5

    Indirect taxes 30

    Subsidies 15

    Net income from abroad 8

    If net national product at factor cost is $140 billion, the value of X is A. 10

    B. 12

    C. 20

    D. 28 (02-01)

    18. If the growth rate of per-capita real Gross Domestic Product (GDP) is greater than that of the real

    GDP as well as that of the per-capita nominal GDP, we can conclude that A. both the population and the general price level have fallen.

    B. the growth rate of population is higher than that of real output and the standard of living has

    fallen.

    C. the growth rate of population is lower than that of real output and the standard of living has risen. D. the inflation rate is greater than the growth rate of real output. (02-02)

    19. Which of the following statements about gross domestic product (GDP) is/are correct? (1) Real GDP is always equal to nominal GDP in the base year.

    (2) Everyone is worse off when the growth rate of real GDP is negative.

    (3) When the growth rate of nominal GDP is greater than the inflation rate, real GDP decreases.

A. (1) only

    B. (1) and (2) only

    C. (2) and (3) only

    D. (1), (2) and (3) (03-01)

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    2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

    20. The word gross in the gross national product indicates that no deduction has been made for A. exports and imports.

    B. capital consumption allowance.

    C. profits tax.

    D. a change in inventories. (03-07)

21.

    Gross Domestic Product (GDP) Components $ billion

    Private consumption expenditure 300

    Government consumption expenditure 50

    Gross domestic fixed capital formation 40

    Change in inventory -20

    Total exports 80

    Total imports 120

Which of the following statements about the above table is correct?

    A. The balance of payments is not balanced because the total export value is different from the total

    import value.

    B. The value of total market transactions in the economy is $330 billion.

    C. There is insufficient data in the table to reflect the living standard of the people in the economy. D. If $50 billion of sales tax is imposed in the economy, the value of GDP at factor costs will be

    $280 billion. (04-02)

    22. In an economy the growth rate of nominal GDP is positive and falling while the population growth

    rate and the inflation rate are both negative. It means that

    A. both per capita nominal GDP and real GDP are rising.

    B. the growth rate of real GDP must be rising.

    C. the per capita real GDP must be falling.

    D. the fall in nominal GDP growth rate will lead to a fall in aggregate demand. (04-02)

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2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

    23. Consider the following information on an economy:

    Growth rate

    (relative to previous year) (%)

    Year 1 Year 2

    Nominal gross domestic product -3 0

    (Nominal GDP)

    General Price Level -4 -2

    Population 2 -1

    Which of the following about the economy is FLASE? A. The nominal GDP in the above two years is the same. B. The real output increases in year 2.

    C. The general price level is decreasing at a decreasing rate. D. The per capita real GDP decreases in year 2. (05-03)

    MC Answers on National Income Accounting

    C B B C A D A C C C

    A C C A B B B A A B

    C A D

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2008-AL-ECON-II Past Questions on Macroeconomics

    Prepared by A.Chow

    National Income Accounting

1992 Q. 1

    As measure of welfare, GNP tends to overstate that of the newly industrialized countries and understate that of the less developed countries.Explain. (12 marks)

    GNP accounts do not include non-market transactions. For example, housewives services are not counted. As a country develops, there will be a higher of labour specialization. The ratio of market to non-market transactions will also rise. Less developed countries tend to have proportionally bigger non-market sectors as compared to newly industrialized countries, therefore, the measured GNP tend to understate the welfare of the less developed countries.

    Also it is assumed that market prices approximate the social value of output. Measured GNP overstates the social value of output of negative externalities (such as pollution) exist but they are not included in the private costs. Because newly industrialized countries tend to have proportionally more production with negative externalities, their measured GNP tends to overstate their welfare.

1999 Q. 5

    (a) Define Gross domestic product (GDP) and gross national product (GNP) and

    explain their difference in an open economy. Must the economy be closed for GDP

    to equal GNP? (5 marks)

    GDP can be defined a measure of the total market value of final goods and services of all resident producing units of a country or territory in a specified period, before deducting allowance for consumption of fixed capital.

    By resident producing units, we mean all producing units which based their major economic activities within the territory, thus the actual production activities may take place within or outside the territory of the economy and the factors may be supplied by domestic residents or non-residents.

    By GNP, we mean the total market value of final goods and services produced by the citizens, or residents, of a country within a period of time, usually a year.

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