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Macroeconomics Quiz 1
1. The most significant factor determining a nation's consumption and saving is
a. the rate of inflation
b. technological change
c. the real rate of interest
d. disposable income
2. Kim's house has increased in value by almost 50% due to a booming housing market. Kim finds
he is saving less and spending more on items such as new furniture and appliances. This is an
example of
a. inflationary expectations
b. a marginal propensity to consume
c. the multiplier effect
d. the wealth effect
3. If consumption spending increases from $358 to $367 billion when disposable income increases
from $412 to $427 billion, the marginal propensity to consume is

a. 0.4 b. 0.6 c. 0.8 d. 0.9

4. For an economy as a whole,

a. Wages must equal profit.
b. Consumption must equal income.
c. Income must equal expenditure.
d. Consumption must equal saving.
5. In a simple circular-flow diagram,
a. households spend all of their income.
b. all goods and services are bought by households.
c. expenditures flow through the market for goods and services, while income flows
through the markets for the factors of production.
d. all of the above
6. In the economy of Denmark in 2015, consumption was $700, exports were $200, government
purchases were $300, imports were $150, and investment was $400. What was Denmark's GDP
in 2015?

a. $1350 b. $1450 c. $1050 d. $1750

7. Which of the following statement is correct:

a. Households supply in the product market
b. Businesses earn income through the factor market
c. Businesses supply in the product market and households supply in the factor market
d. Businesses demand in the product market and households demand in the factor market
8. The table below shows the quantity and price of candy and corn produced and sold in Country C.
[3 marks]

a. Calculate the nominal GDP for Country C in year 2. (Hint: Remember that GDP is the
total value of the final goods and services produced in a country in that year.)

9. Use the table below to answer the following questions: [4 marks]

a. What is the real GDP in Year 3?

b. What is the real GDP in Year 4?

10. Draw the circular flow diagram of an economy. Clearly label the following: [6 marks]
 Households; businesses; government; financial intermediaries; foreign markets
 Arrows showing the flow of products; arrows showing the flow of money
 Factor market; product market