Sample Questions

Multiple Choice

1) Which of the following statements about GDP is FALSE?

1. It includes bread sold to a supermarket customer.
2. It does not include child care provided by parents.
3. It includes stocks sold on the NYSE.
4. It does not include the sale of flour by a miller to a baker.

2) If the US economy quadruples in size in 35 years, what is the approximate average annual growth rate of GDP?

1. 2%
2. 4%
3. 6%
4. 8%

3) Which of the following is LEAST likely to lead to an increase in the level of output in the economy?

1. An increase in management training programs
2. An inflow of immigration
3. New government regulations requiring a decrease in pollutant emissions from factories
4. Computerization of businesses nationwide

4) A change in which of the following would not affect demand for U.S. exports?

1. real exchange rate
2. tastes of U.S. consumers for foreign products
3. the level of income abroad
4. tariffs imposed by foreign countries

Short Answer

1) The current price of a regular O’Ronalds burger in the Euclidean Union is 3 euclos. O’Ronalds produces and sells the very same kind of burger in the country of Assymetrica at a price there of 400 assims. Exactly one year ago you could get 100 assims in exchange for 5 euclos in the currency exchange market. Since then, though, the real interest rate in Assymetrica has increased, while staying constant in the Euclidean Union.

1. Has the euclo appreciated or depreciated with respect to the assim? Explain your reasoning.
2. Assume that the change in the value of the euclo with respect to the assim (appreciation or depreciation depending on your previous answer was 50%. What is the current nominal exchange rate expressed in assim/euclo? Show your work.
3. After the appreciation/depreciation, the world famous journal The Ethologist argues that the price of an O’Ronalds burger is the best indicator of the level of prices in a country. What is today’s real exchange rate in the Euclidean Union as calculated by The Ethologist? Show your work.