Question

Question
No.
1

Suppose that GDP measured in current prices in an economy in year 1 is

$100 million and in year 2 is $165 million. If the price level of the goods
and services produced has increased from an index number of 120 to an
index number of 190 then:
real GDP is unchanged
since prices of goods and
services have increased by 70%
between year 1 and year 2, real
GDP has fallen.
since prices of goods and
services have increased by
58.33% between year 1 and year
2, real GDP is higher in year 2
than it was in year 1.
although prices of goods and
services have increased by 70%
between year 1 and year 2, real
GDP has risen.

None of the above

2

Which of the following would be included in Australias GDP for 2014?

Government purchase of a new
submarine built in South Korea in
2014
The purchase of a home built 10
years ago
The purchase of a home built in
2014
The amount the Middle Fish Thai
Restaurant paid for electricity in
2014
None of the above

Set out below is a small input-output flows table

Industry A

Industry B

Final demand

Total

Industry A

50

70

30

150

Industry B

60

20

100

180

Value added

45

100

Total

155

190

The number 60 is:

The value of the output of
industry B which is purchased by
industry A for use as a raw
material
The value of the output of

145
130

475

industry A which is purchased by

industry B for use as a raw
material
The total sales of intermediate
goods and services by industry A
The value of the output of
intermediate goods and services
by industry A which is purchased
by industry B
None of the above
4

Consider the following production data for a hypothetical economy that

uses engines to manufacture only two final goods, motor cycles and
cars.
Year
2012
2012
2012
2013
2013
2013

Commodity
engines
motor cycles
cars
engines
motor cycles
cars

Price

Quantity
15
10
50
9
90
8

100
50
99
55
180
90

What is the (approximate) value of the Laspeyres volume index for GDP in
2013 compared with 2012?
89
97
103
116
181
5

The nominal rate of interest is 10% while the rate of inflation is 9%.
What is the real rate of interest?
-1%
1%
10%
11%
19%

If a CPI is computed using a Laspeyres Price index then in order to

compute the index we need to know for each year (excluding the base year)
The quantities of each item which
households purchase in each year
The proportions of household
expenditure which is spent on
each item in each year
The prices paid and the quantities
of each item purchased by the
household in each year.
The prices paid for each item

purchased by the household in

each year
None of the above
7

If prices in the current year are higher on average than in the base year, real
GDP in the current year _________ nominal GDP in the current year.
is greater than
is less than
is equal to
could be greater or less than
is one-third of

Bob's Barber Shop cut 3000 heads of hair in the year 2000 and 3100 in the
year 2001. The price of a haircut was $7 in 2000 and $8 in 2001. If the year
2000 is the base year, what was Bob's contribution to real GDP in the year
2000?
$21 000
$21 700
$24 000
$24 800
$25 000

Peg's Manicure Manor did 4000 sets of nails in the year 2000 and 4500 sets
of nails in the year 2001. The price of a set of nails was $20 in 2000 and
$22 in 2001. If the year 2000 is the base year, Peg's contribution to real
GDP in 2000 was _____ and in 2001 was _____.
$80 000; $88 000
$80 000; $90 000
$80 000 $99 000
$88 000 $90 000
$90 000 $99 000

10

Suppose that the total expenditures for a typical household in 2000 equalled
$2500 per month, while the cost of purchasing exactly the same items in
2003 was $3000. If 2000 is the base year, the CPI for the year 2003 equals
83
100
120
125
130