Week 2 MCQ Flashcards
What is the difference between gross domestic product (GDP) and gross national income (GNI)?
a. GDP is a location-based measure, whereas GNI is an ownership-based measure of economic activity.
b. GDP is measured in constant prices, whereas GNI is measured in current prices.
c. GDP is limited to market transactions, whereas GNI includes imputed values for non-market economic activities.
d. GDP is a flow variable, whereas GNI is a stock variable.
e. none of the above
a. GDP is a location-based measure, whereas GNI is an ownership-based measure of economic activity.
(Both are flows and both can be measured in both current and constant prices. GDP refers to transactions within a country’s borders (location-based) while GNI includes earning of SA residents abroad and excludes earning in SA by foreigners (ownership-based).)
“Employment is generally procyclical” means
a. higher rates of unemployment tend to move together with periods of high economic growth.
b. employment tends to rise in periods of high economic growth and fall in periods of low economic growth
c. employment tends to fall during periods of high economic growth and rise in periods of low economic growth
d. employment does not move in relation to business cycles.
e. all of the above
b. employment tends to rise in periods of high economic growth and fall in periods of low economic growth
(Unemployment falls when GDP rises)
Which of the following statements is NOT a positive statement?
a. Inflation is rising
b. Inequality in the distribution of income is a more serious problem than unemployment
c. The richest 10 per cent of the population has had a bigger percentage increase in incomes over the past 10 years than the poorest 10 per cent
d. The proportion of people’s income paid in taxes is higher under this government than under the previous government
e. A higher share of labour in the national income is associated with lower prices of stocks
b. Inequality in the distribution of income is a more serious problem than unemployment
(This is an opinion and so is not a positive statement. )
Real GDP and international reserves are:
a. Stock and flow variables respectively
b. Flow and stock variables respectively
c. Stock variables
d. Flow variables
e. None of the above is correct.
b. Flow and stock variables respectively
GDP is a flow i.e. Rx trillion per year. International reserves are a measurement at a moment in time i.e. a stock.
If the South African current account is in surplus by R400 billion, the financial account is in surplus by R400 billion, and errors and omissions are a negative R880 billion, what has happened to foreign exchange reserves?
a. They have increased by R80 billion
b. They have remained constant
c. They have decreased by R80 billion
d. They have increased by R800 billion
e. They have increased by R400 billion
a. They have increased by R80 billion
(Current account + financial account + change in reserves + errors & omissions = 0
R400 + R400 + RX -R880 = 0
X = R800 – R400 – R400
X = R80 billion)
Which of the following would be counted as investment when calculating GDP?
a. the building of a new factory by Volkswagen
b. the addition of some production equipment by Volkswagen
c. the sale of cars by Volkswagen
d. the sale of their house by a worker at Volkswagen.
e. Both (c) and (d) would not be counted
e. Both (c) and (d) would not be counted
((C)Sales of consumer goods and are not means of production so are ¬not investment.)
((D)This is the sale of an existing house not the creation of a new one so does not impact on the nation’s capital stock.)
According to Keynes, the most volatile component of GDP and therefore the most important contributor to the upswings and downswing in the business cycle is
a. Consumption.
b. Exports and imports.
c. Investment.
d. Government spending.
e. Changes in interest rates.
c. Investment.
Depends on “animal spirits” (optimism/pessimism) so tends to be volatile.
