Vee Macroeconomics.final Test .

VEE MACROECONOMICS.FINAL TEST 2026\2027.




Which of the following transactions would most likely be included in a gross domestic product
(GDP) output calculation:
A. a gallon of tap water consumed.
B. raw materials sold to a steel mill.
C. a stay at home mother caring for her children.
A. a gallon of tap water consumed

Goods are excluded if they are not produced during the measurement period, have not been sold in the
market, or are not the final product yet.
The very short-run aggregate supply curve is most accurately described as:
A. Vertical
B. Horizontal
C. Upward sloping
B. Horizontal

In the very short run, firms can adjust to very sensitive price changes.
Confirmation of an increase in a country's standard of living is most likely provided by an
increase in its:
A. real GDP
B. nominal GDP
C. per capital real GDP
C. per capital real GDP

Standard of living accounts for population size
Before being purchased by a consumer, an item passes through the following stages in the value
chain:
Receipt of raw materials supplier from manufacturer: $100

Receipt of manufacturer from retailer: $400

Receipt of retailer from final consumer: $600

,VEE MACROECONOMICS.FINAL TEST 2026\2027.



After a 10% increase in the cost of raw materials, the manufacturer's price rises by 15%. If half of
the increase in manufacturer's price can be passed along to the final consumer, the decrease in
the amount of value added by the retailer is closest to:
A. 30
B. 35
C. 40
A. 30

The manufacturer price increased by 15%, so the retailer Pais additional $60 (400 x 0.15 = 60)

Half of this ($30) goes to the consumer.
Before being purchased by a consumer, an item passes through the following stages:

Contributor Value added
Raw materials $4
Manufacturer $5
Retailer. $6
The price paid by the retailer to the manufacturer is closest to:
A. 9
B. 11
C. 15
A. 9

The retailer covers both the raw and the manufacturer cost
The neoclassical growth model is based on a two-factor production function, according to which
an economy's aggregate level of output is most likely determined using which combination of
components?

A. capital and labor only
B. labor, capital, and total factor productivity
C. total factor productivity and the ratio of labor to capital
B. labor, capital, and total factor productivity

Y = A x F(L,K)
Aggregate output = total factor productivity x function(labor, capital)

, VEE MACROECONOMICS.FINAL TEST 2026\2027.




Note: this is a 2 factor function because the function element only includes L and K, but A is still part of
the model
An econometrician who specializes in economic forecasting has estimated the following formula
based on the neoclassical growth model to calculate potential GDP growth:

Growth in potential GDP = 1.4 + 0.68(growth in labor) + 0.32(growth in capital).

In the above formula, the intercept (1.4) most likely represents the:

A. real long-run sustainable growth rate
B. growth rate of total factor productivity
C. nominal long-run sustainable growth rate
B. growth rate of total factor productivity

This is the Solow growth accounting equation.
The IS and LM curves are most likely plotted against which axes:

A. prices and income
B. real interest rates and prices
C. income and real interest rates
C. income and real interest rates

Relates investment-spending to the liquid money supply
According to the neoclassical growth model formula, all else equal, a 5% increase in net capital
investment will most likely increase an economy's output by:

A. less than 5 percent
B. exactly 5 percent
C. more than 5 percent
A. less than 5 percent

The model assumes diminishing marginal productivity with respect to individual inputs, so if everything
else is held constant, there will be diminishing returns from 5% increase in investment.