University of Cape Town School of Economics Macroeconomics ECO1011S QUESTIONS ONLY November Exam 2022/2023

University of Cape Town School of Economics Macroeconomics ECO1011S November Exam 2022/2023 1 University of Cape Town School of Economics Macroeconomics ECO1011S November Exam INSTRUCTIONS  Only use PENCIL when filling in the MCQ answer sheet  Use the MCQ answer sheet provided  Complete the bubbles for your student number before you begin!  Write in your first name, surname and student number  If you change your mind about an answer don’t cross it out, use a soft plastic eraser.  Do not turn the front page of the question paper until you are instructed to do so  Check that it’s all there: there are 70 MCQs in this exam and 21 pages  Each question has five options A-E, choose the one you think is most correct  You may not leave in the first half hour or the last 15 minutes of this exam Time: 2 hour 30 minutes Questions: 70 Marks: Correct answer 4 Incorrect answer -0.5 Blank 0 N.B. this is a lower negative mark than usual: statistically it means that you should be willing to take a chance even if you are unsure of the answer. 2 1. A country’s circular flow of income is in equilibrium. If there is an unexpected R1 000 increase in savings followed by a R800 decrease in taxes, which of the following statements best describes what will happen? A. Injections are greater than withdrawals, therefore expenditure rises, firms produce more and gross domestic product (GDP) increases. B. Injections are greater than withdrawals, therefore expenditure falls, firms produce less, and gross domestic product (GDP) decreases. C. Withdrawals are greater than injections, therefore expenditure falls, firms produce less, and gross domestic product (GDP) decreases. D. Withdrawals are greater than injections, therefore expenditure rises, firms produce more and gross domestic product (GDP) increases. E. Withdrawals are greater than injections, therefore expenditure rises, firms produce less and gross domestic product (GDP) decreases. 2. If Nissan South Africa sells 200 Navaras for a total of €500 000 to Germany, while South Africa imports 100 BMWs for a total of €600 000 from Germany, then, A. South African gross domestic product (GDP) increases because it sells more Navaras. B. South African gross domestic product (GDP) decreases because net exports fall. C. Germany’s gross domestic product (GDP) decreases. D. South African gross domestic product (GDP) is unaffected because local sales of local cars are unchanged. E. None of the above. 3. A lawyer does work for the poor pro bono, i.e. without charging a fee. These services are NOT included in gross domestic product (GDP) because, A. they are not final goods or services. B. she only does this out of normal working hours. C. that would involve double counting. D. their value is actually charged as a tax deduction by the lawyer’s firm. E. there is no market transaction involved. 3 4. If a country’s nominal gross domestic product (GDP) in 2001 was R1 500 billion, and in 2002 its nominal gross domestic product (GDP) was R1 600 billion then, i. the country’s real levels of output must have risen. ii. total spending in the country must have gone up. iii. total earnings by households must have gone up. iv. price levels in the country must have gone up. A. all of the above B. i and ii C. ii and iii D. iii and iv E. i and iv 5. Which of the following statements is CORRECT? A. Real gross domestic product (GDP) is the market value of all final goods and services produced for sale in a year, but valued in the prices of a base year (e.g. 2011). B. If you buy shares on the Johannesburg Stock Exchange, the value of the shares is included in investment spending. C. Potential Real gross domestic product (GDP) is always greater than Equilibrium Real gross domestic product (GDP). D. Social security and welfare are examples of spending on infrastructure. E. All of the above are correct. 6. The period of the business cycle in which real gross domestic product (GDP) is increasing faster than usual is called A. the expansionary phase. B. the peak. C. the recessionary phase. D. the trough. E. stagflation.