Lesson 4.2.1.2

4.2.1.2 Macroeconomic indicators Quiz: AQA Economics, Unit 2

20 questions

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Lesson 4.2.1.2, Macroeconomic indicators: 20 multiple choice questions for the AQA Economics (7136), Unit 2: The national and international economy, written with Revision Ninja.

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The 20 questions

  1. Which indicator measures the value of output per person in an economy after adjusting for price changes?

    • Real GDP per capita, which divides real output by the population to show average output per person over the year.
    • The balance of payments on current account, which records the net flow of trade in goods and services with other countries.
    • The consumer prices index, which measures the average change in the prices of a basket of goods bought by households.
    • Nominal GDP, which measures the total value of output in current prices and so ignores changes in the price level.

  2. Why is real GDP preferred to nominal GDP when comparing output over time?

    • Real GDP removes the effect of price changes, so it shows whether the quantity of output has actually risen.
    • Real GDP is always higher than nominal GDP, so it gives a larger figure that makes economic performance look better.
    • Real GDP includes the value of illegal activity, so it gives a more complete measure of total output than nominal GDP.
    • Nominal GDP is calculated only from exports, so it is not a measure of the total output produced in the economy.

  3. What does the consumer prices index (CPI) measure?

    • The number of people in the labour force who are actively seeking work and available to start a job immediately.
    • The net flow of income between the domestic economy and the rest of the world over a given period of time during the period under review.
    • The total value of all goods and services produced in the economy in a single year at current market prices.
    • The average change in the prices of a representative basket of goods and services bought by households over time.

  4. Which is a measure of productivity commonly used in macroeconomic analysis?

    • The rate of interest set by the central bank, which shows the cost of borrowing for households and firms in the economy.
    • The number of workers employed in the economy, which shows how many people are in work in the given period.
    • Output per worker or output per hour worked, which shows how much is produced for a given amount of labour input.
    • The balance of trade in services, which shows the value of services exported minus the value of services imported.

  5. Which of the following is a measure of unemployment?

    • The consumer prices index, which records the average change in prices of goods and services bought by households.
    • Real GDP per capita, which divides real output by the population to show average output per person in the economy.
    • The claimant count, which records the number of people claiming unemployment-related benefits at a given date.
    • The balance of payments on current account, which records net flows of trade and income with other countries.

  6. Which statement about the CPI and RPI is most accurate?

    • Both track the price of a basket of goods, but they differ in their coverage and in whether housing costs are included.
    • Both measure the number of people in work, so they are used as alternative measures of unemployment in the economy.
    • Both measure only the prices of imported goods, so neither index is used to measure inflation experienced by households.
    • Both measure the total value of output in the economy, so they give identical figures for real GDP over any period of time.

  7. The current account of the balance of payments records:

    • Only the flows of investment and financial assets between the domestic economy and foreign countries in the period.
    • The total stock of government debt held by domestic and foreign investors at a single point in the year.
    • Trade in goods and services, plus net income and current transfers with the rest of the world over a period of time.
    • Only the number of workers who migrate into and out of the economy over the course of a year for the households concerned.

  8. Nominal GDP rises from £1,600 billion to £1,760 billion, while the price index rises from 100 to 110. What is the change in real GDP?

    • Real GDP falls to £1,450 billion, since the price index rise reduces the value of nominal output in the year concerned.
    • Real GDP rises to £1,936 billion, since nominal GDP is multiplied by the price index to give the real value of output.
    • Real GDP is unchanged at £1,600 billion, since 1,760 divided by 110 times 100 equals 1,600.
    • Real GDP rises by 10 per cent to £1,760 billion, since the price index change has no effect on the level of output.

  9. Which index is most likely to be used to adjust a wage to measure changes in its purchasing power?

    • The productivity index, which tracks output per worker in the economy over time for the whole labour force during the period under review.
    • The balance of payments on the current account, which tracks the value of trade flows between countries in each year.
    • The claimant count, which tracks the number of people claiming unemployment-related benefits at a given date.
    • The consumer prices index, which tracks changes in the prices of goods and services bought by typical households over time.

  10. What does a current account deficit indicate about the balance of payments?

    • Payments to the rest of the world exceed receipts from trade and income, so the country is a net borrower from abroad.
    • The stock of foreign reserves has increased, which indicates that the central bank has gained currency during the year.
    • Government spending exceeds tax revenue in the year, which indicates that the budget is in deficit at the time.
    • Receipts from the rest of the world exceed payments, so the country is a net lender to foreign economies over the period.

  11. Which of the following would be an issue when using real GDP to compare living standards over time?

    • It includes the value of all unpaid domestic work, so it overstates living standards in every period of the economy.
    • It counts only the output of the government sector, so it gives no information about private sector living standards.
    • It is always calculated using current prices, so it ignores the effect of inflation on the economy in each period at the time in question.
    • It does not capture the value of unpaid work, leisure or environmental quality, so it may overstate changes in living standards.

  12. Which indicator is most suitable for comparing the efficiency of workers in two countries?

    • The total government budget, which shows how much the state spends on public services and not labour efficiency.
    • The total number of workers in each country, which shows how many people are employed but not how efficient they are.
    • Output per hour worked, which shows how much output is produced for each hour of labour input in each economy.
    • The nominal exchange rate, which shows the price of one currency in terms of another at a given time in the market.

  13. A country's CPI basket is updated to reflect new spending patterns. What is the purpose of this change?

    • To lower the unemployment rate, because a new basket changes the number of people counted as being in the labour force.
    • To raise the measured inflation rate, because a larger basket always contains more goods that are subject to rising prices.
    • To keep the index representative of what households actually buy, so that the measured inflation rate remains accurate over time.
    • To remove the need for price data, because a fixed basket is always the most accurate measure of price changes over time.

  14. Which is an example of a measure that is not a macroeconomic indicator of the performance of an economy?

    • The rate of unemployment for the whole economy, as measured by the share of the labour force without work in the period.
    • The average price of a single brand of breakfast cereal sold by one supermarket chain in one town in a given week.
    • Real GDP growth, as measured by the percentage change in the value of output adjusted for prices over a year.
    • The balance of payments on current account, as measured by net trade and income flows with the rest of the world.

  15. Which indicator is the best measure of the level of inflation experienced by households?

    • The consumer prices index, which measures the price changes of a basket of goods and services typically bought by households.
    • The total stock of money held by banks, which measures the liquidity of the financial system at a given date in the case described.
    • The number of new houses built in a year, which measures the level of construction activity in the economy each period.
    • The producer price index for raw materials, which measures the price of inputs bought only by manufacturing firms each year.

  16. Which factor could make real GDP per capita a misleading measure of living standards?

    • A rise in the price level with no change in output, which always raises the measure of real GDP per capita.
    • A fall in the population with no change in output, which always leaves the measure unchanged in every case in the case described.
    • A large rise in the population with little change in output, which reduces output per person even though total output rises.
    • A rise in the number of hours worked with no change in output, which always raises real GDP per capita in the economy.

  17. Which of the following best explains why the RPI is usually higher than the CPI in the UK?

    • The CPI is calculated using the prices of exports only, which are always lower than the prices of goods sold at home.
    • The RPI measures only the output of the government sector, which always has higher prices than private sector output.
    • The RPI includes only the prices of imported goods, which are always higher than the prices of domestic goods in the market.
    • The RPI includes housing costs such as mortgage interest, while the CPI excludes them, so the two indices give different results.

  18. Which is a main limitation of using nominal GDP to compare output between two years?

    • Nominal GDP excludes the value of all goods and services bought by households, so it understates total consumption in each year.
    • Nominal GDP is always lower than real GDP, so it understates the size of the economy in every year of the period under study.
    • Nominal GDP may rise only because prices have risen, so it can overstate the growth in the quantity of output produced.
    • Nominal GDP counts only the output of exports, so it cannot show how much is produced for domestic use in the economy.

  19. Which is a limitation of the unemployment rate as an indicator of labour market conditions?

    • It counts all students as unemployed, so it always rises when the number of pupils in full-time education increases in a year.
    • It measures only the number of people in government jobs, so it ignores the private sector completely in the economy.
    • It excludes people who are discouraged from seeking work or who are underemployed, so it may understate slack in the labour market.
    • It includes every person of working age, so it overstates the number of people who want a job in the economy at any time.

  20. The balance of payments on current account is in balance when:

    • Government spending equals tax revenue in the same year, so the public sector has no net borrowing at all during the year.
    • The central bank holds no foreign currency reserves at any point during the year in question in the economy for the households concerned.
    • Receipts from exports of goods and services, plus net income and transfers, equal payments for imports and net outflows over the period.
    • Households save exactly the same amount as they invest in capital goods in the economy over the course of the year.

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