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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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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