CIRCULAR FLOW MODEL

1. In an open economy with balanced budget investment is equal to 5 billion and imports are higher than exports
by 500 million. a. saving is 4.5 billion; b. saving is 5.5 billion; c. saving is 5 million; d. saving is equal to
investment; e. cannot say
2. In an open economy S=300, I=400 and the budget is balanced. a. there is a trade surplus; b. the economy is
indebted towards other countries; c. the balance of trade is zero; d. there is a surplus of foreign currency; e. a
and d
3. The following information is given on an open economy: S (private saving)=80, budget deficit=20, net
export=10, T=45, M=30. I and G are: a. 50, 25; b. 30, 45; c. 110, 65; d. 50, 65; e. 30, 25
4. The following information is given on an open economy: S (private saving)=80, budget deficit=20, net
export=10, T=45, M=30. National savings and X are: a. 100, 20; b. 80, 65; c. 60, 65; d. 80, 40; e. 60, 40
MACROECONOMIC INDICATORS COMPUTATIONS
1. C=80% of GDP, G=7% of GDP, I=20% of GDP. Under these conditions: a. export is higher than import by
7% of GDP; b. export is lower than import by 7% of GDP; c. net export is positive amounting to 7% of GDP; d.
net export is zero; e. none of the above
2. If in a closed economy C=150, S=20, G=40 and the budget is balanced, GDP is: a. 170; b. 190; c. 210; d. 60;
e. none of the above
3. For a closed economy, C=150+0.8Yd; I=100; G=150; T=120; transfers=30. GDP is: a. 1640; b. 1400; c.
2600; d. 2000; e. 1600 (The disposable income Yd =GDP-T+Tr)
4. M=100+0.1GDP, NX=50 and GDP=500. X is: a. 0; b. 55; c. 200; d. 75; e. 25
5. Depreciation is 40, indirect taxes are 22, investment is 100, private consumption is 850, government spending
is 143, net export is 7. GDP and net investment are: a. 1100 and 170; b. 1140 and 1150; c. 1060 and 100; d.
1133 and 50; e. 1100 and 60
THE MEASUREMENT OF GDP
1. Which of the following are limitations to GDP: a. domestic activities such as childcare and housework are not
counted in; b. GDP is neutral to the kinds of goods produced in the economy; c. GDP does not measure the
effects of redistributive policies or the distribution of output and income among individuals; d. GDP does not
reflect social losses due to crime and pollution; e. all of the above
2. Which of the following is comprised in the GDP: a. the output produced by Romanian citizens abroad; b.
profits earned abroad by Romanian companies; c. the output produced by Hungarians working in Romanian
companies in Bulgaria; d. profits earned by Hungarian-owned companies in Romania; e. none of the above
3. Which is true about the differences between GDP and GNP: a. there is no difference; b. GDP is always
higher; c. when a Hungarian company earns profits in Romania, those profits are counted as part of Hungarian
GDP, but not part of Hungarian GNP; d. the wages paid to Romanian workers working in a Hungarian factory
in Romania are counted as part of Romanian GNP, but the profits from the factory are not; e. none of the above
4. An item excluded from the Romanian GDP but included in the Hungarian GNP is wages earned by a: a.
Romanian citizen employed at a Romanian-owned company in Romania; b. Romanian citizen employed at a
Hungarian-owned company in Romania; c. Romanian citizen employed at a Hungarian-owned company in
Hungary; d. Hungarian citizen employed at a Romanian-owned company in Romania; e. Hungarian citizen
employed at a Romanian-owned company in Hungary

5. Gross National Product is: a. Gross Domestic Product minus depreciation; b. National Income discounted by
the GDP deflator; c. income earned by foreign investors; d. Net National Product plus depreciation; e. Net
Domestic Product minus depreciation
THE COMPONENTS OF GDP
1. If C=100, I=50, G=55, Exports=80, Imports=90, T=20, then GDP is equal to: a. 180; b. 150; c. 195; d. 205; e.
175
2. Purchases of new housing are included in: a. consumption; b. investment; c. government purchases; d. taxes;
e. all of the above
3. As a rule, the largest component in the GDP is: a. consumption; b. investment; c. government purchases; d.
net exports; e. net imports
REAL VERSUS NOMINAL GDP
1. Changes in real GDP reflect: a. changes in prices; b. changes in prices and in the amounts being produced; c.
only changes in the amounts being produced; d. all of the above; e. none of the above
2. Considering that an economy produces only three types of goods, apples, oranges and tomatoes, and their
prices in the base year are 12, 14 and 15 respectively and their prices in the current year become 11, 12 and 16
respectively; quantities produced in the base year are 1, 3 and 4 respectively and 2, 6 and 8 respectively in the
current year, the GDP deflator is: a. 100%; b. 97.37%; c. 102.70%; d. 36.49%; e. 194.74%
3. Real GDP is not a good measure of economic welfare because it: a. excludes the external costs and benefits
of externalities; b. does not include the black economy and black labour; c. excludes the value of leisure time
and illegal gambling; d. untraded goods and changes in the distribution of income and undeclared tips; e. all of
the above
4. If real GDP is 7 trillion m.u. and the GDP deflator is 140, nominal GDP would be: a. 70 billion; b. 8.4
trillion; c. 9.8 trillion; d. 13.72 trillion; e. 7 billion