INTRODUCTION TO MACROECONOMICS (ECO 1102) Practice Exam #1 Answers on last page
Coverage: Mankiw chapters 5, 6, 7, 8 and 9

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Macroeconomics includes the study of topics such as a. national output, the inflation rate, and the trade deficit. b. the price of Cisco stock, wage differences between genders, and antitrust laws. c. differences in market structure, and how consumers maximize utility. d. None of the above is correct. Which of the following statistics is the best single measure of an economy's well-being? a. the unemployment rate b. the inflation rate c. GDP per capita d. the trade deficit If GDP rises, a. income and expenditure must both rise. b. income and expenditure must both fall. c. income must rise, but expenditure may rise or fall. d. expenditure must rise, but income may rise or fall. In a simple circular-flow diagram, total income and total expenditures in an economy are a. equal because firms are ultimately owned by households. b. equal only if there is no saving. c. never equal because some people’s income is not for production. d. equal because every transaction has a buyer and a seller. e. none of the above is true Which of the following is the correct definition of GDP?

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a. the market value of all goods produced within a country b. the market value of all final goods and services produced by the citizens of a country c. the market value of all final goods and services consumed within a country over a number of years. d. the market value of all final goods and services produced within a country in a given period of time. e. None of the above is correct. 6. Which of the following is excluded from GDP? a. unpaid cleaning and maintenance of houses b. services such as those provided by lawyers and hair stylists c. illegal drugs d. production of foreign citizens living in the Canada e. both a and c are correct