These are just the sample questions.

You should be prepared for all sorts of questions

from Chapters 5, 6, 7, 8 and 9.

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1. Suppose an economy produces and consumes only two goods: houses and
entertainment. The following table shows quantities consumed and prices for three years:
Year 0 (the base year), Year 1, and Year 2.

a) Using the base year basket, compute the CPI for Year 1 and Year 2.

b) Compute the GDP deflator for Year 1 and Year 2.

c) Compute inflation rates based on CPI and the GDP deflators.

2. What are the basic differences between bonds and stocks?

3. In a closed economy GDP = $1300, private saving = $125, government budget deficit
= $5, and government spending =$15 (all numbers are in billions). Calculate national
saving, taxes, and consumption.

4. Consider a closed economy. Use the supply and demand for loanable funds model to
predict the effects of the following events on interest rates and investment.

. The government introduces a tax credit for savings.

. Budget deficit
. Change of income tax to consumption tax

5 Government agency provides labour data as presented in the table below. Based on this
data, answer the following questions.

in thousands

Both sexes, 15 years and over

Population 27 696.6
Labour force ?
Employment 17 189.8
Unemployment 1 475.2
Participation rate ?
Unemployment rate ?
Employment rate ?
a. What is the labour force? b. What is the participation rate? c. What is the
unemployment rate? d. What is the employment rate?

Between July 2011 and July 2012, employment has increased by 393 700 workers, but
the labour force increased by only 309 100 workers. Explain the difference in these
numbers. Is it possible that the increase in labour force is greater than the increase in
employment?

During the same period, employment increased by 393 700 workers, but unemployment
decreased by only 84 600. Are these data plausible? How could this difference be
explained?

6. A hypothetical economy produces only two items: maple syrup and trips to a local
tourist attraction. Calculate nominal GDP, real GDP, and the GDP deflator, and fill in the
corresponding columns in the following table:

Price of
Price of Quantity of Number of Nominal Real GDP De-
Year Maple
Trips Maple Syrup Trips GDP GDP flator
Syrup

1 $11 $250 300 425

2 $13 $258 310 570

3 $12 $260 324 550

4 $14 $262 410 580

The real GDP per capita in an economy increases at a rate of 2.6 percent. Calculate the
number of years that it takes for real GDP to double. Assuming that the current GDP per
capita is $40 000 and the growth rate will be on average 2.6 percent, how much will GDP
per capita be after 10 years? After 20 years? After 30 years? Draw a graph to show
approximately the evolution of this economy for the next 30 years.

Study Guide
Chapter 5: All Multiple Choice Questions
All short answer questions

Chapter 6: All Multiple Choice Questions

All short answer questions

Chapter 7: All Multiple Choice Questions

All short answer questions
Chapter 8: Short Answer Questions
Chapter 9: Practice Problems

Book
Chapter 5: Problems and Applications: Questions 5, 6, 7
Chapter 6: Problems and Applications: Questions 4, 5, 6
Chapter 7: Problems and Applications: Questions 7, 8, 11
Chapter 8: Problems and Applications: Questions 7, 8, 11