Exam macroeconomics june 2010

1 Question 1 - In Ecoland, net factor income abroad is positive, indirect taxes are equal to 200, production subsidies are equal to 100, and capital depreciation is equal to 100. What can we say with with certainty ? :

	Net National Product at factor prices is larger than Net National Product at market prices.
	National Income is smaller than Net National Product at market prices.
	Domestic product is larger than National Product.
	We cannot say with certainty whether National Product at factor prices is smaller or larger than National Product at market prices.

2 Question 2 - Real GDP per capita is an imperfect measure of the standard of living because :

	it does not take into account the negative externalities that economic activity has on the environment.
	it does not take into account the size of the population that needs to share global production.
	it does not take into account the purchasing power lost due to a generalized price increase.
	it overestimates the importance of the informal economy.

3 Question 3 - Consider an economy in which there are three sectors and for which you only have the following information :

Sector	A	B	C
intermediates Purchases	0	15 from A	5 from A; 15 from B
Wages	5	10	10
Value of production	20	35	60

We can then state the following :

	GDP calculated as the sum of factor income is equal to 25.
	Value added of sector B is 10.
	GDP calculated as the sum of final output is equal to 80.
	The sum of value added is equal to 115.

4 Question 4 - What is the difference between the GDP deflator and the Consumer Price Index (CPI) ?

	The GDP deflator overestimates inflation and the CPI underestimates inflation due to the sub- stitution bias.
	The GDP deflator underestimates inflation and the CPI overestimates it due to consumer hete- rogeneity.
	The GDP deflator excludes the price of exported goods and the CPI includes them.
	The GDP deflator excludes the price of imported goods and the CPI includes them.

5 Question 5 - The GDP in 2005 evaluated at 2001 prices was equal to 460, and the consumer price index in 2005 with base 100 in 2001 was equal to 105. We can say with certainty that :

	Nominal GDP increased between 2001 and 2005.
	The inflation rate between 2001 and 2005 was 50%.
	Purchasing power increased by 5% between 2001 and 2005.
	None of the above is correct.

6 Question 6 - The residents of Frutland spend all their income on oranges, apples and bananas. In 2004, they purchased 50 oranges at a price of 2CHF each, 50 apples at a price of 1CHF each and 500 bananas at a price of 0.1CHF each. In 2005, they purchased 75 oranges at a price of 3CHF each, 80 apples at a price of 1CHF each, and 500 bananas at a price of 0.2CHF each. If the base year was 2004, and we calculate the inflation rate using the consumer price index, what is the rate of inflation in 2005 ?

	60%
	45%
	50%
	20%