Macroeconomics Practice Questions and Answers

Question 1
a) Income method
= 495 + 1690 + 2670 – 45 + 350
= 5160
b) Expenditure method
= 590 + 195 + 680 + 2995+ 685 – 555
= 4590
c) Gross national expenditure
= 685 + 590 + 195 + 2995
= 4465
d) Net domestic product
= 5160 – 350
= 4810
e) NPD is a better measure than GDP since it only accounts for the real monetary value of
national income
f) Gross national product
= 5160 + 45
= 5205
g) Net national product
= 5205 – 350
= 4855
h) Current account balance
Exports – Imports
680 – 555
= 125
i) Gross national savings
=2670 +1690 + 495 – 590 – 195 – 2995
= 1075

j) Gross national savings with tax
= 1075 – 17
= 1068
k) GDP = 4873
MPC = 0.683
C = 4873 * 0.683
= 3328.3
L) New value of GDP
= 4 -3-3+4
= 2
New value of GDP = 4590 + 2
= 4592
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Question 2
a) Unemployed is defined as a person actively looking for work and is available for work or
someone who is waiting to start a new job. This means that an unemployed person should be
sending out applications or engaging in job interviews. This means that a person who is just
sitting at home after graduation and not looking for work is not qualified to be called
unemployed.
b) Frictional unemployment is inevitable because the economy is always changing with new
trends causing some firms to expand while others shrinking or other regions expanding while
others shrinking. (2 marks)
c)Structural unemployment is caused when there is a technological change in the industry. The
government can assist when they provide its citizens with opportunity to train for the required
skills. It is different from cyclical unemployment since cyclical unemployment happens with the
life cycle of a production of a product eg agricultural products. (4 marks)
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Question 3
a) Demand pull inflation
Y1 Y2
P2
P1