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PMA512S- PRINCIPLES OF MACROECONOMICS- 2ND OPP- NOV 2023 |
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nAm I BIA un IVE RSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
COURSE NAME: PRINCIPLES OF MACROECONOMICS
DATE: NOVEMBER 2023
DURATION: 3 HOURS
COURSE CODE: PMA512S
SESSION: PAPER THEORY
MARKS: 100
EXAMINER(S)
MODERATOR:
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
Ms. Precious Mwikanda
Ms. Ms. Lavinia Hofni
Mr. Eslon Ngeendepi
INSTRUCTIONS
1. This question paper consists of 76 questions with total marks of 100.
2. Answer ALL sections on the Answer Sheet provided.
3. Shade your student number correctly with similar layer of shading.
4. Shade your answers correctly and neatly.
5. Remember, only ONE correct shaded answer per number, shading TWO circles on one number
will result in loss of your point/mark even if one of them was correct.
THIS QUESTION PAPER CONSISTS OF 23 PAGES (Including this front page and answer sheet)
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Total Marks: 100
Instructions:
• Read all questions carefully
• Answer all questions on the provided sheet by shading one correct answer on each number
1. The quantity of money demanded for transactions and precautionary purposes is
related to the:
[1 mark]
A. interest rate
B. level of income in the economy
C. inflation rate
D. None of the above.
2. If the banks in an economy operate with a reserve ratio of 20 per cent then the
money multiplier is:
[1 mark]
A. 4
B. 20
C. 25
D. 5
3. The Monetary Policy regime in Namibia maintains a:
A. Managed exchange rate
B. Free floating exchange rate
C. Fixed exchange rate
D. Interest - rate - based exchange rate.
[ 1 mark]
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4. A restrictive fiscal policy would result in government:
[1 mark]
A. Decreasing taxes and decreasing government spending at the same time.
B. Increasing taxes and decreasing government spending.
C. Increasing government spending and increasing taxes at the same time.
D. None of the above options.
5. Assumingcountry Bchargesits residents a progressivetax rate, what does that imply
to a high income earner who earns $20000 annually and to a low income earner
who earns $8000 annually?
[1 mark]
A. A larger percentage tax income would be collected from the low earner.
B. A smaller percentage tax income would collected from the high earner.
C. A larger percentage tax income would be collected from the high earner.
D. A lower income earner would be exempted due to lower earnings.
6. Assume you are a regular importer of a popular shoe brand from the US. Your
domestic currency suddenly depreciates in value, what effect will this have on your
importing decision?
[1 mark]
A. You will order more quantities.
B. You will order less quantities.
C. You will order when the currency depreciates.
D. You will put orders on hold.
7. Which of the following statements is true about a country with a trade deficit?
[1 mark]
A. Net exports are negative.
B. Net capital outflow must be positive.
C. Exports exceed imports.
D. Net exports are positive.
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8. Which of the following is not an argument used in favour of protectionism?[l mark]
A. to protect domestic jobs
B. to protect an "infant" industry
C. to reduce prices paid by domestic consumers
D. to provide government revenue.
9. If the marginal propensity to consume is equal to 0.60 and autonomous spending
increases by N$10 million, by how much will the equilibrium income increase?
[1 mark]
A. N$25 million
B. N$10 million
C. N$16.7 million
D. N$16 million
10. A country with a population of SOmillion people, there are 20 million children under
the age of 15 years, 16 million employed, 9 million pensioners, 4 million unemployed
and 1 million people who are physically unable to work. The unemployment rate in
this country equals:
[1 mark]
A. 25%
B. 20%
C. 13.3%
D. 10%
11. Which of the following can create demand-pull inflation?
A. recessions and depressions
B. sharply rising oil prices
C. excessive aggregate spending
D. higher labour costs.
[1 mark]
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12. Which of the following groups benefits from inflation?
A borrowers
B. savers
C. landlords
D. lenders.
[1 mark]
13. To derive GDP at market prices from Gross Domestic Expenditure, we must: [1 mark]
A. subtract spending on exports and add spending on imports.
B. subtract spending on imports and add spending on exports.
C. subtract spending on intermediate goods and add spending on exports.
D. subtract spending on exports and add spending on intermediate goods.
14. GDP per capita is a relatively good measure of:
A. the distribution of income
B. purchasing power
C. household production
D. the standard of living.
[1 mark]
15. Gross domestic product can be derived by:
[1 mark]
A. disposable income+ taxes+ investment spending+ exports+ imports.
B. consumer spending +.government purchases + financial spending + exports -
imports.
C. consumer spending + government purchases + investment spending + exports -
imports.
D. consumer spending + government transfers + investment spending + exports -
imports.
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16. Which of the following does not represent a key macroeconomic variable?[l mark]
A. the production of beef in Namibia
B. the inflation rate
C. the unemployment rate
D. Gross domestic product.
17. The reason the dollar value of only final goods and services are counted in GDP is
that:
[1 mark]
A. intermediate goods reduce GDP.
B. if we counted the value of all goods we would count inputs, such as the value of
steel in a new car, more than once.
C. only final goods and services matter for the economy.
D. we can only measure the value of final goods and services and cannot measure
the value of inputs.
18. The "medium of exchange" function means money is used:
A. as the common denominator of prices.
B. as the common denominator of future payments.
C. to accumulate wealth.
D. to pay for goods and services.
[1 mark]
19. Assume you are an exporter of horse mackerel to Indian based importers. What
would be the effect of an appreciated domestic currency to your exports? [1 mark]
A. I will sell more horse mackerel than before.
B. I will sell less horse mackerel than before.
C. I will supply same quantities regardless of the exchange rate.
D. I will wait for favourable price to export.
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20. Which of the following statements is true about a country with a trade surplus?
[1 mark]
A. Net exports are negative.
B. Net capital outflow are positive.
C. Imports exceed exports.
D. Net exports are positive.
21. The following are functions of money except
A. Medium of exchange
B. Unit of account
C. Standard of deferred payment
D. Measure of status
[1 mark]
22. Consider an initial deposit of 2000 and a reserve requirement of 20%, the credit that
would be created from this demand deposit is?
[1 mark]
A. 4000
B. 8000
C. 10000
D. 12000
23. Interest rate control is one of the indirect monetary policy instrument used to
influence either deposit rate or borrowing rate?
[1 mark]
A. True
B. False
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24. If the Bank of Namibia wishes to apply an expansionary monetary policy and
choosesto do this via the repo rate instrument. What policy direction will they
follow?
[1 mark]
A. decrease the repo rate
B. Increase the repo rate
C. Freeze repo rate for more than five years
D. Maintain the repo rate at the rate commercial banks have unanimously agreed
25. __ refers to the fixed part of consumption spending that does not change as the
level of income changes.
[1 mark]
A. Induced consumption
B. Autonomous consumption
C. fixed consumption
D. Zero saving
26. If the simple Keynesian income multiplier is 4, then MPC is__
A. 0.25
B. 0.75
C. 2.25
D. 3.75
[1 mark]
27. Consider a money market equilibrium state, where the interest rate drops below
equilibrium, this will motivate many people to hold more money by [1 mark]
A. reducing the holding of bonds.
B. increasing the holding of bonds.
C. not reacting to the change in interest rate.
D. waiting for interest to drop further down before they can decide.
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28. In the simple circular flow model____
products.
A. Households
B. Government
C. Businesses
D . Landlords
are suppliers of both resources and
(1 mark]
29. Per capita GDP measures the income per person and is calculated as: (1 mark]
A. national income divided by the total labour force of the country in given year
B. Real GDP divided by the total population in a given year
C. National income divided by working population
D. Annual GDP divided by labour productivity
30. GDP is referred to as "real" when the effects of inflation are discounted from the
nominal value of the GDP.
(1 mark]
A. correctly stated
B. Incorrectly stated
C. Inflation is not considered to know the value of real GDP
D. None of the above
31. The total volume of businesssales in our economy is several times as large as the
GDP because the GDP excludes intermediate transactions.
(1 mark]
A. correctly stated
B. Incorrectly stated
C. The total volume of business sales can never be larger than GDP
D. The total volume of business equals the GDP because business produce everything
in the economy
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32. If households' income changes from N$14 200 to N$16 200 and consumption
spending changes from N$12 000 to N$13 100, then the MPC equals.
[1 mark]
A. MPC is 0.55
8. MPC is 0.75
C. MPCis0.8
D. MPC is 0.20
33. One of the most important views expressed by classicaleconomists was that supply
creates its own demand.
[1 mark]
A. True
8. False
34. In economics, economic growth can best be described as a period of growth in the
nominal GDP of a country.
[1 mark]
A. True
8. False
The following data are estimates describing Zambia's economy in 2006 and 2007 {in millions
of kwachas, in constant prices). Study the data and answer question No. 35 below.
2006
2007
Consumption
84,000
89,000
Government expenditure
24,000
26,000
Investment
48,000
48,000
Exports
142,000
151,000
Imports
123,000
128,000
Subsidies
1,800
1,900
Taxes
500
500
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35. Which of the following is true regarding Zambia's economy after you have analysed
the above data?
[2 marks]
A. The change in GDP from 2006 to 2007 represented a peak in the business cycle.
B. GDP decreased from 2006 to 2007.
C. Net exports decreased from 2006 to 2007.
D. Consumption was 48 percent of Zambia's GDP in 2007.
36. The main considerations why valuing goods at their market prices is different than
valuing them at their factor costs include:
[1 mark]
A. depreciation and investment.
B. exports and imports.
C. personal taxes and corporate taxes.
D. indirect taxes and subsidies.
37. The word tax evasion tells us that:
[1 mark]
A. People do not have information about paying taxes so they do not declare .
B. Taxpayers know their obligation but are declaring incorrect amount of taxable
income.
C. Taxpayers use a legal provision in the law to avoid paying taxes.
D. Taxpayers are free to choose paying taxes or not.
38. If a country is experiencing a deflationary gap, the equilibrium level of income would
be:
[1 mark]
A. Greater than the full employment income.
B. Lessthan the full employment income.
C. Greater than the planned investment.
D. Equal to the full employment income.
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39. In 2020/21, "Namibia's total government expenditures were projected at N$52.8
billion to be expended on total estimated revenue of N$77.8 billion. What type of
budget does this statement confirm?
[1 mark]
A. Surplus budget
B. Deficit budget
C. Balanced budget
D. Emergency budget
Two friends, Abel and Abram both work in Namibia, Abel earns N$300,000.00 and Abram
earns N$800,000.00 per year. They both get charged a fixed rate of 30% in income tax. Use
this information to answer questions 40 to 43 below.
40. What is value of tax that Abel will pay per year?
A. N$100 000 tax payable
B. N$90 000 tax payable
C. N$150 000 tax payable
D. 75 0000 tax payable
[2 marks]
41. What is value of tax that Abram will pay per year?
A. N$200 000 tax payable
B. N$300 000 tax payable
C. N$240 000 tax payable
D. N$160 000 tax payable
[2 marks]
42. What form of tax system was used for this particular year?
A. Proportional tax
B. Progressive tax
C. Value added tax
D. Regressive
[1 mark]
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43. Which of the following is an example of the tax system described in your answers
No.40 and 41 above?
[1 mark]
A. Value added tax
B. affordability tax
C. Sin tax
D. Company tax
To answer questions 44 to 47 refer to the information below:
Countries involved in international trade follow both direct and indirect methods of
determining exchange rate when exporting and importing their goods and services. Use the
knowledge you acquired in international trade to answer the following questions:
44. A bottle of beer costing N$9 is exported to the United States. What is the price of
this bottle of beer in US dollars if the exchange rate is USDl = N$10.30? [2 marks]
A. $ 92.7
B. $0.87
C. $1.14
D. 0.67
45. An imported cell phone costs USD200 and the exchange rate is USDl = N$9.20. How
is the exchange rate calculated?
[2 marks]
A. $200 X N$9.20
B. $200/N$9.20
C. $1/$200
D. N$9.20/$200
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46. The price of a painting is N$1 000. What is the price of the painting in US dollars if
the exchange rate is N$1 = USD0.14?
[2 marks]
A. $7142
B. $140
C. $1400
D. $240
47. If a can of Coke costs N$7 and the exchange rate is N$1 = €0.08. What is the price of
the can of Coke in Euro?
[2 marks]
A. 7.08
B. €87.5
C. €0.56
D. €1.08
48. Which of the following definition is correct to describe what an ad valorem tariff is
[1 marks]
A. levied as a percentage of the value of the imported item
B. A fixed amount that is levied on each imported item
C. a percentage of tax levied based on the type of material imported
D. levied based on the weight of the imported items
49. If the CPls for December 2019 and for December 2020 were 130.5 and 140.2
respectively, the inflation rate in that country for 2020 was:
[2 marks]
A. 10%
B. 6.7%
C. 16.4%
D. 7.43%
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50. The supply of money can be influenced by:
A. Depositors, commercial banks, foreigners
B. Foreign trade, International capital flows, government transactions
C. Depositors, government, demanders for money
D. Both a and b factors above
[2 mark]
Refer to the table below showing the trading combination for two countries and answer the
question 51 to 56 below:
Table 1: production capacities between Uganda and Eritrea
Countries
Uganda
Eritrea
Fabric/day
100 meter
40 meter
Products
Sorghum/day
50 kg
10kg
51. Calculate the opportunity cost of producing 1 kg of sorghum in terms of fabric in
Uganda.
[2 marks]
A. 2 meters
B. 0.5 meter
C. 4 meter
D. 0.25 meter
52. Calculate the opportunity cost of producing one meter of fabric in terms of sorghum
in Uganda?
[2 marks]
A. 2 kg
B. 0.5 kg
C. 4 kg
D. 0.25 kg
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53. Calculate the opportunity cost of producing 1 kg of sorghum in terms of fabric in
Eritrea?
[2 marks]
A. 2 metres
B. 0.5 metres
C. 4 metres
D. 0.25 metre
54. Calculate the opportunity cost of producing one metre of fabric in terms of sorghum
in Eritrea?.
[2 marks]
A. 2 kg
B. 0.5 kg
C. 4 kg
D. 0.25 kg
55. Which country has a comparative advantage in the production of fabric?l mark]
A. Uganda
B. Eritrea
C. Both have comparative advantage in fabric
D. None of them.
56. Which country has absolute advantage in sorghum production?
A.Uganda
B. Eritrea
C. Both have comparative advantage in fabric
D. None of them.
[1 mark]
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You are given the following function, C = 150+ 0. 75Y. Study the function and answer questions
No. 57 to 61 below.
57. This function is known as?
[1 mark]
A Investment function
B. Saving function
C. Consumption function
D. Income function
58. Refer to the given function above. If disposable income (Y) is given as N$3 000,
calculate the total amount of consumption (C).
[3 marks]
A. 452 250
B. 4200
C. 2250
D. 2400
59. Refer to the given function above. Determine by how much savings (S) will increase
if income (Y) increases by N$200?
[2 marks]
A. 30150
8. 150
C. so
D. 250
60. Refer to the given function again. Calculate the income multiplier
A. 8
B. 4
C. 12
D. 6
[3 marks]
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61. Refer to the given function again. What does the figure 150 represent?
[1 mark]
A. Dissaving
B. Savings
C. Induced consumption
D. Autonomous consumption
The table below is a hypothetical industrial column for wine produced in Namibia during 2012.
Use the data to answer questions 62 to 65 below.
Table 2: Market and Value added
Firm (N$)
Farmer
Wine cellar
Wholesaler
Retailer
Total:
Market Value (N$)
Value added
(N$)
10 000
?
18 000
?
20 000
?
25 000
?
73000
?
62. Refer to the table above. What is the valued added at the farmer production's stage.
[1 marks]
A. 0
B. 8000
C. 10000
D. 28000
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63. Refer to the table above. What is the valued added at the wine cellar's production
stage
[1 marks]
A. 0
B. 8000
C. 10000
D. 28000
64. Refer to the table above. What is the valued added at the wholesaler stage?
[1 marks]
A. 2000
B. 8000
C. 10000
D. 12000
65. What is the valued added at the retailer stage.
A. 0
B. 5000
C. 15000
D. 20000
[1 marks]
Table 3: Gambia statistics
Year
2013
2014
Nominal GDP N$ millions
540 000
?
Price index
108.00
116.64
Real GDP N$ millions
?
525 000
Gambia is a small country with a population of 2.5 million. Table 3 above shows some statistics
regarding the Gambian economy. Use the statistics to answer the following questions, No. 66
to 70 below:
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66. Calculate the real GDP for 2013
A. 300 million
B. 580 million
C. 500 million
D 525 million
67. Calculate the nominal GDP for 2014.
A. 612.3 million
B. 616.300 million
C. 600 million
D. 630 million
68. Calculate the GDP growth rate for 2014.
A. 7%
B. 6%
C. 5%
D. 4%
69. Calculate the GDP per capita for 2013.
A. 300 000
B. 200 000
C. 400 00
D. 500 000
70. Calculate the inflation rate for 2014.
A. 8%
B. 7%
C.5%
0.4%
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[2 marks]
[2 marks]
[2 marks]
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71. List the main sources of inflation.
A. Input costs and wages
B. Demand pull and demand push factors
C. Cost push and demand pull factors
D. Production and other hidden costs
[2 marks]
For questions 72 to 76 below describe what type of unemployment is linked to each of the
following statements.
72. New entrants into the labour market looking for their first job.
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment
[1 mark]
73. Unemployed workers who have insufficient skills to find a job.
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment
[1 mark]
74. Unemployment that results from a temporary decrease in aggregate demand.
[1 mark]
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment
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('
75. The use of automated robots in a factory.
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment
[1 mark]
76. An individual who cannot find work because his/her skills have become obsolete.
[1 mark]
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment
--END--
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