MacroEcon_L01_Problems

VEE Macroeconomics Practice Problems 2023 Learning Objective 1 Problems (1) The following data represents Neverland ' s spending and investment data for 2021. Component of GDP Amount ( $ , Billions) Consumer Spending 7 Government Expenditure 2 Imports 3 Exports 4 Assuming Neverland ' s total GDP is 12 billion, how much did businesses invest in Neverland in 2021? (A) 2 billion dollars (B) 3 billion dollars (C) 4 billion dollars (D) 5 billion dollars (2) Edna Mode , an American super-suit manufacturer, wants to expand her incredibly profitable business to France. What will happen to the US’ GNI and France’s GDP? (A) The US’ GNI will rise, while France’s GDP will fall. (B) The US’ GNI will fall, while France’s GDP will rise. (C) Both the US’ GNI and France’s GDP will rise. (D) Both the US’ GNI and France’s GDP will fall. (3) In 2020, Luxembourg’s GDP was 70 billion. In 2021, nominal GDP rose to $ 110 billion, while the inflation rate was 10%. The real GDP of Luxembourg rose by: (A) $ 30 billion (B) $ 35 billion (C) $ 40 billion (D) $ 45 billion © 2023 The Infinite Actuary, LLC Page 1

VEE Macroeconomics Practice Problems 2023 (4) Wakanda has decided to lower taxes following a recent coup attempt. What effect will this have on their aggregate demand? (A) Aggregate demand will fall (B) Aggregate demand will remain the same (C) Aggregate demand will rise (D) Indeterminate based on information given (5) The GDP and Net Foreign Factor Income(NFFI) of two countries are as follows: Country NFFI ( $ , trillions) GDP ( $ , trillions) Italy 0.9 10.6 China -0.7 12.0 Which country has the higher GNI, and by how much? (A) Italy by $ 0.6 trillion (B) Italy by $ 0.2 trillion (C) China by $ 1.2 trillion (D) China by $ 3 trillion (6) At what stage of the business cycle is one most likely to lose their job? (A) Expansion (B) Boom (C) Recession (D) Trough (7) The government of Drusselstein wants to improve national aggregate demand following Dr. Heinz Doofenshmirtz turning most of the population into hamsters in an attempt to thwart his nemesis Perry the Platypus . Which of these will NOT improve aggregate demand? (A) Increase in income tax (B) Decrease in interest rates (C) Increase in investment (D) Quantitative easing © 2023 The Infinite Actuary, LLC Page 2