H1 Intro to Macro: SOL & KEI Quiz

Which of the following would Macroeconomics study be most concerned with?

• The surge in the price of coffee beans.

• The total number of workers retrenched from the automobile industry.

• The fall in the number of petrol cars produced.

• The total number of workers out of job in the economy.

Answer explanation

Macroeconomics concerns the aggregation of all markets and economic agents to make up entire economies. 

Macroeconomics study will be more concerned about the proportion of the labour force that is not employed.

What are the different aspects of Standard of Living?

(Select all answers which are applicable)

• Basic well-being

• Material well-being

• High-life living

• Non-material well-being

Answer explanation

Standard of living refers to the well-being of an average person in the economy.

This includes the material (quantitative) and non-material (qualitative) aspects of welfare.

What does GDP stand for?

• General Development Product

• Gross Development Product

• General Domestic Product

• Gross Domestic Product

Answer explanation

GDP refers to Gross Domestic Product (Nominal), which is the the total monetary value of all final goods and services produced within the geographical boundaries of a country in a given period of time, usually one year.

GDP is an example of a national income statistics.

Which of the following is a qualitative aspect of standard of living?

(Select all which are applicable)

• Employment rates

• Average life expectancy

• Access to drinkable water

• Leisure time

Answer explanation

Non-material standards of living refer to aspects of well-being that are not directly tied to income or material possessions but significantly influence quality of life.

Access to quality healthcare and education are common examples.

In addition, environment quality and work-life balance are also examples.

Which indicator is used to measure price stability?

• Unemployment rate

• Consumer Price Index

• Real GDP

• Gross National Income

Answer explanation

The Consumer Price Index (CPI) measures the average change in prices over time for a fixed “basket” of goods and services commonly purchased by resident households.

By looking at CPI values, we can calculate the inflation rate to reflect the increase (or decrease) in general price levels of goods and services in the economy.

What does the term 'real GDP' account for?

• Government spending

• Income distribution

• Population size

• Inflation

Answer explanation

Real GDP takes into account inflation in that it removes the effects of inflation.

An increase in real GDP value would hence imply an increase in the actual quantity of goods & services in the economy, instead of a possible increase in the general price of goods & services.

It is a more accurate measure of the actual purchasing power of money income, hence a better indicator (compared to nominal GDP which is measured at current monetary value).

What does the term 'per capita' refer to?

• Total population

• Average per person

• Total income

• National output

Which of the following is a measure of income inequality?

• Human Development Index

• Consumer Price Index

• Real GDP per capita

• Gini Coefficient

Answer explanation

The Gini coefficient represents the income distribution of a nation's residents and is the most used measure of income inequality. It ranges from zero to one, with zero representing perfect income equality and one representing perfect income inequality.

Which of the following is a limitation of using GDP as a measure of SOL?

(Select all which are applicable)

• It measures only material aspects

• It does not account for environmental factors

• It includes non-marketed goods

• It does not reflect income distribution

An increase in Gross Domestic Product (GDP) of a country, can lead to an improvement in material well-being of its citizens.

Explain how is GDP related to standard of living.

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Answer explanation

A higher GDP indicates that more goods and services are produced in the economy and are thus available for consumption.

Higher GDP also suggests that a country has higher national income which translates to higher household disposable incomes

This means that households have a higher purchasing power and will be able to purchase more goods and services which increases their satisfaction and hence leads to higher material standard of living.