Answer ALL questions in Section A, one from Section B, and one from Section C.

Time 1 hour.

Section A

Answer ALL questions. Each question is worth 3 marks.

Provide a definition of the following concepts:

  1. Inflation
  2. Income
  3. Output
  4. Productivity
  5. Unemployment
  6. Savings
  7. Investment
  8. Consumption
  9. The multiplier
  10. Terms of trade

Section B

Answer one question.

  1. National income and accounts:
    1. What is national income and how is it measured? [15]
    2. What are the problems with GDP measurement? [10]
    3. Does, and should, GDP measure wellbeing? [10]
  2. Growth and Total Factor Productivity:
    1. What is total factor productivity (TFP) and how does it affect economic growth? [15]
    2. What is the Golden Rule, and does it seem plausible? [10]
    3. “TFP is just a residual and hence should be ignored.” Do you agree with this statement? [10]
  3. Unemployment:
    1. What is unemployment, and how do we measure it? [15]
    2. Describe how effective government policy can be at influencing unemployment. [10]
    3. Should governments explicitly target the unemployment rate? [10]

Section C

  1. Theory and reality:
    1. Define an economic fact, and an economic theory. How are the two related? [15]
    2. What constitutes a useful economic model? Can you give an example? [10]
    3. “The world must abandon obsolete economic theories”. Does this seem like good advice? [10]