question
In a simple circular-flow diagram total income and total expenditure are
answer
always equal because every transaction has a buyer and a seller
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GDP
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excludes the value of intermediate goods because their value is already counted in the value of final goods
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Goods that go into inventory and are not sold during the current period are
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included in current period GDP as inventory investment
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Anna, a U.S. citizen, works only in Germany. The value added to production from her employment is included
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only in German GDP
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Which of the following statements about nominal GDP and real GDP is most accurate?
a. Nominal GDP is a better gauge of economic well-being than is real GDP.
b. Real GDP is a better gauge of economic well-being than is nominal GDP.
c. Real GDP and nominal GDP are equally good measures of economic well-being.
d. Whether real GDP or nominal GDP is a better measure of economic well-being depends
on what sort of goods are produced
a. Nominal GDP is a better gauge of economic well-being than is real GDP.
b. Real GDP is a better gauge of economic well-being than is nominal GDP.
c. Real GDP and nominal GDP are equally good measures of economic well-being.
d. Whether real GDP or nominal GDP is a better measure of economic well-being depends
on what sort of goods are produced
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B: Real GDP is a better gauge of economic well-being than is nominal GDP
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If the GDP deflator is 200 and nominal GDP is $10,000 billion, then real GDP is
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$5,000 billion
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The price of imported athletic shoes produced by a U.S. company operating in Thailand increases. By itself what effect will this change have on the GDP deflator and on the CPI?
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The GDP deflator will be unaffected and the CPI will increase
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Babe Ruth's 1931 salary was $80,000. The price index for 1931 is 15.2 and the price index for 2001 is 177.
Ruth's 1931 salary was equivalent to a 2001 salary of about
Ruth's 1931 salary was equivalent to a 2001 salary of about
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$930,000
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If the nominal interest rate is 5 percent and the rate of inflation is 10 percent, the real interest rate is
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-5 %
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Which of the following is a determinant of productivity?
a. human capital
b. physical capital
c. natural resources
d. All of the above are correct.
a. human capital
b. physical capital
c. natural resources
d. All of the above are correct.
answer
All of the above are correct
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The inputs used to produce goods and services are also called
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factors of production
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The relationship between the quantity of output created and the quantity of inputs needed to create it is called
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the production function
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Inward-oriented policies
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include imposing tariffs and other trade restrictions.
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If Congress reduced the tax rate on interest income, investment
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and saving would increase
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Patents turn new ideas into
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private goods, and increase the incentive to engage in research
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A bond is a
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certificate of indebtedness
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Stock represents:
a. a claim to the profits of a firm.
b. ownership in a firm.
c. equity finance.
d. All of the above are correct
a. a claim to the profits of a firm.
b. ownership in a firm.
c. equity finance.
d. All of the above are correct
answer
D
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Suppose that in a closed economy GDP is equal to 10,000, Taxes are equal to 2,000, Consumption equals 6,500, and Government expenditures equal 2,500. What are private saving and public saving?
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1500 and -500
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If the current market interest rate for loanable funds is above the equilibrium level, then
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the quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.
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If Congress reduced the tax rate on interest income, investment
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and saving would increase
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When the government runs a budget deficit,
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investment is lower than it would be otherwise
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T/F: U.S. GDP excludes the production of illegal goods.
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True
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T/F: When an American doctor opens a practice in Bermuda, his production there is part of U.S. GDP.
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False
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Compute how much each of the following is worth in terms of today's dollars using 177 as the price index for today.
a. In 1926 the CPI was 17.7 and the price of a movie ticket was $0.25
b. In 1932 the CPI was 13.1 and a cook earned $15.00 a week
c. In 1943 the CPI was 17.4 and a gallon of gas cost $0.19
a. In 1926 the CPI was 17.7 and the price of a movie ticket was $0.25
b. In 1932 the CPI was 13.1 and a cook earned $15.00 a week
c. In 1943 the CPI was 17.4 and a gallon of gas cost $0.19
answer
a. The movie ticket is worth $.25 177/17.7 = $2.50 in today's dollarsb. the cooks weekly wage is worth $15.00 177/13.1 = $202.67 in today's dollarsc. the gallon of gas is worth $.19 177/17.4 = $1.93 in today's dollars
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Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan.
a. What was the expected real interest rate?
b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?
a. What was the expected real interest rate?
b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?
answer
a. The expected real interest rate was 4 percent.b. The actual real interest rate was 1 per-cent.c. George, the banker, lost because he receives less real interest income than he ex-pected. Jay and
Joyce gain because they pay less real interest income than they expected.
Joyce gain because they pay less real interest income than they expected.
question
Use the data below to find out the growth of income per person (over the entire period, not an annual basis) between the two years listed.
1982, Real GDP-$4,915,600 million, Population- 223 million
2000, Real GDP-$9,243,800 million, Population- 283.5 million
1982, Real GDP-$4,915,600 million, Population- 223 million
2000, Real GDP-$9,243,800 million, Population- 283.5 million
answer
Income per person in 1982 was $4,915,600/233 = about $21,097. Income per person in 1999 was$9,243,800/283.5 = about $32,606. Income per person grew by (32,606 - 21,097)/21,097 = about 54.5 percent.
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