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EC 305-Exam1-Ch2
Macro
| Question | Answer |
|---|---|
| In calculating this year's GDP, national income accountants | exclude Social Security payments to retirees |
| Assume you built a new house, bought a used car, and bought some government bonds. Which of the following is true? | investment went up since you built a new house |
| Which of the following is FALSE? | if the underground economy grows, people's standard of living will decline |
| Which of the following statements is true? | NDP cannot be greater than GDP |
| Increases in unwanted business inventories are counted as | an increase in investment |
| The difference between gross domestic investment and net domestic investment is equal to | the difference between GDP and NDP |
| Assume nominal GDP increased by 4.2% in the U.S. but by only 3.4% in Germany. We can definitely conclude that | -the strd of lvng of the pple in U.S. went up more than the strd of lvng of the people in GE -real econ growth in the U.S. was higher than in GE -infl in U.S. was 0.8% higher than in GE -productivity growth in U.S. was higher than in GE E)none |
| Assume you deplete your savings to buy a new sofa and some government bonds and then take a vacation in a foreign country. Which of the following is true? | consumption will increase |
| If gross investment were zero, which of the following would be true? | net investment would be negative |
| Depreciation is | -the difference between gross investment and net investment -the difference between GDP and NDP -the difference between GNP and NNP -another word for capital consumption allowances E)all of the above |
| If we counted the value of autoworkers' salaries, wheels, tires, steel, body parts, and final car sales in calculating GDP, then we would be | overstating GDP through double counting |
| The difference between gross investment and net investment is | equal to capital consumption allowances |
| In the United States, annual per-capita GDP in 2009 was around | $46,500 |
| As defined in our text, private domestic investment (I) does NOT include | investment in labor productivity through education and training |
| Assume a U.S. dealer bought 100 TVs from South Korea for $250 each in 2009. He subsequently sold 80 of them in 2006 for $450 each, and the rest in 2010 for $400 each. By how much was the U.S. GDP affected in 2009? | $16,000 |
| In 1994, U.S. GDP was $6,931, GNP was $6,922, NNP was $6,104, and national income was $5,495 (all numbers are in billions of dollars). We can conclude that | depreciation was $818 billion |
| In a simple economy with no depreciation, no government, and no foreign sector, it is correct to say that for any specified time period (say the month of June) | Y – C ≡ S |
| Which of the following identities is FALSE? | I - S ≡ (G - TA + TR) + NX |
| If private domestic saving in an economy increases, which is the most likely to occur? | an increase in private domestic investment |
| Assume the budget deficit increases. Which of the following can happen? | -private domestic saving can increase -private domestic investment can decrease -imports can increase -exports can decrease E)all of the above |
| If the government increases taxes, which of the following is LEAST likely to occur? | a decrease in net exports |
| Assume that GDP = 4,800, consumption = 3,400, private domestic savings = 400, government purchases = 1,200, and net exports = -120. Which of the following is true? | -disposable income is 3,800 -private domestic investment is 320 -the budget deficit is 200 D)all of the above |
| If private domestic saving is 960, private domestic investment is 780, and the government spends 300 more than it receives in tax revenues, then it follows that | the trade deficit is 120 |
| Assume that GDP = 8,100, consumption = 5,400, gross private domestic investment = 1,200, government purchases = 1,600. Which of the following is true? | imports exceed exports by 100 |
| Assume exports = 300, imports = 400, tax revenues = 1,100, government purchases = 1,400, private domestic saving = 900. Then the level of private domestic investment is | 700 |
| If imports increase by $15 billion, which of the following has to happen for GDP to rise? | 1-consumption has to increase by more than $15 billion 2-government purchases have to increase by more than $15 billion 3-private domestic investment has to increase by more than $15 billion E)either 1), 2), or 3) would be sufficient to increase GDP |
| As a percentage of GNP, the U.S. federal debt | sharply increased in the 1980s and then decreased in the 1990s |
| If private domestic saving exceeds private domestic investment by $220 billion and government spending exceeds tax revenue by $340 billion, then | the trade deficit is $120 billion |
| If national income is 5,200, disposable income is 4,400, consumption is 4,100, the trade deficit is 110, and the budget deficit is 150, what is the level of private domestic investment? | 260 |
| Assume government purchases = $1,500, the budget deficit = $120, consumption = $4,800, private domestic saving = $1,220, the trade deficit = $90, and transfer payments = $0. Which of the following is true? | -private domestic investment is $1,190 -national income is $7,400 -disposable income is $6,020 D)all of the above |
| If the U.S. budget deficit increased substantially while private domestic saving and private domestic investment remained roughly the same, then | the U.S. imported more than it exported |
| Assume the budget deficit decreased by $15 billion, private domestic saving decreased by $20 billion, exports increased by $10 billion, and imports increased by $15 billion. By how much did private domestic investment change? | private domestic investment did not change at all |
| The budget deficits in the early 1980s were largely financed through | a decrease in net exports |
| If the budget surplus increases, which of the following is likely to happen? | exports will increase more than imports |
| If we look at U.S. net exports over the last four decades, we realize that | U.S. trade deficits decreased greatly in the early and mid 1980s |
| If the U.S. unemployment rate has increased, which of the following must have occurred? | -more pple have been forced to work in part-time rather than full-time jobs -there has been an decrease in the work force as fewer job openings were listed -more people have become only "marginally attached" to the work force E)none of the above |
| The PCE deflator measures | price changes in consumer expenditures based on national income accounts |
| The GDP-deflator and the producer price index (PPI) differ since | the PPI measures a fixed market basket but the GDP-deflator doesn't |
| Assume that the prices of cars manufactured in the U.S. increases due to an increase in quality. Which of the following should happen if the same number of cars is produced? | nominal GDP should increase |
| If nominal GDP was $9,200 billion in Year 1 and $9,420 billion in Year 2 and prices increased from Year 1 to Year 2, then | we cannot determine the value of the GDP-deflator or real GDP in Year 2 |
| If nominal GDP is $8,820 billion and the GDP-deflator is 105, then real GDP is | $8,400 billion |
| If nominal GDP increased from $8,000 billion in the base year to $8,400 billion in the following year and real GDP stayed the same, which is true? | prices increased on average by 5 percent |
| Assume that in 1962 nominal GDP was about $600 billion and real GDP was about $2,400 billion. The GDP-deflator for that year was | 25 |
| Assume nominal GDP was $8.0 trillion in Year 1 and $8.8 trillion in Year 2. If Year 1 is the base year, then | 1-the GDP-deflator is 110 2-prices increased on average by 10 percent 3-real GDP has not changed E)both 1) and 2) are true, but only if 3) is true |
| The unemployment rate is most likely to decrease if | more people who are currently out of work decide to give up looking for a job |
| Which of the following is TRUE? | core inflation excludes price changes for food and energy |
| The CPI, a price index used to measure inflation, is imperfect since | 1-it only measures those goods that are included in the market basket 2-it does not take into account quality improvements E)only 1) and 2) |
| The consumer price index (CPI) and the producer price index (PPI) differ from each other since | the composition of their market baskets is different |
| If the nominal interest rate on a government bond is 6% and the rate of inflation is 4%, what is your real rate of return on this government bond? | +2% |
| Assume you can exchange 10 Mexican pesos for one U.S. dollar, but you need only 0.64 British pounds to get one U.S dollar. What does this imply? | -product prices in GB are much cheaper than Mexico -product prices in GB are much more expensive than Mexico -you can get about 36 Mexican pesos for one British pound -you can get about 64 Mexican pesos for one British pound E)none of the above |
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