Exam 1

Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

$1,200

Exports are:

$10 billion

government purchases of goods and services are:

$300 billion

consider the tables of production and price statistics for a small economy in 2013. if the economy only produces the four goods listed below, what is the nominal GDP for 2013

$428,000

Considering 2008 as the base year, nominal GDP in 2009 was:

$47,000

total expenditure on GDP by the household sector are:

$500 billion

a simple economy produces only peanut butter and jelly. Using the data in the attached table, nominal GDP in 2009 was ______ and real GDP in 2009 was ______.

$525; $450

Considering 2008 as the base year, real GDP in 2009 was:

$69,000

(scenario: real GDP) the value of nominal GDP in years 1&2 respectively is:

$900; $1,077.50

(scenario: real GDP) using year 1 as a base year, real GDP in year 2 is:

$970

if the exchange rate is 1 euro =$2, then US $1=

0.50 euros

if the exchange rate is $1=110 yen, a $20,000 ford truck costs how much in Japan

2,200,000 yen

The GDP for 2007 was

94 billion

scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

If the British pound appreciates against the dollar, this will make:

British exports more expensive but lower the price of American exports to Britain

government spending on transfer payments is included in government purchases when calculating GDP because it results in the production of new goods and services

FALSE

which of the following equations correctly measures GDP in an economy?

GDP=C+I+G+NX

a rise in the dollar price of Chinese yuan signals an appreciation of the yuan and a depreciation of the dollar

TRUE

governments can use foreign controls to help them fix the value of their currency

TRUE

if the exchange rate for the US dollar changes from $1.25 per euro to $1.50 per euro, then the value of the dollar depreciates

TRUE

the largest spending category in GDP is consumption

TRUE

when the value of a sterling pound changes from $1.25 to $1.50, it follows that the:

US dollar has depreciated

if the value of a US dollar changes from 120 yen to 110 yen, it follows that:

US goods become cheaper for the Japanese consumers to purchase

which of the following goods is directly counted in GDP?

a 12-inch subway sandwich purchased by a student

which of the following would be classified as consumption

a new car purchased by an employee of a company for personal use

which of the following would not be included in the expenditure category called investment expenditures

a purchase of shares of preferred stock

which of the following will shift the demand for the euro to the right?

all of the following: an increase in interest rates in the European Union an increase incomes for countries that but European goods expectations among speculators that the price of the euro will rise in the future

Suppose that Europeans begin to view the United States as a more attractive investment opportunity. Which of the following is likely to occur?

an appreciation of the dollar, which will discourage Europeans from buying American goods and services

the rule that governs a countrys policy towards its exchange rate is known as

an exchange rate regime

which of the following would increase gross private domestic investment in an economy

an increase in the level of Apple's inventory

the value of a euro goes from 1 euro=$1.25 to 1 euro=$1.50. The euro has:

appreciated

government spending _____ is included in GDP

at federal, state, and local levels of government

the value of a euro goes from 1 euro=$1.25 to 1 euro=$1.50. French exports to the United States will:

be more expensive

if a government fixes the exchange rate______ the market equilibrium, there will be a shortage of the domestic currency and tendency for the exchange rate (US dollars per unit of domestic currency) to _________.

below ; rise

Real GDP is nominal GDP adjusted for:

changes in prices

To calculate GDP by the expenditure method, one must add

consumption spending, investment spending, government spending, and net exports

a floating exchange rate is

determined by the market

To fix its exchange rate, a government can use:

exchange market intervention

GDP tends to overstate our economic well being by including which of the following?

expenditures on crime prevention, payments for cleaning up the environment, and repairs to structures destroyed by storms

goods that are produced domestically but are sold abroad

exports

if a country has a _____ exchange rate, its central bank must buy and sell its holdings of currencies to maintain a given exchange rate

fixed

a system in which exchange rates are set by government policy is an

fixed exchange rate system

the market in which currencies can be exchanged for each other is known as the:

foreign exchange market

Dividing real GDP by the population:

gives real GDP per capita.

the reason the dollar value of only final goods and services are counted in GDP is that:

if we counted the value of all goods we would count inputs, like the value of steel in a new automobile, more than once

the purchase of a new house is included in

investment expenditures

an intermediate good would be

lumber used in building a house

A movement from E1 to E2 (up the supply curve of US dollars) in this foreign exchange market would cause Americans to purchase _________ goods and services from Europe.

more

A country's exports minus its imports during a period are:

net exports

a country's standard of living is best measured by the:

per capita real GDP

GDP is the sum of

personal consumption, investment, government purchases, and net exports

if nominal GDP increased from one year to the next, we can conclude that:

prices rose from one year to the next, real GDP rose from one year to the next or that prices and real GDP rose from one year to the next.

the exchange rate is

relative price of currencies between countries

in the foreign exchange market, when the demand for the euro increases, the equilibrium US dollar price of the euro _________ and the US dollar _________

rises; depreciates

a fixed exchange rate is

set by the government

investment spending is

spending on productive physical capital

all other things equal, if the economy of Europe expands rapidly and this increases tourism dramatically in the United States, which of the following will be the result

the US dollar will appreciate

economics

the study of the choices people make to attain their goals, given their scarce resources

which of the following is the best definition of GDP

the total dollar value of all final goods and services produced in the economy during a given year

the value of all the following goods is included in the calculation of GDP expect:

the value of Bridgestone tires purchased by Ford Motor Co.

Real GDP is:

the value of the production of all final goods and services adjusted for price changes

Suppose in 2014, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2014?

the value of the services of the real estate agent

which of the following would be an example of an intermediate good

tires purchased from Goodyear by General Motors for newly produced electric cars

why did china buy $47 billion in the foreign exchange reserves?

to keep the yuan from appreciating

a major drawback off adopting a floating exchange rate is the:

uncertainty about the value of goods traded internationally

which of the following approaches could the Genovian government use to decrease the value of the gene below its present equilibrium exchange rate and into the target range?

use its own currencies

which of the following would not be a part of GDP

used car sales

opportunity cost

what you give up to get something else, implicit and explicit costs

the value of a euro foes from 1 euro=$1.25 to 1 euro = $1.50. In Germany, exports:

will decrease and imports will increase

if the US dollar appreciates relative to currencies in other countries, then US imports:

will increase and exports will decrease

the value of a euro goes from 1 euro=$1.25 to 1 euro= $1.50. In the United States, exports:

will increase, and imports will decrease