Econ HMWK 5

Developing countries with large informal sectors tend to have firms that invest less in capital equipment.

True

During a business cycle expansion, total production ________ and total employment ________.

A) increases; increases

Which of the following are not considered part of government purchases?

A) welfare benefits

Refer to Table above. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals

B) $6,400.

Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is

B) 2014.

Gross domestic product in the economy is measured by the

B) dollar value of all final goods and services produced in the economy.

The output of Mexican citizens who work in Texas would be included in the

B) gross national product of Mexico.

Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that

B) the price level in 2016 was less than the price level in the base year.

Refer to Table above. What is the GDP deflator in 2016 if 2016 is the base year?

C) 100

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is

C) 125

Which of the following is not directly counted in GDP?

C) intermediate goods

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?

D) 2.7%

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that

D) all of the above are true.

Investment, as defined by economists, would include the purchase of a

D) computer by an accounting firm.

Gross domestic product understates the total production of final goods and services because of the omission of

D) household production.

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

D) net exports.

Real GDP is GDP in a given year

D) valued in the prices of the base year.

If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.

False

Residential investment includes spending by firms on office buildings.

False

Transfer payments are subtracted from national income to get to personal income.

False