Econ test 2

you purchase a new car (produced this year) for $38,000. after six months, you sell the car for $31,500. how much does GDP rise because of these two transactions?

GDP rises by $38,000. When the car has been purchased the GDP increased by $38,000. When the same car is sold for $31,500 it implies $38,000-$31,500= $6,500 of the product has been consumed by the owner and remaining is the second hand selling price. This second hand selling price does not add any value so there is no newly added amount to the GDP . So the GDP rose only by $38,000 at the first time.

which of the following are included in investment? (i) military spending (ii) the purchase of an aircraft by a domestic airline (iii) the purchase of $45,000 worth of bonds (iv) the purchase of $32,000 worth of stock (v) social security payments (vi) the construction of a highway by the federal government

(ii) only - the purchase of an aircraft by a domestic airline.

Based on the following statistics, how much are net exports?

-$0.575 trillion GDP = C + I + G + (X - M) Value of export = $2.357 trillion Value of import = $2.932 trillion Net export = 2.357 - 2.932 = -0.575 Consumption $13.312 trillion Investment $3.317 trillion Government spending $3.412 trillion Exports $2.357 trillion Imports $2.932 trillion

Technological advancement is NOT represented by which of the following

the adoption of an existing technology by new firms

The government passes a new investment tax credit initiative. Which input in the production function changes, and what is the effect on economic growth in the country?

the capital stock increases and economic growth is positively affected

In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010?

$39,770 1357000/34.12= 39771.3

refer to the diagram of the circular flow of income. they key lessons from this diagram are that: (i) all flows of resources are matched by flows of money. (ii) the market value of total output must be equal to total spending.(iii) total spending must equal total income. (iv) all inputs are provide by businesses.

(i),(ii),and (iii)

If a bakery buys a second oven, hires a second baker, buys double the number of ingredients, doubles the size of the bakery, and then produces double the number of cakes, then the bakery is experiencing:

constant returns to scale

If Greenville's GDP doubled over 5 years, what was the approximate annual growth rate (using the rule of 70)?

n=70/R, where n is number of years to get GDP doubled and R is the rate of growth 5 = 70/R R = 70/5 = 14%

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the real GDP for last year using this year as the base year?

185,000 100*1850 Tons of Frozen Fish sold Actual Price Last year 100 $1,800 This year 105 $1,85

A constant returns to scale production function means that if all inputs are increased by 75%, this should lead to output:

rising by 75%.

The table below shows data for Central African Republic (CAR). What was this country's real GDP per person in 2010?

$487.95 Year 2009 $2.045.767.418. 4.337.625 2010 $2,140,503,193. 4.386.768 2011 $2,230,289,068 4.418.636 2012 $2.343.002.553 4.436.415 2013 $1.498.644.740 4.447.942 Central African Republic GDP (constant U.S. dollars) Population

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the nominal GDP for last year?

250000 5000*50 Textbooks sold Actual Price Last year 5,000 $50 This year 5,250 $55

Price Quantity Price Quantity Snickers $2.50 10 $3.00 12 Coffee $7.00 15 $7.50 20 Nominal GDP in 2017 using 2017 as the BY is:

$130.00

Price Quantity Price Quantity Snickers $2.50 10 $3.00 12 Coffee $7.00 15 $7.50 20 The nominal GDP in 2017 is

$130.00 Snickers 2.50 times 10=$25.00 Coffee. 7.00 times 15=$105.00

Price Quantity Price Quantity Snickers $2.50 10 $3.00 12 Coffee $7.00 15 $7.50 20 Real GDP is:

$136.25 2.75*10=27.5 7.25*15=108.75

During 2000 and 2001, nominal GDP in the United States grew by 3.2%,and the rate of inflation was 2.2%.What was the growth rate of the real GDP between the two years?

1%

in 2017, the total population of Africa was estimated to be about 1,250,000,000 people.

1.25

Assume that economy produces only barrels of oil. What is the nominal GDP for last year?

Barrels of Oils Sold Actual Price Last year 80,000 $60 This year 83,000 $63 Answer:80,000*60=4,800,000

Assume that economy produces only barrels of oil. What is the nominal GDP for this year?

Barrels of Oils Sold Actual Price Last year 80,000 $60 This year 83,000 $63 Answer:83,000*63=5,229,000

Why does a small difference in economic growth result in a large difference in wealth over time?

Because the effect of compounding allows growth to build upon previous growth

The government mandates that community college education be tuition-free. Which inputs into the production function changed?

Human capital

The capital stock in an economy stops growing when:

Investment equals depreciation

Technological advancement can be shown by which of these production functions

Option B

The government provides a tax-free period firms to purchase computers and tablets for employees. Which inputs into the production function changed?

Physical capital

A constant returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by:

The same proportion

Refer to the table below, which shows data for the United Arab Emirates (UAE). What was the economic growth rate in UAE between 2009 and 2010?

United Arab Emirates Year 2007 $47.283 90 2008 $42.456.79 2009 $36.024.06 2010 $33.893.30 2011 $34.634.86 2012 $35.416.89 GDP per person (constant U.S dollars) $33.893.30-$36.024.06/$36.024.06*100=-5.91%

If China's economy maintains a 7% annual growth rate over the next 20 years, how large will its economy be in 20 years if its current GDP is $12 trillion? (Use the rule of 70)

Y=A(1+G) ^no of years = 12* (1+0.07)^20 since (1.07)^20 will 3.86 rounded to 4 so =12*4 = 48 trillion.

The aggregate production function is represent as:

Y=f(L,H,K)

Refer to the table below that shows data for Panama. What was Panama's economic growth rate between 2000 and 2001?

Year GDP (constant U.S. dollars) Population 2000 $16,647,538,295.86 3,030,328 2001 $16,743,140,578.59 3,089,648 2002 $17,116,370,199.13 3,149,188 2003 $17,836,198,453.76 3,209,048 2004 $19,177,851,509.38 3,269,356 2005 $20,556,984,394.79 3,330,217 2000=$16,647,538,295.86/3,030,328=5493.64 2001=$16,743,140,578.59/3,089,648=5419.11 (5419.11-5493.64)/5493.64*100=-1.36

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to ___ productivity

a smaller increase in

Southeast Asian countries experience high temperatures and high humidity during the monsoon seasons. This makes working conditions difficult. Because air conditioners are expensive and consume a lot of electricity, an alternative air cooler called an Eco-cooler was invented. This device does not use electricity, is made from readily available soda bottles, and works by funneling air into a room. This scenario is an example of:

a technological innovation that can increase labor productivity and thus increase economic growth.

Which of the following would represent the fastest annual growth?

has real GDP increasing at 5% and population growth of 1%. Hence real GDP per capita grows at 5 - 1 = 4%

In the market for outputs:

households buy goods and services.

The rule of 70 tells us roughly:

how long it will take something to double if you divide by 70 by its annual growth rate.

Which of the following can be classified as technologic progress?

invention of the light bulb

Along the same aggregate production function, the level of _____ is the same

technology

Which of the following is an example of transfer payments?

unemployment benefits

Which of the following explains the shape of aggregate production function?

The law of diminishing returns

Rapid growth in poorer countries leads to:

convergence in real GDP per person between poorer countries and richer countries.

McDonald's hire 20 new workers to staff a new restaurant Where does this transaction take place?

input market

Which of the following is an example of a durable good?

your new car

Assume that economy produces only barrels of oil. What is the growth rate of nominal GDP between the two years rounded to the nearest percent?

83,000*63=5,229,000 80,000*60=4,800,000 5,229,000-4,800,000/4,800,000*100=8.9375 Answer:9%

The government changes the minimum working age to 21. Which inputs into the production function changed?

Labor

Physical capital includes:

Machine tools

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP?

They are not counted.

The production function exhibits _____ returns to physical capital.

diminishing but positive

What is the difference between microeconomics and macroeconomics?

microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole

Which of the following encourages the development of new ideas and inventions?

patents

Below is U.S. economic data for 2018. What was total spending?

$20.58 trillion Total Spending = Consumption expenditure + Investment expenditure + government expenditure + (Export - Import) Total Spending = $ 13.999 + $ 3.628 + $ 3.591 + ($ 2.510 - $ 3.148) = $ 20.577 (=$ 20.58 approx)

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the real GDP for last year using this year as the base year?

$4,980,000 83000*60 Barrels of Oils Sold Actual Price Last year 80,000 $60 This year 83,000 $63

The aggregate production function Y=f(L,H,K) shows that economic growth can occur if: (i)human capital increases (ii)labor productivity falls (iii) the capital stock in the country depreciates (iv) the depreciation rate increases

(i) only

In 2017, Canada's GDP was approximately $1.57 trillion, and its population was about 36.96 million. What was Canada's approximate GDP per person in 2017?

42,590

Assume that economy produces only barrels of oil. What is the average price level between the two years?

Answer:$61.50 Last year:$60 This year:$63

Assume that economy produces only barrels of oil. What is the growth rate of the price level between the two years rounded to the nearest percent?

Answer:(63-60)/60)*100=5%

The moral of the story of the Solow growth model is that:

capital accumulation alone cannot lead to sustainable economic growth.

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

output bought by households

Technological progress is advanced through:

research and development

Which of the following is a scaled number?

government budget deficit as a percentage of GDP

If C = 1000;I=500; G = 800;X=400; M = $600, what is the value of GDP?

$2,100 Calculate GDP GDP = C + I + G + X - M GDP = $1,000 + $500 + $800 + $400 - $600

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century?

South Korea

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and infant deaths per 1,000 live births. What can explain this relationship?

As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition

Based on the following statistics, how much is consumption?

$6.49 trillion 2.56+2.95=5.51 1.80-2.18=-0.38 5.51+(-0.38) 11.62-5.13=6.49 Consumption $11.62 trillion Investment $2.56 trillion Government spending $2.95 trillion Exports $1.80 trillion Imports $2.18 trillion

Consider the data shown in the table. Assume the economy produces only textbooks. What is the growth rate of real GDP between the two years using last year as the base year?

5% Textbooks sold Actual Price Last year 5,000 $50 This year 5,250 $55 (5000*50)=250,000 (5250*55)=288,750 (288,750-250,000)/250,000=5%

Suppose that GDP is a 50million in 2015 but falls to 48 million in 2016 and that no changes in personal consumption expenditures, gross private domestic investment, and government spending are recorded. What must have happened to net exports to cause this change?

From 2015 to 2016, the difference between exports and imports must have fallen by $2 million

Consider the data. Assume that economy produces only only barrels of oil. What is the growth rate of the quantity of barrels of oil sold between the two years rounded to the nearest percent?

Real GDP in base year = Actual Price last year * Oil sold last year = 80000*60 = $4800000 Real GDP in this year = Actual Price last year * Oil sold this year = 60 * 83000 = $4980000Growth rate of real GDP = (4980000/4800000) - 1 = 0.0375 or 3.75% Answer:4%

Assume that economy produces only barrels of oil.What is the growth rate of real GDP between the two years using the calculations from the previous two questions and rounded to the nearest percentage?

Answer: 83000*61.50=5104500 80000*61.50=4920000 5104500-4920000/4920000=3.75 4%

Molly Maids house cleaning services are considered:

Consumption

True or False:Automation necessarily leads to job loss.

False

You just bought two used textbooks for $25 each. How much does GDP change because of your purchase?

GDP does not change

The government of Ontario, Canada, has implemented a frontier college program that is designed to improve literacy and math skills among students who live in remote parts of Canada and in First Nations communities that are underserved by educational facilities.This is an example of a government program designed to build:

Human capital

Assume that economy produces only barrels of oil. What is the real GDP for last year using the average price level?

Last year 80,000 $60 This year 83,000 $63 80000*61.50=4920000

Assume that economy produces only barrels of oil. What is the real GDP for this year using the average price level?

Last year 80,000 $60 This year 83,000 $63 83000*61.50=5104500

Human capital refers to improvements in:

a worker's skills, made possible by education,training,and knowledge.

Refer to the table below that shows data for Panama. What was Panama's real GDP per person in the year 2002?

Year GDP (constant U.S. dollars) Population 2000 $16,647,538,295.86 3,030,328 2001 $16,743,140,578.59 3,089,648 2002 $17,116,370,199.13 3,149,188 2003 $17,836,198,453.76 3,209,048 2004 $19,177,851,509.38 3,269,356 2005 $20,556,984,394.79 3,330,217 $17,116,370,199.13/3,149,188=$5,435.17

What is the difference between spending from a microeconomic standpoint versus spending from a macroeconomic standpoint?

in microeconomics, spending refers to spending by you, or your family or your company, whereas in macroeconomics, spending refers to the spending by all consumers, all businesses, and the government in the economy

GDP is defined as

the market value of all final goods and services produced within a country in a given period of time