Econ 320 - Ch 3: National Income
If total consumption (measure in billions of current dollars) equals $3,657, consumption of durable good is $480, and consumption of nondurable goods is $1,194, then consumption of services is
$1,983
If GDP (measure in billions of current dollars) is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are
$704
If total investment (measured in billions of current dollars) equal $741, business fixed investment is $524, and residential fixed investment is $222, then inventory investment is
-$5
If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by
0.85 units
Scenario 4: (continued) General Motors builds $500 million worth of cars, but consumers only buy $470 million of them As a result Inventory...
Inventory investment increases by $30 million
Scenario 2: Sarah spends $1,200 on a new laptop to use in her publishing business. The laptop was built in China Investment...
Investment increases by $1,200
Scenario 2: (continued) Sarah spends $1,200 on a new laptop to use in her publishing business. The laptop was built in China Net exports...
Net exports decrease by $1,200
An economy's factors of production and its production function determines the economy's
Output of goods and services
The economy begins in equilibrium at Point E, representing real interest rate, r_1, at which savings, S_1, equals desired investment, I_1. What will be the new equilibrium combination of real interest rate, savings, and investment if the government cuts taxes, holding other factors constant
Point A
The economy begins in equilibrium at Point E, representing the real interest rate, R_1, at which savings, S_1, equals desired investment, I_1. What will be the new equilibrium combination of real interest rate, savings, and investment if there is a tax law change that makes investment projects less profitable and decreases the demand for investment goods (but does not change the amount of taxes collected in the economy)
Point A
The economy begins in equilibrium at Point E, representing real interest rate, r_1, at which saving, S_1, equals desired investment, I_1. What will be the new equilibrium combination of the real interest rate, savings, and investment if the government cuts spending, holding other factors constant
Point B
The economy begins in equilibrium at Point E, representing the real interest rate, R_1, at which savings, S_1, equals desired investment, I_1. What will be the new equilibrium combination of real interest rate, savings, and investment if there is a technological innovation that increases the demand for investment goods
Point B
Consumption depends _____ on disposable income, and investment depends _____ on the real interest rate
Positively; negatively
All of the following actions are investments in the sense of the term used by marcoeconomists except
Sandra Santiago's buying 100 shares of IBM stocks
According to the model developed in Chapter 3, when taxes decrease without a change in government spending
consumption increase and equilibrium investment decreases
The demand for output in a closed economy is the sum of
consumption, investment, and government spending
According to the model developed in Chapter 3, when taxes are increased but government spending is unchanged, interest rates
decrease
An increase in the supply of capital will
decrease the real rental price of capital
If the consumption function is given by C = 150 + 0.85 (Y - T) and T increases by 1 unit, then savings
decreases by 0.15 units
A consumption function shows the relationship between consumption and
disposable income
The investment function slopes _____ because there are _____ investment projects that are profitable as the interest rate decreases
downward; more
According to the model developed in Chapter 3, when government spending increases without a change in taxes
equilibrium investment decreases
All of the following are measures of GDP except the total
expenditures of all business in the economy
To avoid double counting in the computation of GDP, only the value of _____ goods are included
final
The underground economy
includes domestic workers for whom Social Security tax is not collected
Use the model developed in Chapter 3 and assume that consumption does not depend on the interest rate. In this case, when there is technological advances that leads to an increase in investment demand
investment is unchanged and the interest rate rises
If the production function describing and economy is Y = 100K^25L^.75, then the share of output going to labor
is 75 percent
When the demand for loanable funds exceed the supply of loanable funds, household want to save _____ than firms want to invest and the interest rate _____
less; rises
In equilibrium, total investment equals
national savings
The marginal propensity to consume is
normally expected to be between zero and one
The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, national savings
raises by $60 billion
The real wage will increase if
the productivity of labor increases
An economy's ______ equals its ______.
total income; total expenditure on goods and services
All of the following transaction that took place in 2009 would be included in GDP for 2009 except the purchase of a
2001 Jeep Cherokee
Scenario 4: General Motors builds $500 million worth of cars, but consumers only buy $470 million of them As a result consumption...
Consumption increases by $470
Scenario 1: Debbie spends $300 to buy her husband dinner at the finest restaurant in Orange County
Consumption rises by $300
Scenario 1: (continued) Debbie spends $300 to buy her husband dinner at the finest restaurant in Orange County
GDP increases by $300
Scenario 4: (continued) General Motors builds $500 million worth of cars, but consumers only buy $470 million of them As a result GDP...
GDP increases by $500 million
Scenario 3: Jane spends $800 on a computer to use in her editing business. She got last year's model on sale for a great price from a local manufacture As a result GDP...
GDP is not affected
Scenario 2: (continued) Sarah spends $1,200 on a new laptop to use in her publishing business. The laptop was built in China GDP...
GDP is unchanged