ECON EXAM #2
GDP equals $5 trillion consumption equals $3.1 trillion government purchases equals 0.7 trillion $ in taxes equals $0.9 trillion for this economy investments amount to
$1.2 trillion
Supposed economy is close with national savings of $3 trillion consumption of $10 trillion in government purchases of $4 trillion what is GDP
$17 trillion
What was country A's investment in 2010
$1999
In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?
$2.50
Quality motors Japanese and company that produces automobiles. All of it's automobiles ads produced in American planes. In 2008 quality motors produced 25 million worth of automobiles and sold 12 million in the us and 13 million in Mexico. In addition it sold 2 million from the previous years inventory in the us. The transactions just described contribute how much to us GDP for 2008?
$25 million
A farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. How much of the farmer's sales will be included as apples in GDP?
$25,000
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
$250 to GDP
Consider two cars manufactured by Chevrolet in 2014. During 2014,Chevrolet sells one of the two cars to Emily for $20,000. Later in the same year Emily sells the car to Jim for $18,000 the second automobile, with a market value of $19,000 is unsold at the end of 2014 and it remains in Chevrolet's inventory. The transactions just described contribute to how much GDP for 2014?
$39,000
Suppose there are only two firms in an economy cowhide inc produces leather and sells it to couches in which produces and sells leather furniture. With each $1,000 worth of leather that it hits from cowhide inc, couches inc, produces a couch and sells it for $2,600. Neither firm had any inventory at the beginning of 2015. During that head, cowhide produced enough leather for 25 couches. Couches inc bought 80% of that leather for $20,000 and promised to buy the remaining 20% for 5,000 in 2016. Couches inc produced 20 couches during 2015 and sold each one during that year for $2,600. What is the economies GDP for 2015?
$57,000
A dairy buys 50,000 worth of mild and spends 5,000 on cartons and utilities. It sells the cartons of milk to a grocery store for 60,000 then sells all of the cartons to consumers for 65,000. How much do these actions add to GDP?
$65,000
What was country As GDP in 2010
$7253
In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014?
$8 million
What was the growth rate of real GDP for 1931
-6.49% real GDP is a better gauge of economic well-being the nominal GDP
What was the growth rate of real GDP for 1930
-8.62% real GDP is a better gauge of economic well-being the nominal GDP
If the nominal interest rate is 3% and the inflation rate is 4% and the real interest rate is
-one%
For this economy public saving is equal to
0.2 trillion and the government is running a budget surplus of 0 .2 trillion
Several studies in the 1990s concluded that the consumer price index overstated inflation by about
1 percentage point per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage point
A countries real GDP rose from $500-$530 wells nominal GDP rose from $600-$700 what was this countries inflation rate
10.0%
Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2004 was
116.9 and the inflation rate was 9.8
In 2013 XYZ corporation had total earnings of 500 million and XYZ retained 20% of the earnings for a future investment if the price of a share of XYZ stock is $70 and if 1 million shares of that stock is outstanding and what is the price earnings ratio
14.0
In this country of bienmundo
17 billion and 6 billion
What are the GDP deflator and the inflation rate for 1931
19.6, -10.3
Net national product for chereaux in 2015 is
198
The market value of all final good and services produced within chevereaux in 2015 is
200
Gross national product for chereaux in 2015 is
204
James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?
22,000
In the small closed economy of San Lorena
260 billion denars 70 billion denars
Between October 2014 and October 2015 CPI in Canada rose from 120 to 124 the CPI in Mexico rose from 2:10 to 229.1 what were the inflation rates for Canada and Mexico over this one year.
3.3% for Canada and 9.1% for Mexico
What Belongs in space e
3.9%
Suppose that an economy produces 20,000 units of good A which sells at $3 a unit and 40,000 units of good B which sells at $1 per unit. Production of Good A contributes
3/2 times as much to GDP as the production of good B
In this country of Meditor
390 million merits and 110 million merits
If the cost of housing increases by 10% then other things the same CPI's likely to increase by about
4.1%
And a small closed economy investment is $50 billion in private saving as $45 billion what are public saving and national saving
5 billion and 50 billion
The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?
5%
Which of the following is a financial market transaction
A saver buys a bond a corporation has just issued so it can purchase capital.
In a closed economy national saving equals
All of the above
Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2004 was
All of the above
What statement about GDP is true
All of the above
Which of the following is included in the investment component of GDP
All of the above
Which of the following is a way to compute GDP
All of the above are correct
In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are
All of the categories
Which of the following is not correct
American families have a larger fraction of their income saved than their counterparts in many other countries such as Germany and Japan
The residents of country A earn $500 million of income from abroad. Residents of other countries earn $200 million in country A. These earnings are accounted for in country A's A. GNP which is smaller than GDP in country A. B. GDP which is smaller than GNP in country A. C. GNP which is larger than GDP in country A. D. GDP which is larger than GNP in country A.
C
For the purpose of calculating GDP investment spending on
Capital equipment inventory and structures structures including Household purchases of new housing
Suppose the government finds a major defect in one of the companies products and demands that the products be taken off the market we would expect that
Demand for existing shares of the stock in the price for both fall
Which advantages do make sure funds claim to provide
Diversification and access to the skills of professional money managers
One of the big acknowledge problems with using the consumer price index is a measure of the cost of living is that CPI
Fails to account for the introduction of new goods
The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.
One bag of flour is sold for 1.00 to a bakery, which uses the flour to bake bread that is sold for 3.00 to consumers. A second bag of flour is sold for 1.00 to a grocery store who sells it to a consumer for 2.00. Taking these four transactions into account, what is the effect on GDP?
GDP Increases by $5.00
What statement about GDP is correct
GDP is to a nations economy as household income is to a household
Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?
GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services.
Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they use to sell her. Which of the following statements is consistent with the way GDP is computed?
GDP will fall if Jennifer marries Thomas but not if she marries Darin.
Suppose the government illuminates all environmental regulations and as a result the production of goods and services increases there is considerably more pollution based on the scenario which of the following statements is correct
GDP would definitely increase because GDP exclude environmental quality
Which of the following correctly list what is included in the consumption component of GDP
Household purchases of services nondurable goods and durable good other than residential construction
For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?
If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016.
If an economy's GDP falls, then it must be the case that the economy's
Income and expenditure both fall
Public saving falls by $2 billion and private saving falls by $1 billion and closed economy
Investment falls buy $3 billion
GDP
Is used to monitor the performance of the overall economy and is the single best measure of a societies economic well being.
Consider two items that might be included in GDP one the estimated rental value of owner occupied housing and two purchases of newly constructed homes how are these two items accounted for when GDP is calculated
Item 1 included in the consumption component of GDP while item to was included in the investment component of GDP
Suppose the price for 1 gallon of gasoline rises from $3.50 to four dollars and the price of 1 gallon of milk rises from three dollars to $3.20 if the CPI rises from 1:20 to 1:30 to the people likely will buy
Les gas in more milk
Suppose the price of a gallon of ice cream rises from four dollars to five dollars and the price of a can of coffee rises from two dollars to 250 if the CPI rises from 1:50 to 177 the people likely will buy
Les ice cream in last coffee
Compared to stocks bonds are for the holder
Lower risk and lower potential return
Suppose the price of a quart of milk rises from one dollar to $1.20 and the price of a T-shirt rises from eight dollars to $9.60 if the CPI rises from 1:50 to 195 and people likely will buy
More milk and more T-shirts
Suppose in economy's production consist only of corn and soybeans in 2000 1020 bushels of corn are sold at four dollars port per bushel and 10 bushels of soybeans are sold at two dollars per bushel and 2009 the price of corn was two dollars per bushel and the price of soybeans was one dollar per bushel using 2009 as the base year it follows that for 2010
Nominal GDP is $100 real GDP is $50 and the GDP deflator is 200
Suppose that an economy produces only cranberries and maple syrup in 2000 1050 units of cranberries were sold at $20 per unit and 100 units of maple syrup were sold at eight dollars per unit and 2009 the base year the price of cranberries was sold at $10 per unit and the price of maple syrup was sold $15 per unit for 2010
Nominal GDP was $1800 real GDP is $2000 and the GDP deflator his 90
For a closed economy GDP is $11 trillion consumption is $7 trillion taxes or two .5 trillion and the government runs a surplus of $1 trillion what are private saving in national saving
One point5 trillion in two.5 trillion
If the cost of food and beverages increases by 10% then other things the same for CPI is likely to increase by about
One.5%
Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?
Only Joe's and Jim's grocery store purchases are included in GDP
Consider the following three items are spending by the government one the federal government pays a 500 unemployed benefit to unemployed person to the federal government makes 2000 salary payment to a Navy lieutenant the city of Bozeman Montana makes $10,000 payment to ABC lighting company for streetlights and Bosman which of these payments contributes directly to government purchases in the national income accounts
Only items two and three
For an imaginary closed economy T equals $5000 S equals $11,000 C equals $48,000 and the government is running a budget surplus for $1000 then
Private saving equals $10,000 in GDP equal $63,000
An increase in the governments budget deficit means
Public saving is less and 0 and decreasing
Worldwide discovery service corporation develops a new way to speed up it's deliveries and reduce his cost we would expect that this would
Raise the demand for existing shares of the stock causing a price rises
Which of the following statements about nominal GDP in real GDP is correct
Real GDP is a better gague in economic well-being than nominal GDP
And 2009 the US government's budget deficit increased substantially other things the same this means
Supply of loanable shifted to the left
When constructing the consumer price index the bureau of labor statistics does not do which of the following
Survey sellers to determine what the typical consumer buys
Jerry has the choice of two bonds when the pay is 5% interest and one that pays 2% interest which of the following is most likely
The 2% bond as a municipal bond and the 5% bond as a US government bonds
The US government pays in economist at the US department of commerce $100,000 in salary in 2013 that economist retires in 2014 the government pays and $60,000 in Social Security benefits which of the following is correct
The 2013 payment is included and 2013 GP is government purchases a 2014 payment is allocated to the previous year's GDP according to the amount of work performed by the economist each year
In 1979 1980
The US inflation rate was measured by the CPI was higher than that measured by the GDP deflator in the difference was explained by rapidly rising oil prices
Which is the most accurate statement about the GDP deflator in the consumer price index
The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year where is the GDP deflator compares the price of currently produce goods and services to the price of the same goods and services in the base year
Which is the most accurate statement about the GDP deflator and the consumer price index
The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.
Which of the following is correct
The cpi is better than the GDP deflator at reflecting the goods and services bought by consumers
Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantities of loanabkw funds
The demand for loanable funds shifted leftward
Supposed to Congress were to institute an investment tax credit what would happen in the market for loanable funds
The demand for loanable funds which shift right
Suppose the Congress were to repeal an investment tax credit what would happen in the market for loanable
The demand for loanable funds would shift left
Suppose private saving in a closed economy is $12 billion investment is $10 billion
The government budget deficit must equal to billion dollars
During the third quarter of this year a firm produces consumer goods and add some of those goods to his inventory during the fourth quarter of this year the firm sells the goods at a retail outlet with the result that the value of it inventory at the end of the fourth quarter is smaller than the value of it inventory at the end of the third-quarter these actions affect which components of the fourth quarter GDP
The increased consumption and decreased investment
Suppose the market for loanable funds is an equilibrium what would happen in the market for loanable funds other things the same if the Congress and President increase the maximum contribution limits the 401(k) and 403B tax-deferred retirement accounts
The interest rate will decrease in the quantity of loanable funds would increase
Which of the following is not included in US GDP
The market value of an oil change that Ben performs on his own car
What topic is more likely studied by a macro
The percentage of the labor force that is out of work, and the differences in average income from country to country
Which of the following scenarios is consistent with this statement "the rate of inflation was 23.75% for 2011"
The price of a hamburger was 3.80 rather than 5.50 in 2010 with which other prices in the table remaining fixed
Which of the following scenarios is consistent with this statement "the cost of living increased by 25% between 2009 and 2011"
The price of a hot dog was 4.07 rather than 3.63 in 2011, with other prices in the table remaining fixed
What is a headline that microeconomists study than to what macros study
The price of gasoline rises due to rising oil prices
Suppose the quality of televisions changed over time but the quality change Goes and measured for the purpose of computing the consumer price index in which of the following instances with the buyers resulting from the unmeasured quality change the most severe
The quality of TV improves and TV becomes more expensive relatives other gods
Which of the following statements is correct
The supply of an demand for loanable funds depend on the real interest rate
Which of the following is included in Singapore's GDP
The value of production by an American working in Singapore
In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?
The value of the consumer price index is always 100 in the base year.
An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?
The value of the goods and services produced by the restaurant is included in French GDP, but not in U.S. GDP.
Most entrepreneurs do not have enough money of their own to start your own business when they acquire the necessary funds from someone else
Their investments are being financed by someone else's saving
What would happen in the market for lotta both fans if the government were to decrease the tax rate on interest income
They would be an increase in the amount of loanable funds borrowed
For a closed economy GDP is $12 trillion consumption is 7 trillion taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion what a private saving a national saving
To trillion dollars and $1 trillion respectively
Suppose that in a closed economy GDP is equal to 20,000 consumption is equal to 15,000 government purchases equal 4000 in taxes equal 3000 what our private saving public saving a national saving
To000, -1000, and one000 respectively
When an American household purchases a bottle of Italian wine for $100
U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.
Because the CPI is based on a fixed basket of goods the introduction of new goods and services in the economy causes the CPI to over estimate the cost of living this is so because
What a new good as introduced to guess consumers greater choice first reducing the amount they must spend to maintain their standard of living
In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct?
When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007.
What is a question more likely studied by micro instead of a macro?
Why do wages differ across industries?
Which is not a question a macroeconomist would address
Why does the price of oil rise when war erupts in the Middle East?
Other things the same if the government increases transfer payments to households then the effect of this government budget
Will make the rate of interest rice
Suppose the government where to replace the income tax with a consumption tax that interest rates on savings was not taxed the result would be that interest rate
With decreased and investment would increase
Which of the following is included in GDP
both the market value of rental housing services and the market value of owner-occupied housing services
Other things the same, when the interest rate rises,
c. people would want to lend more, making the quantity of loanable funds supplied increase.
According to the circular-flow diagram GDP
can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production
When the consumer price index falls at the typical family
can spend fewer dollars to maintain the same standard of living
In the actual economy, households
divide their income among spending, taxes, and saving
Because every transaction has a buyer and a seller,
every transaction contributes equally to an economy's income and to its expenditure.
A macroeconomist is interested in
explaining why the unemployment rate is higher.
Categories of US consumer spending ranked from largest to smallest are
housing, transportation, food & beverages, and medical care.
The CPI differs from the GDP deflator in that
increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.
Municipal bonds pay a relatively
low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
In computing GDP, market prices are used to value final goods and services because
market prices reflect the values of goods and services
The slope of demand for loanable funds curve represents the
negative relation between the real interest rate and investment.
The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland's
net factor payments from abroad are negative, and its GDP is larger than its GNP
Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used car dealership or the purchase of an antique rocking chair by a person at a yard sale, are
not included in current GDP because GDP only measures the value of goods and services produced in the current year.
By not taking into account the possibility of consumer substitution, the CPI
overstates the cost of living
Other things the same government budget deficit
reduces both public and national saving
A larger budget surplus
reduces the interest rate and raises investment
Long-term bonds are
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
Suppose that in 2010 the producer price index increases by 1.5 percent. As a result economists most likely will predict that
the consumer price index will increase in the future.
In early 2010 Molly paid $200,000 for a house built in 2000. She spent $30,000 on new materials to remodel the house. Although Molly lived in the house after she remodeled it, its rental value rose. Which of the following contributed to real GDP in 2010?
the costs of the remodeling materials and the increase in rent, but not the price of the house
If there is a shortage of loanable funds, then
the quantity demanded is greater than the quantity supplied and the interest rate will rise.
If the government institutes policies that diminish incentives to save then the loanable funds market
the supply of loanable funds shifts leftward
GDP is defined as the
value of all final goods and services produced within a country in a given period of time