ECON 103- First Exam

Other things equal, relatively poor countries tent to grow

faster than relatively rich countries; this is called the catch up effect

If in a closed economy the national savings are equal to 70,000 and the public savings are equal to 35,000, then how much is the private savings?

35,000

A farmer sells 50,000 of apples to individuals who take them home to eat and 75,000 of apples to a company that uses them all to produce cider. How much of the farmer's sales will be included as apples in GDP?

50,000

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Bond A has a term of 20 years and Bond B has a term of 2 years

Which of the following bond buyers did not buy the bond that best met his or her objective?

Cecilia held long-term bonds rather than short term bonds to avoid risk

Real GDP per person is 10,000 in Country A, 20,000 in Country B, and 30,000 in Country C. The saving rate increases by the same rate in all three countries. Other things equal, we would expect that

Country B will grow the fastest

If the national saving in a closed economy is greater than zero, which of the following, must be true?

Either the public or private savings must be greater than zero; investment is positive; Y-C-G>0

Consider two items that might be included in GDP: (1) the estimated rental value if owner-occupied housing and (2) purchases of newly constructed homes. How are these two items accounted for when GDP is calculated?

Item (1) is included in the consumption component of GDP, while item (2) is included in the investment component of GDP

Janet bought flour and used it bake bread she ate. ABC Bakery bought flour which is used to bake bread that customers purchased. In which case will the flour be counted as a final good?

Janet's purchase but not ABC Bakery's purchase

Which of the following is correct?

None

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Private savings is positive; public saving is negative

Gina, a US citizen, works only in Bermuda. The value of Gina's production is included in

US GNP and Bermudan GDP

John buys a used car for 5,400 and spends 600 on new parts, made in the US, to fix his car. The end result of theses two transactions is

US consumption purchases increase by 600 and US GDP increases by 600

For the purpose of the calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing

Over time, people have come to rely more on market produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own homes, hire people to clean their houses. By itself, this change has

caused measured GDP to rise

When the consumer price fix index rises, the typical family

has to spend more dollars to maintain the same standard of living

You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the US government

According to the definitions of private and public saving, if Y, C and G remained the same, an increase in taxes would

lower private saving and raise public saving

An increase in the real interest rate will make happier the

people that want to save

A US firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a US construction company. In which quarters does these transactions raise investment?

the first but not the second

Which of the following both make the interest rate on a bond higher than otherwise?

the interest it pays is taxed and it was issued by a finically weak corporation

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year

GDP is defined as

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