ECON 2300 Assignment 6

An economy has GDP of $41,817, consumption of $28,493, investment of $14,719, and no government spending. How much are the net exports?

-1,395

An economy has GDP of $42,325, consumption of $28,076, investment of $16,448, and no government spending. How much are the net exports?

-2,199

The real GDP in a hypothetical economy is $29,489 and the GDP deflator is 137. Calculate the nominal GDP. Round your answer to 2 decimal places if necessary.

40,400

The real GDP in a hypothetical economy is $28,516 and the GDP deflator is 136. Calculate the nominal GDP. Round your answer to 2 decimal places if necessary.

38,781.76 (NGDP/RGDP)*100 = GDP Deflator

Compared to the previous year, an economy produces $2,927 more worth of goods that are consumed by households and imports $508 more worth of goods that are purchased by the government. By how much does GDP increase?

2,927

The GDP deflator was 123 in 2015 and 156 in 2016. Calculate the inflation rate between 2015 and 2016. Express your answer as percentages (write 5% as 5 and not as 0.05), rounded to 2 decimal points!

26.82

The GDP deflator was 123 in 2015 and 156 in 2016. Calculate the inflation rate between 2015 and 2016. Express your answer as percentages (write 5% as 5 and not as 0.05), rounded to 2 decimal points!

26.83

The real GDP in a hypothetical economy is $27,281 and the GDP deflator is 114. Calculate the nominal GDP. Round your answer to 2 decimal places if necessary.

31,100

The following table presents information on prices and quantities produced by an economy that only produces milk and cereal. The base year is 2015. Calculate the nominal GDP in 2015.

8,900

In an economy, the GDP is $24,237, households consume $9,760, the firms invest $7,413, there are no exports and $1,925 worth of imports. What is government spending?

8,989

The following table presents information on prices and quantities produced by an economy that only produces milk and cereal. The base year is 2014. Calculate the GDP deflator in 2015.

80 Nom. GDP = (8*600)+(4*700) = 7,600 Real. GDP = (10*600)+(5*700) = 9,500 GDP Def = (7,600/9,500) * 100 = 80

Which of the following is a final good? A. flour purchased at the store to bake cookies B. a share of IBM stock C. the memory chips in your new smart phone D. flour used by the bakery to bake cookies

A. flour purchased at the store to bake cookies

Gross domestic product is a measure of the total value of all A. sales in an economy over a period of time. B. final goods and services produced in an economy over a period of time. C. consumer income in an economy over a period of time. D. capital accumulation in an economy over a period of time.

B. final goods and services produced in an economy over a period of time.

Which of the following is NOT included in real GDP? A. production of services, such as the services of doctors B. production in the home C. production of goods that do not last more than one year, such as gasoline D. production of goods that last more than one year, such as television sets

B. production in the home

Real Gross Domestic Product is A. the amount of people unemployed divided by the total labor force. B. the value of total production linked back to the prices of a single year. C. the most that can be produced when the economy's resources are fully employed. D. the productivity of labor.

B. the value of total production linked back to the prices of a single year.

In the definition of GDP, "market value" refers to A. not counting intermediate products. B. valuing production according to the market price. C. valuing production in production units. D. when the production took place.

B. valuing production according to the market price.

Double counting (counting the same thing twice) in GDP accounting is avoided by not including: A. depreciation. B. intermediate goods. C. illegal activities. D. net exports.

B.intermediate goods.

Choose the best statement. A. An increase in compensation of employees increases aggregate income but does not change GDP. B. An increase in government purchases increases aggregate expenditure but does not change GDP. C. GDP equals aggregate expenditure and equals aggregate income. D. GDP always equals aggregate expenditure and sometimes equals aggregate income.

C. GDP equals aggregate expenditure and equals aggregate income.

Nominal GDP is A. GDP valued at constant prices. B. real GDP valued at base year prices. C. GDP valued at prices of that year. D. real GDP adjusted for price changes.

C. GDP valued at prices of that year.

GDP using the expenditure approach equals the sum of personal consumption expenditures plus A. gross private investment. B. gross private investment plus government expenditure on goods and services. C. gross private investment plus government expenditure on goods and services plus net exports of goods and services. D. gross private investment plus government expenditure on goods and services minus imports of goods and services.

C. gross private investment plus government expenditure on goods and services plus net exports of goods and services.

GDP counts only final goods and services because this A. method avoids understating the value of GDP produced during a given year. B. method avoids including any goods that are produced this year and sold next year. C. method avoids double counting of goods going through several stages of production. D. amount can be more easily determined in the marketplace.

C. method avoids double counting of goods going through several stages of production.

In the United States, GDP is typically measured A. weekly. B. monthly. C. quarterly. D. daily.

C. quarterly.

Real GDP does not show the state of economic welfare in a country in part because GDP omits: I. household production. II. leisure time available III. the quality of the environment A. I only B. I and III C. II and III D. I, II and III

D. I, II and III

Which of the following is not a final good? A. a purse sold to a foreign visitor B. a new computer sold to an NYU student C. a hot dog sold to a spectator at a Chicago Bears football game D. a new car sold to Avis for use in their fleet of rental cars

D. a new car sold to Avis for use in their fleet of rental cars

An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease II. U.S. investment increases A. only I B. neither I nor II C. only II D. both I and II

D. both I and II

The circular flow diagram shows only the aggregate expenditures measure of GDP. T/F

False

The underground economy means that GDP will overstate the actual level of economic welfare. T/F

False

To measure economic welfare, one needs only to measure real GDP. T/F

False

Household production is not measured in the GDP. T/F

True

When IBM, an American firm, produces computer chips in another country, this production is not included in U.S. GDP because the production did not take place in the United States. T/F

True

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 . Refer to Table 23-10. What was this country's GDP deflator in 2017? a. 123.4 b. 116.7 c. 120.0 d. None of the above is correct.

a. 123.4

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 . What was this country's GDP deflator in 2017? a. 123.4 b. 116.7 c. 120.0 d. None of the above is correct.

a. 123.4 Nom. GDP = (12*625)+(6*925) = 13,050 Real. GDP = (11*625)+(4*925) = 10,575 GDP Def = (13,050/10,575) * 100 = 123.40

According to the circular-flow diagram GDP a. 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. b. can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. c. can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services. d. cannot be computed as either the revenue firms receive or the payments they make to factors of production.

a. 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.

Gross domestic product measures a. income and expenditures. b. income but not expenditures. c. expenditures but not income. d. neither income nor expenditures.

a. income and expenditures.

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate? a. -9.1%. b. 10.0%. c. 15.0%. d. 16.7%.

b. 10.0%.

If an economy's GDP rises, then it must be the case that the economy's a. income rises and expenditure falls. b. income and expenditure both rise. c. income and saving both rise. d. income rises and saving falls.

b. income and expenditure both rise.

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP a. increases by $1500. b. increases by $220. c. increases by $40. d. increases by $280.

b. increases by $220.

Consider the following three items of spending by the government: (i) the federal government pays a $500 unemployment benefit to an unemployed person; (ii) the federal government makes a $2,000 salary payment to a Navy lieutenant; (iii) the city of Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman. Which of these payments contributes directly to government purchases in the national income accounts? a. only item (i) b. only items (ii) and (iii) c. only items (i) and (ii) d. only item (ii)

b. only items (ii) and (iii)

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise? a. both real GDP and nominal GDP. b. real GDP but not nominal GDP. c. nominal GDP but not real GDP. d. neither nominal GDP nor real GDP.

b. real GDP but not nominal GDP.

GDP is not a perfect measure of well-being; for example, a. GDP incorporates a large number of non-market goods and services that are of little value to society. b. GDP places too much emphasis on the value of leisure. c. GDP fails to account for the quality of the environment. d. All of the above are correct.

c. GDP fails to account for the quality of the environment.

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that a. GDP is not a useful measure of society's welfare. b. GDP is still the best measure of society's welfare because these other values cannot actually be measured. c. GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare. d. GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government.

c. GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare.

Because every transaction has a buyer and a seller, a. the number of firms must be equal to the number of households in a simple circular-flow diagram. b. firms' profits are necessarily zero in a simple circular-flow diagram. c. every transaction contributes equally to an economy's income and to its expenditure. d. GDP is more closely associated with an economy's income than it is with an economy's expenditure.

c. every transaction contributes equally to an economy's income and to its expenditure.

In the actual economy, goods and services are purchased by a. households and the government, but not firms. b. households and firms, but not the government. c. households, firms, and the government. d. households, but not firms or the government.

c. households, firms, and the government.

Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800, and investment of $3,000. GDP equals a. $24,450. b. $20,700. c. $11,550. d. $15,300.

d. $15,300. Y = C+I+G+(Exp-Imp) 9000+3000+3500+(2500-2700) = 15,300

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015? a. $2000 b. $4400 c. $5600 d. $3200

d. $3200