Macroeconomics
Last year in country C, the GDP was $3000 billion, private consumption was $2000 billion, investment was $300 billion, and government expenditure was $600 billion. How much was the net exports of country C last year? -$100 billion -$10 billion $0 billion $10 billion $100 billion
$100 billion
This year, country K has a budget deficit of $30 billion, taxes are $70 billion, and government expenditures are $80 billion. How much did the government spend in providing transfers? $0 billion $20 billion $40 billion More information is needed
$20 billion
ef and e represent forward and spot exchange rates, and i and i* represent the interest rates on domestic currency and interest rate on foreign currency, respectively. Which of the following equations can represent the Covered Interest Parity? Check all that apply. (1+i)/(1+i*) = e/ef (ef -e)/e = (i*-i)/(1+i) (1+i)ef = (1+i*)e (1+i*)ef = (1+i)e
(1+i)/(1+i*) = e/ef (ef -e)/e = (i*-i)/(1+i) (1+i)ef = (1+i*)e
Suppose you have $10,000 and the exchange rate between the dollar and the euro in the one-year forward market is ef = 0.89€/$. If the interest rates on the one-year dollar and euro bonds are the equal to each other, i$ = i€, what spot exchange rate makes you indifferent between buying dollar bond and euro bonds? (Answer in €/$.)
.89 Since the interest rates are the same, buying dollar bonds would be better if the dollar has a higher value in the forward market vis-à-vis the euro when compared to the current spot market. Buying euro bonds would be better if the dollar has a lower value in the forward market compared to the current spot market. You would be indifferent between the two types of bond if the spot and forward rates are the same.
The price of one Indian rupee (INR) in terms of Australian dollar (AUD) is 0.02. If the price of a basket of goods is INR 50,000 in India and AUD 2000 in Australia, then the real exchange rate of the rupee vis-à-vis the Australian dollar (treating the rupee as home currency) is __________. 0.2 0.5 1.0 2.0
0.5
Consider the same economy as in Question 5. The following price and quantity statistics are available about this economy: Year Hamburgers Soft Drinks 2015 Price = $2.00; Quantity = 2000 Price = $0.50; Quantity = 2000 2016 Price = $2.25; Quantity = 2000 Price = $0.50; Quantity = 2200 Taking 2015 as the base year, find the rate of inflation based on GDP deflator in 2016. Round to the nearest whole percent and enter just the number with no symbols.
10
Among the adult population in country C, 50% participate in the labor market and 45% are employed. What is the unemployment rate in country C? 5% 10% 20% 50%
10%
Consider an economy that produces only two goods, soft drinks and hamburgers. The following price and quantity statistics are available about this economy: Year Hamburgers Soft Drinks 2015 Price = $2.00; Quantity = 2000 Price = $0.50; Quantity = 2000 2016 Price = $2.25; Quantity = 2000 Price = $0.50; Quantity = 2200 Taking 2015 as the base year, find the growth rate of the constant-price GDP in 2016. Round to the nearest whole percent and enter just the number with no symbols.
2
Over the past three decades, the real GDP of the United States has increased at an average the rate of 3% per year. The average growth rate of population in the country has been 1% per year. What has been the average growth rate of real per capita GDP in the US during the past three decades? 0% 1% 2% 3% 4%
2%
Suppose that the aggregate income in a country is $100 billion, aggregate private consumption is $60 billion, and total tax payment is $20 billion. How much does the private sector save in this economy? (Answer in billions of dollars.)
20
You are in charge of managing $10 million for one year. You are allowed to invest only in the US or German government bonds, both of which are considered risk free. The money is needed exactly one year from now in dollars, and you are not allowed to take any risks with it. The interest rates on the dollar and the German bonds are, respectively, i$ = 0.02 and i€ = 0.05. The spot exchange rate is e = 0.90€/$ and the forward rate is ef = 0.945€/$. What is the highest return you can expected on the $10 million? (Answer the number of dollars with no dollar sign or separators.) Assume that any contract you make must be backed by the assets that you already have.
200000
You travel to Egypt with your friend, and in the bazaar you see a locally-made shirt that you would like to buy. The shopkeeper tells you that he is going to give you a good deal and sell you the shirt at 200 Egyptian pounds. Your friend tells you that an importer back in the US sells the same shirt at $28. You know that the exchange rate is 8 Egyptian pounds per US dollar. How much of a discount is the shopkeeper offering you relative to the importer's price? (answer in US dollars)
3 The price of the shirt offered by the Egyptian seller in terms of US dollars is 200/8 = $25. How much less is this than what the importer charges?
Over the past 10 years, the real GDP of country A has grown at 5% per year, and its population has grown at 2% per year. During that period, the annual growth rate of per capita GDP in country A must have been approximately __________. 1% 2% 3% 4% 5%
3% Rate of growth of per capita GDP is defined as the difference between the rate of growth of GDP and the rate of growth of population as Per Capita GDP = GDP/Population. So, the growth rate of per capita GDP = 5% - 2% = 3%.
Suppose that the interest rate on dollar accounts is equal to 2% (i$ = 0.02), the interest rate on Polish zloty accounts is equal to 4.5% (izł = 0.045), and the expected exchange rate between the dollar and the zloty one year from now is ee = 4 zł/$. Assume that the (uncovered) interest parity holds. Find the spot exchange rate, e. (Answer in zł/$ and round to the nearest tenth.)
3.90
Suppose that the interest rate on dollar accounts is equal to 2% (i$ = 0.02), the interest rate on Polish zloty accounts is equal to 4.5% (izł = 0.045), and the expected exchange rate between the dollar and the zloty one year from now is ee = 4 zł/$. Assume that the (uncovered) interest parity holds. What would the spot rate, e, be if the expected exchange rate remains the same and the interest rate on Polish assets declines to izł = 0.02? (Answer in zł/$.)
4
This year, country J has a trade deficit of $50 billion, a net factor income of $20 billion, and net unilateral transfers of -$10 billion. If the country's central bank keeps its reserve assets constant, how much must the country be borrowing? (Answer in billions of dollars.)
40
Which of the following transactions can help pay for part of the trade deficit of a country? Reducing official reserves held by the central bank of the country Selling domestic non-reserve financial papers to foreigners Remittances of the country's workers who are employed in other countries Gifts and unilateral transfers received by the country All of the above
All of the above
Which one of the following transactions creates demand for the British pound in the currency exchange markets? An economics professor in Australia orders a book printed in Britain. A finance professor in Hong Kong buys bonds issued by the British government. A marketing professor in Dubai takes a vacation in London. All of the above None of the above
All of the above All of the options create a demand for the British pound because they entail purchases of British products by people outside UK.
An Indian company buys a new machine made in Britain by a Japanese company. No additional resources are used in India for the investment. The machine is made entirely with British labor and British-made parts. Assume that other activities in India, Britain, and Japan are unaffected by this purchase. As a result, __________. Japan's GDP increase, but British and Indian GDPs are unaffected The GDPs of all three countries increase Britain's GDP increases, but Indian and Japanese GDPs remains unaffected India's GDP increases, but Japanese and British GDPs are unaffected
Britain's GDP increases, but Indian and Japanese GDPs remains unaffected
Suppose that the yuan-euro exchange rate and the price level in China are constant. If the real GDP in China and the Euro Area are kept constant but the price level in the Euro area declines, given other factors, then China's net exports to the Euro Area will decline China's net exports to the Euro Area will rise China's net exports to the Euro Area will not change China's net exports to the Euro Area may rise or decline
China's net exports to the Euro Area will decline
In macroeconomic analysis, why does one have to distinguish between consumption and investment expenditures? Consumption expenditure is included in GDP, but investment expenditure is not. Consumption expenditure has many sub-components, but investment does not. Investment expenditure is included in GDP, but consumption expenditure is not. Consumption and investment expenditures are determined by different factors.
Consumption and investment expenditures are determined by different factors.
Country L's capital market is lending to the rest of the world while its net inflow of factor incomes, unilateral transfers, and official reserves are zero. Which of the following must be true about country L? Select all that apply. Country L has a positive Trade Surplus. Country L has a negative Trade Surplus. Country L has a negative Trade Deficit. Country L has a positive Trade Deficit.
Country L has a positive Trade Surplus. Country L has a negative Trade Deficit.
The economies of El Salvador and Nicaragua are similar in terms of population size and the real amount of goods and services that households consume. However, in Nicaragua households produce the goods that they need for their own consumption mostly at home, while in El Salvador households produce more products for the market and buy most of the goods that they consume in the market. a. El Salvador has a lower measured GDP than Nicaragua. b. El Salvador has a higher measured GDP than Nicaragua. c. El Salvador and Nicaragua have the same measured GDPs. d. El Salvador is likely to have fewer firms active in the market than Nicaragua. e. El Salvador is likely to have a lower labor force participation rate than Nicaragua.
El Salvador has a higher measured GDP than Nicaragua.
During recessions, it is natural for an economy to consume less and invest more. True False
False
The labor force participation (LFP) rate is the percentage of adult population that has a job. True False
False LFP rate is defined as the percentage of adult population that is in the labor force.
Which of the following could have contributed to high trade deficit in the United States? Increase in private sector savings Decline in private sector investment Increase in budget deficit Increase in government saving
Increase in budget deficit
Suppose Jamaica trades only with the United Kingdom and the United States. Assume that the price levels in all countries are exogenously given. If the US dollar depreciates relative to the British pound and Jamaica's GDP and overall trade balance remain unchanged, then __________. Jamaica's net exports to the United States may increase or decrease Jamaica's net exports to the United States will remain unchanged Jamaica's net exports to the United States will increase Jamaica's net exports to the United States will decrease
Jamaica's net exports to the United States will decrease
Suppose that current prices in the US and Japan are practically constant while the dollar is gaining value against the yen. Other things are the same around the world. This means that compared to the Japanese products, the goods produced in the US are becoming _________. less competitive in Japan but not in the US markets Less competitive in the US markets but not in Japan Less competitive in all markets around the world Less competitive in both Japan and the US but not in the rest of the world More competitive in both Japan and the US but not in the rest of the world
Less competitive in all markets around the world Since the dollar is appreciating with respect to the yen while prices are constant, goods produced in the US become more expensive relative to Japanese products, rendering US producers less competitive around the world.
Which of the following is a correct representation of the relationship between Trade Surplus (NX) and other macroeconomic variables [GDP (Y), Private Consumption (C), Government Consumption (G), Investment (I), Domestic Savings (S), Private Savings (Sp), and Government Savings (Sg)]? NX = Y - S NX = Sp + Sg NX = S - I NX = Y - (C - G - I)
NX = S - I
How does a depreciation of the dollar against the yen affect the net exports of the US? Net exports of the US to Japan will rise, but net exports of the US to the rest of the world will remain unchanged. Net exports of the US to Japan and the rest of the world will rise. Net exports of the US to Japan and the rest of the world will decline. Net exports of the US to Japan will decline, but net exports of the US to the rest of the world will rise.
Net exports of the US to Japan and the rest of the world will rise.
Suppose the exchange rate between the dollar and the euro is e = 0.97€/$ in the spot market and ef = 0.95€/$ in the one-year forward market. Assume that you have $10,000 and need it next year in dollars. Meanwhile, you want to get the highest return on it. If the interest rates on the one-year dollar and euro bonds are both equal to i$ = i€ = 0.02, which one of the following options would be better for you? Option A: Keep all the money in dollars and buy one-year US bonds. Option B: Turn the money into euros in the spot market, buy one-year euro bonds, and use a forward contract to turn the resulting principal and interest into dollars a year from now. Option C: Use the half of the money to buy one-year US bonds. Turn the other half into euros in the spot market, buy one-year euro bonds, and use a forward contract to turn the resulting principal and interest into dollars a year from now. Option D: Keep all the money in US dollars as cash.
Option B: Turn the money into euros in the spot market, buy one-year euro bonds, and use a forward contract to turn the resulting principal and interest into dollars a year from now. Option A gets you about 2 percent less than Option B because the spot rate is 2 percent more favorable for the dollar than the forward rate while interest rates are the same.
Which of the following is a macroeconomic variable? The price of a dollar in terms of euro The price of a BigMac meal relative to that of a Whopper hamburger The average wage rate of production workers at Boeing The number of employees of British Airways The price of IBM stock
The price of a dollar in terms of euro The price of a dollar in terms of euro is an Exchange Rate, which is a macroeconomic variable.
Which of the following is used as a measure of real GDP? The current dollar value of all goods and services produced in the country in each year The total annual income of all citizens of a country regardless of their residence The total value of all domestic production in each year evaluated in the prices of a given year The total annual consumption and investment of all residents of a country
The total value of all domestic production in each year evaluated in the prices of a given year The total value of all domestic production in a given year evaluated at a given base price is the Constant-Price measurement of real GDP.
In the United States, there are more adults in the labor force than outside labor force. True False
True Out of the 251.5 million adult population, about 60% are in the labor force as per Bureau of Labor Statistics as of October 2015.
In 2015, the average nominal wage rate in country A went up by 1% and the rate of inflation was -2%. The real wage rate growth in 2015 in the country must have been approximately __________. -3% -1% 0% 1% 3%
WRONG 1% WRONG -1%
Question 10 Suppose (1+i)ef < (1+i*)e where ef and e represent forward (a year from now) and spot exchange rates and i and i* represent the interest rates on domestic currency and the interest rate on foreign currency, respectively. If the forward rate for six months from now is equal to e + (ef - e)/2, which of the following will guarantee higher returns a year from now? Keeping Home currency in interest bearing form now and converting to Foreign currency a year later Converting to Foreign currency now and keeping the foreign currency in interest bearing form for a year Keeping Home currency in interest bearing form for six months and then converting it to foreign currency and keeping foreign currency bonds for the rest of year All three of the above will give the same returns
WRONG All three of the above will give the same returns
Suppose Botswana decides to peg its currency, pula, to the US dollar at the of rate 0.1$/pula and allows capital to free flow in and out of the country so that the interest parity condition holds. If everyone views the peg as credible and comes to expect the exchange rate to remain constant in the coming years, then the one-year, risk-free interest rate in Botswana will be equal to the one-year, risk-free interest rate in the US. be lower than the one-year, risk-free interest rate in the US. be higher than the one-year, risk-free interest rate in the US. be higher or lower than the one-year, risk-free interest rate in the US.
WRONG be higher than the one-year, risk-free interest rate in the US.
Which of the following is the correct representation of Gross Domestic Product (Y) in terms of consumption (C), investment (I), government expenditure (G), net taxes (T), and net exports (NX)? Y = C + I + G Y = C + I + G + T Y = C + I + G + NX Y = C + I + G - NX
Y = C + I + G + NX
The purchase of __________. a used house does enter GDP new material for improving a used house does not enter GDP both a used house and the new material for improving a used house enter GDP a used house does not enter GDP, but the purchase of new material for improving a used house does
a used house does not enter GDP, but the purchase of new material for improving a used house does
In 2017, India's trade deficit as share of GDP widened. In that year, government deficit as share of GDP declined and investment as share of GDP remained constant. What must have happened to private savings as share of GDP? a. Private savings as share of GDP must have declined. b. Private savings as share of GDP must have increased. c. Private savings as share of GDP must have remained constant. d. Private savings as share of GDP may have risen or declined, depending on the situation.
a. Private savings as share of GDP must have declined.
GDP deflator is a price index for a. the value added produced in a country. b. goods and services sold by firms in a country. c. goods and services purchased by firms in a country. d. goods and services purchased by the households in a country.
a. the value added produced in a country.
During the two decades following the breakup of the fixed exchange rate system in the early 1970s, the Japanese yen __________. lost its value relative to the US dollar fluctuated sharply against the US dollar but eventually returned to its 1970 value kept its value constant relative to the US dollar appreciated vis-à-vis the US dollar
appreciated vis-à-vis the US dollar During the two decades following the break up of the fixed exchange rate system, the dollar lost its value relative to the Japanese yen.
Suppose between 2016 and 2017, Australia's trade balance (net exports) did not change, but its current account balance increased. Which one of the following can explain this outcome? a. An decrease in the net inflow of unilateral transfers (donations by Australians to people outside their country less the donations Australians received from the rest of the world). b. An increase in the net inflow of factor incomes (Remittances to Australia of incomes earned in other countries less remittances of incomes earned in Australia to other countries). c. A decrease in Australia's imports from the rest of the world. d. An increase in Australia's exports to the rest of the world. e. An increase in Australia's capital account balance.
b. An increase in the net inflow of factor incomes (Remittances to Australia of incomes earned in other countries less remittances of incomes earned in Australia to other countries).
Egypt has been running a trade deficit. Recently, the Egyptian government's budget deficit increased while private savings and trade deficit were unchanged. This means that investment in Egypt must have a. increased. b. decreased. c. remained unchanged. d. may have gone up or down, depending on the situation.
b. decreased.
There are many unemployed workers in Illinois. CU Automotive Company develops a project that creates 50 new jobs for those unemployed workers in Illinois, without affecting the rest of the labor market. Assume that in the absence of the project, those workers would not have been able to find employment. In 2019, the project's sales are $6 million and its intermediate input purchases are $2 million. Assume that the intermediate input purchases are made entirely outside the state. How much does the project contribute to the GDP of the Illinois economy in 2019? a. $2 million. b. $3 million. c. $4 million. d. $6 million. e. $8 million.
c. $4 million. First note that under the assumptions of this question, those 50 workers would not have produced any output. So, when they gain employment, their production adds to the GDP. The contribution of the project to the GDP of the economy is the total value of all final goods and services sold on the market less the value of inputs imported from outside the state. Thus, the increase in Illinois GDP is $6−$2 = $4 million.
In the above question, if the chain-rule GDP is used as the measure of real GDP, what is the rate of inflation of the GDP deflator between in 2018 and 2019? a. 3.03% b. 6.00% c. 6.25% d. 6.67% e. 10.0%
c. 6.25% GDP of 2019 in 2018 prices = (2x50) + (1x60) = $160 Nominal GDP in 2019 = (1x50) + (2x60) = $170 GDP Deflator in 2019 if it is set equal to 1 in 2018 = $170/$160 = 1.0625 Inflation rate between 2018 and 2019 = (1.0625−1)/1 = 0.0625 = 6.25%.
US trade balance (net exports) a. has always been negative. b. had always been positive until the last decade. c. had been mostly positive until the late 1970s when it became consistently negative. d. had been mostly negative until the late 1970s when it became consistently positive.
c. had been mostly positive until the late 1970s when it became consistently negative.
The history of macroeconomic trends in the US shows that during recessions, as share of GDP, a. private consumption and total investment tend to rise. b. total consumption and total investment tend to decline. c. total consumption tends to rise and total investment tends to decline. d. total consumption tends to decline and total investment tends to rise. e. total consumption tends to remain unchanged and total investment tends to decline.
c. total consumption tends to rise and total investment tends to decline.
In the above question, suppose that the intermediate input purchases are made inside the state from a company, Intermed Inc., that like CU Automotive ends up employing the previously unemployed workers in Illinois. Assume that Intermed has excess capacity to meet the demand of CU Automotive without turning away any other customer. How much does the CU project contribute to the GDP of the Illinois economy in 2019 under this alternative scenario? a. $2 million. b. $3 million. c. $4 million. d. $6 million. e. $8 million.
d. $6 million.
Under the chain rule, we compare the GDP of each two consecutive years in terms of prices that prevail in the earlier year. Therefore, to compare 2018 and 2019, we must first calculate GDP in both years in 2018 prices. Consider an economy that produces only two goods, bread and butter. The following statistics are available about this economy. What is the growth rate of the real chain-rule GDP between 2018 and 2019? 2017: Base Year 2018 2019 Quantity Price Bread 40 $1 50 $2 50 $1 Butter 60 $1 50 $1 60 $2 a. 3.03% b. 6.00% c. 6.25% d. 6.67% e. 10%
d. 6.67%
The purchase of a used house in 2019Q2 a. enters the 2019Q2 GDP as an amount equal to the price paid for the house. b. and any new material purchased for its improvement in that quarter enter the 2019Q2 GDP. c. does not enter the 2019Q2 GDP, neither does any new material purchased for its improvement. d. does not enter the 2019Q2 GDP, but any new material purchased for its improvement in that quarter does.
d. does not enter the 2019Q2 GDP, but any new material purchased for its improvement in that quarter does.
According to the U.S. Bureau of Labor Statistics (BLS), U.S. firms added 242,000 jobs to their payroll in February 2016. The economists regarded this outcome as a robust increase in employment over the previous month. However, the unemployment rate remained unchanged from the previous month at 4.9 percent. These figures indicate that in February 2016 the in U.S. a. the BLS must have made a mistake in measuring the unemployment rate or the labor force participation rate. b. the labor force participation rate must have remained unchanged. c. the labor force participation rate must have decreased. d. the labor force participation rate must have increased.
d. the labor force participation rate must have increased.
If the government budget deficit and investment rise in the US economy this year and at the same time private savings remain unchanged, the US trade deficit a. may go up, may go down. b. will remain unchanged. c. will decline. d. will rise.
d. will rise.
The substitution bias in the standard CPI calculation causes an over-estimation of cost of living because in aggregating consumer prices, the standard CPI calculation method uses weights that __________. do not change in response to relative price changes do not reflect the introduction of new goods into the basket of household consumption decline in response to increases in relative prices rise in response to increases in relative prices
do not change in response to relative price changes
Company BH produces bike helmets. In the fist quarter of 2019 (2019Q1), it produced 11,000 helmets at the cost of $20 each. It sold 10,000 of those helmets at $25 each and stored the rest as inventory. In 2019Q2, the company sold the inventoried helmets at $30 each. The inventory activity of Company BH a. added nothing to the GDP of 2019Q1 and $30,000 to the GDP of 2019Q2. b. added $30,000 to the GDP of 2019Q1 and nothing to the GDP of 2019Q2. c. added $20,000 to the GDP of 2019Q1 and $30,000 to the GDP of 2019Q2. d. added $20,000 to the GDP of 2019Q1 and nothing to the GDP of 2019Q2. e. added $20,000 to the GDP of 2019Q1 and $10,000 to the GDP of 2019Q2.
e. added $20,000 to the GDP of 2019Q1 and $10,000 to the GDP of 2019Q2. The goods produced in a given period but kept in inventories for sale in a later period are treated as investment, valued at cost, and added to the GDP of that period. When those inventories are sold in a later period, the difference between their value at market prices and the cost measured in the period of production is included in GDP as the return to the investment in inventories.
US imports as share of GDP a. have hovered in the 3-5 percent range since the 1930s. b. have hovered in the 15-17 percent range since the 1930s. c. had remained unchanged between 1929 and 1970s, but started to increase afterwards. d. had dropped from over 5 percent to around 3 percent during the great depression, experienced a jump after WWII, and remained around 5 percent until the 1970s when the share started to grow. e. had dropped from over 5 percent to around 3 percent during the great depression, gradually rose back to 5 percent by the late 1960s, and then grew more rapidly to over 15 percent in the 2000s.
e. had dropped from over 5 percent to around 3 percent during the great depression, gradually rose back to 5 percent by the late 1960s, and then grew more rapidly to over 15 percent in the 2000s.
Real GDP a. is the current dollar value of the total amount of production in a country in a given year. b. is the current dollar value of the total amount of production by all citizens of a country in a given year. c. is the value of the total amount of production in a country in a given year, measured in terms of a fixed set of prices. d. is the value of the total amount of production by all citizens of a country in a given year, measured in terms of a fixed set of prices. e. is the value that people attach to the goods and services produced in a country in a given year compared to some reference bundle of goods and services.
e. is the value that people attach to the goods and services produced in a country in a given year compared to some reference bundle of goods and services.
Assuming that the covered and uncovered interest parities both hold at a given time and that ef and ee represent forward and expected exchange rates, we will have ___________. ef > ee ef < ee ef = ee ef and ee cannot be compared.
ef = ee
According to the standard definition of labor market status, a 16 year old woman who works a few hours a week in her parents' store without being paid is considered __________. employed unemployed out of labor force a special category of labor status that is distinct from the above three
employed An adult person (16 years old or above) is considered employed as long as he/she has a job with one or more hours of work per week.
Aggregate income in an economy is always equal to the aggregate expenditure on the goods and services produced in that economy because __________. households eventually spend all their income the dollars that are spent on the goods and services produced in the economy but not earned as income are not counted as part of aggregate expenditure every dollar spent on the goods and services produced in the economy is a dollar earned by the economy's households as wages, rents, or profits households spend all their income as soon as they receive it
every dollar spent on the goods and services produced in the economy is a dollar earned by the economy's households as wages, rents, or profits Aggregate expenditure by firms for production activities equals the aggregate income of households.
In country M, households have been going to restaurants for half of their meals and for the rest they have been enjoying their own cooking at home. This year, habits have changed and households are having only one quarter of their meals in restaurants. Assume that the total expenditure on all other goods and services remains unchanged from last year. As a result of this change, the GDP of country M __________. goes up this year goes down this year does not change this year may go up or down this year
goes down this year
Consumer price index is a measure of the price level for the goods and services __________. produced and consumed in a country produced in a country and consumed by households inside and outside the country imported or produced in a country and consumed by households in that country imported or produced in a country and consumed by households inside and outside the country
imported or produced in a country and consumed by households in that country
Total public and private consumption and investment in a country may add up to more than the total of the country's GDP because __________. in addition to these, GDP includes net exports, which can be negative public investment expenditure is not included in GDP these types of expenditure include intermediate goods that not included in GDP in addition to these, GDP includes budget surplus, which can be negative
in addition to these, GDP includes net exports, which can be negative A country's GDP is calculated by summing public and private consumption and investment with net exports, which can have a negative sign.
The GDP of a country in a given year __________. does not include the value of the country's exports includes the value of goods and services currently produced in that year in the country does not include the value of any intermediate good produced in the country includes the value of goods and services produced in the past and resold in that year includes the value of intermediate goods imported into the country
includes the value of goods and services currently produced in that year in the country GDP includes the value of final goods and services produced in a country in a given period.
Suppose the GDP calculation in a country is carried out annually and 2015 is selected as the base year for real GDP measurement. The statisticians in the country calculate both constant-price and chain-rule GDP indicators. In this situation, the level of the chain-rule GDP measure for 2016 __________. is higher than the constant-price measure for that year is equal to the constant-price measure for that year may be higher or may be lower than the constant-price measure for that year is lower than the constant-price measure for that year
is equal to the constant-price measure for that year The level of chain-rule GDP and constant-price measure GDP are the same for two consecutive years, with the former being base-year in constant-price measure GDP.
For developing countries, the PPP GDP measure in international dollars tends to be considerably higher than the dollar value of GDP calculated at the market exchange rate because in those countries __________. local goods and services tend to be relatively more expensive than is the case in the United States imported goods and services tend to be relatively more expensive than is the case in the United States local goods and services tend to be relatively cheaper than is the case in the United States imported goods and services tend to be relatively cheaper than is the case in the United States
local goods and services tend to be relatively cheaper than is the case in the United States PPP GDP measure takes in the account the purchasing power of local goods and services in developing countries whereas dollar value of GDP only takes into account internationally traded items, making developing countries appear much poorer.
If covered interest parity holds, foreign interest rates are constant, and the rate of interest on dollar deposits rises, the excess value of the dollar in the forward market, (ef - e)/e __________. must decline moves in the opposite direction of the expected appreciation of the dollar in the spot market remains constant must rise may rise or may decline
must decline
In country D, the total adult population and the number of adults with jobs have remained constant since last year, while the labor-force participation rate has declined. In this situation, the unemployment rate this year _________. must have risen must have declined must have remained unchanged may have risen or declined, depending on other developments in the economy
must have declined
GDP deflator is a measure of the price level for the goods and services __________. imported into a country consumed in a country produced in a country exported from a country
produced in a country
For most of the years since the mid-1960s in the United States, __________. public consumption and investment expenditures have been rising as percentages of GDP public consumption expenditure has been rising as percentage of GDP, but public investment has been declining public consumption expenditure has been declining as percentage of GDP, but public investment has been rising public consumption and investment expenditures have been declining as percentages of GDP
public consumption and investment expenditures have been declining as percentages of GDP
In the United States, government expenditure on goods and services as a share of GDP declined between the mid-1960s and late-1990s while the budget deficit was growing. This outcome implies that __________. taxes must have declined while government transfers remained unchanged taxes and government transfers must have both declined taxes net of government transfers must have declined the trade and current account balances must have declined
taxes net of government transfers must have declined
In the terminology of foreign payments, the capital account balance refers to __________. the net inflow of factor income the net inflow of investment goods the changes in a country's net holding of foreign assets the trade surplus plus the net inflow of factor income and unilateral transfers the net inflow of factor income and unilateral transfers
the changes in a country's net holding of foreign assets
Suppose that the nominal GDP of a country was $1 trillion in 2010 and $1.44 trillion in 2015. Also, with 2010 as the base year, the true implicit GDP deflator in 2015 was 1.20. From this, we can infer that between 2010 and 2015 __________. the real GDP of the country must have remained constant the real GDP of the country must have fallen the real GDP of the country must have risen by 12% the price index for the goods and services produced in the country must have risen by 44% the real GDP of the country must have risen by 20%
the real GDP of the country must have risen by 20% The real GDP in 2015 was $1.2 trillion, which is a 20% increase from real GDP in 2010
If the rate of interest on dollar deposits is greater than the rate of interest on euro deposits, i$ > i€, and the spot exchange rate is the same as the expected future exchange rates, ee = e, then in the spot market for foreign exchange __________. there will be excess demand for the dollar there will be excess demand for the euro supply and demand will be balanced uncovered interest parity will hold covered interest parity will hold
there will be excess demand for the dollar Due to the higher interest rate on dollar deposits and the expectation that the exchange rate will remain constant, there will be a higher demand for the dollar as everyone would prefer to buy dollars in the spot market and sell them in the forward market.
