Exam Five

Question 1

According to the text, what is the difference between a closed economy and an open economy?

Answer 1

A closed economy has no foreign sector while an open economy includes a foreign sector.

Question 2

How is the value-added approach to measuring GDP calculated?

Answer 2

The difference between the selling price and the cost of intermediate inputs.

Question 3

In the traditional macroeconomic model investment is assumed to be done by which sector?

Answer 3

Business sector

Question 4

Suppose that an economy is growing at a real rate of 3% per year. About how long will it take for this economy to double in size?

Answer 4

24 years

Question 5

The three methods for calculating GDP are…

Answer 5

the spending approach, the income approach, and the product approach

Question 6

Which of the following identities defines GDP using the income approach?

Answer 6

GDP = National income NET income payments from the foreign sector + Depreciation

Question 7

Which of the following identities defines GDP using the product approach?

Answer 7

GDP = Business production + household and institution production + Government production

Question 8

T/F: A motor vehicle manufactured in Europe but sold in the United States would represent an addition to the gross domestic product of the United States

Answer 8

False

Question 9

Consumer durable goods are those goods that are expected to last longer than…

Answer 9

Three years

Question 10

Net national product is defined as…

Answer 10

GDP minus depreciation

Question 11

Suppose nominal GDP in an economy is $11 trillion and real GDP is $10 trillion. What would be the implicit price deflator?

Answer 11

110

Question 12

The identity used to represent the economy in the traditional macro model is…

Answer 12

Y = C + I + G + NX

Question 13

Which one of the following statements is TRUE about the traditional macroeconomic model?

Answer 13

It assumes that government expenditures are generally used for consumption rather than investment

Question 14

Which one of the following would, in principle, be counted in an estimate of the gross domestic product of the United States?

Answer 14

The value of a new CD you buy from a store

Question 15

T/F: Another name for nominal GDP is current-dollar GDP.

Answer 15

True

Question 16

T/F: Gross domestic product is defined as the value of all final and intermediate goods newly produced in an economy in a given period of time.

Answer 16

False

Question 17

T/F: In an open economy, the foreign sector must be included when GDP is calculated using the spending approach.

Answer 17

True

Question 18

T/F: In the traditional macro model government spending is assumed to be primarily investment expenditures.

Answer 18

False

Question 19

T/F: Net national product is defined as GDP minus net exports.

Answer 19

False

Question 20

T/F: The largest component of GDP attributed to the government sector is spending on Social Security.

Answer 20

False