revision questions chapter 20 pt2

Question 1

The term capital, as used in macroeconomics, refers to

Answer 1

manufactured inputs, including inventories, buildings, machinery, etc.

Question 2

the difference between gross investment and net investment is…

Answer 2

depreciation

Question 3

if nominal GDP is £5 billion and the GDP deflator is 125, what is real GDP?

Answer 3

4 Billion

• real GDP= nominal GDP / GDP deflator X100
• 5000000000/125 X100= 4000000000

Question 4

gross investment is…

Answer 4

The total amount spent on adding to the stock of capital and on replacing depreciated capital

Question 5

in the circular flow of economic activity,…

Answer 5

aggregate expenditure measures the pound value of purchases of final goods and services.

Question 6

An example of “investment” in the national accounts is the purchase of

Answer 6

a new van by a potter, who packs it with his wares and travels to art shows.

Question 7

in the national accounts, the purchase of a new house counts as…

Answer 7

investment

Question 8

The chained volume measure method of measuring real GDP is based on

Answer 8

calculating the growth rate of real GDP from one year to the next using prices from the first of the two years.

Question 9

If national saving (S) is £100,000, net taxes (T) equal £100,000 and government purchases of goods and services (G) are £25,000, how much is private saving?

Answer 9

£25,000
> private savings= income (national savings & gov purchases of G&S) - expenses (net taxes)