EC 111 Exam 2 questions and
complete solutions
measures total income of everyone in the economy and total expenditure on the economy's
output of goods and services - correct answer ✔✔gross domestic product (GDP)
Every dollar of you spend is a dollar of _________________ for someone else. - correct answer
✔✔income
the market value of all final goods and services produced within a country in a given period of
time - correct answer ✔✔gross domestic product (GDP)
What is the formula for GDP? - correct answer ✔✔Y=C+I+G+NX
what is the formula for NX? - correct answer ✔✔exports-imports (EX-IM)
what are the four components of GDP? - correct answer ✔✔consumption, investment,
government purchases, and net exports
what is the biggest component of GDP? - correct answer ✔✔consumption
total spending by households on goods and services - correct answer ✔✔consumption
how is housing included in consumption? - correct answer ✔✔For renters, monthly rent is
included in GDP because it is a current service.
For homeowners, consumption includes the imputed rental value of a house, but not the
purchase price or mortgage payments.
, (owning and living in a house IS a current consumption, but most houses sold on the market are
used, so they look at a house that is similar to your house that is being rented and compute
that)
the money we pay for APLIA is an example of what GDP component? - correct answer
✔✔consumption
what business spend on goods and services and use them to produce more goods - correct
answer ✔✔investment
how are inventories counted in the investment component of GDP? - correct answer ✔✔only
count going into inventory, but not coming out because it would be double counting
goods produced, but not yet sold - correct answer ✔✔inventory
what does the investment component include? - correct answer ✔✔capital equipment
(machines, tools, technology), structures (factories, office buildings), inventories, houses (called
residential fixed investment)
T or F: Investment means the purchase of financial assets like stocks and bonds in economics. -
correct answer ✔✔false
How are houses included in the investment component of GDP? - correct answer ✔✔the house
must be brand new, recently constructed, and never been lived in
If a mechanic buys a wrench, it falls under ________________. If I bought a wrench, it falls
under ______________. - correct answer ✔✔investment; consumption
all spending on goods and services purchased by the government at the federal, state, and local
levels - correct answer ✔✔government purchases
complete solutions
measures total income of everyone in the economy and total expenditure on the economy's
output of goods and services - correct answer ✔✔gross domestic product (GDP)
Every dollar of you spend is a dollar of _________________ for someone else. - correct answer
✔✔income
the market value of all final goods and services produced within a country in a given period of
time - correct answer ✔✔gross domestic product (GDP)
What is the formula for GDP? - correct answer ✔✔Y=C+I+G+NX
what is the formula for NX? - correct answer ✔✔exports-imports (EX-IM)
what are the four components of GDP? - correct answer ✔✔consumption, investment,
government purchases, and net exports
what is the biggest component of GDP? - correct answer ✔✔consumption
total spending by households on goods and services - correct answer ✔✔consumption
how is housing included in consumption? - correct answer ✔✔For renters, monthly rent is
included in GDP because it is a current service.
For homeowners, consumption includes the imputed rental value of a house, but not the
purchase price or mortgage payments.
, (owning and living in a house IS a current consumption, but most houses sold on the market are
used, so they look at a house that is similar to your house that is being rented and compute
that)
the money we pay for APLIA is an example of what GDP component? - correct answer
✔✔consumption
what business spend on goods and services and use them to produce more goods - correct
answer ✔✔investment
how are inventories counted in the investment component of GDP? - correct answer ✔✔only
count going into inventory, but not coming out because it would be double counting
goods produced, but not yet sold - correct answer ✔✔inventory
what does the investment component include? - correct answer ✔✔capital equipment
(machines, tools, technology), structures (factories, office buildings), inventories, houses (called
residential fixed investment)
T or F: Investment means the purchase of financial assets like stocks and bonds in economics. -
correct answer ✔✔false
How are houses included in the investment component of GDP? - correct answer ✔✔the house
must be brand new, recently constructed, and never been lived in
If a mechanic buys a wrench, it falls under ________________. If I bought a wrench, it falls
under ______________. - correct answer ✔✔investment; consumption
all spending on goods and services purchased by the government at the federal, state, and local
levels - correct answer ✔✔government purchases
