EC 302 EXAM 1 QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026

EC 302 EXAM 1 QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026 True or False: GDP does not count the sale of intermediate goods - Answers True True or False: GDP = C+1+G+(exports-imports) - Answers True True or False: GDP = C+S(private)+T - Answers True If a consumer in the U.S. purchases a BMW produced in Germany for $50,000 - Answers US GDP does not change, since US consumption increases by $50,000 and US imports increases by $50,000 A Ford produced in Mexico - Answers increases Mexican GDP but not Mexican GNP During the Great Depression in 1933, President Roosevelt's annual salary was $75,000. Today, a president has an annual salary of $400,000. If the CPI in 1933 was 100 (base year), and today's CPI is 900, which of the following is true. - Answers While the current president's nominal salary is greater than President Roosevelt's, President Roosevelt's real salary is greater than the current president. Suppose you take out a loan from your bank at a 5% rate of interest, while the rate of inflation is 1%. The nominal interest rate on your loan is _____ while the real interest rate is ______ - Answers 5%, 4% Suppose an economy has a total income or total GDP of $12 trillion, where total capital income equals $3 trillion and total labor income equals $9 trillion. What is the Cobb Douglas production function? - Answers Y = AK^(3/12)L^(9/12) Suppose the US would like to increase its total GDP and total income. what policies would help achieve this goal? - Answers increasing the number of new patents granted to increase new technology, new tax laws designed to increase the purchase of new capital, and new immigration laws encouraging more immigrants to enter the US Suppose China would like to increase its GDP per capita. Which policy would help achieve this goal? - Answers increasing the number of new patents granted to increase new technology GDP = ? - Answers C + I + G + (exports - imports) GDP also = ? - Answers C + S(private) + T nominal GDP is - Answers GDP measured in current prices real GDP is - Answers nominal GDP / GDP deflator (R) GNP is - Answers value of goods and services supplied by US residents regardless of where they are located CPI is - Answers current cost / base period cost Fisher Formula is - Answers nominal interest rate = real interest rate + inflation labor force participation rate is - Answers unemployed + employed cobb douglas production function is - Answers Y = AK^(k/Y)L^(l/Y) total factor productivity is - Answers total GDP / [ K^(k/Y)L^(l/Y) ] What is GDP in an open economy? - Answers Y = C + I + G + NX What is GDP in a closed economy? - Answers Y = C + I + G National Savings = ? - Answers T - G(Public Savings) + S(Private Savings) National Savings = ? - Answers private savings + public savings Increasing the monetary level at which citizens can contribute to their ________ will increase __________ _________________ - Answers IRA, private savings A decrease in the tax rate on capital gains will increase _________ ______________ - Answers private savings A policy to reduce government budget deficits will _____________ _______________ ___________________ - Answers increase public savings As the US imports more than it exports, the US current account is ____________ which results in increased ____________ _________________ ____________ and ____________ ____________ __________________ in the US from our trading partners - Answers negative, foreign portfolio investment, foreign direct investment the purchase of a brewery in germany by a NC citizen would be considered an example of ____________ ______________ ________________ - Answers foreign direct investment the purchase of US treasury bonds by investors from china is an example of _______________ ___________ ___________________ - Answers foreign portfolio investment in a closed economy with no international trade, an increase in autonomous consumption and an increase in government spending will - Answers decrease the supply of national savings and increase interest rates suppose next year's inflation rate is anticipated to be 2%. If next year inflation turns out to be 4%, who benefits? - Answers someone borrowing money from a bank with a nominal interest rate based on anticipated inflation The Federal open market committee - Answers maintains monetary policy through its purchase and sale of government securities broadly defined, the monetary base equals ______ while the money supply equals ______ - Answers currency plus reserves. Currency plus deposits