ECO 320L Final Exam revision questions with correct
certified answers
Which of the following is included in US GDP? - A newly constructed house.
Because government services are not sold in markets... - ...they are valued at their cost of
production.
Intermediate goods are... - ...goods that are used up in the production of other goods in the
same period that they were produced.
Marvin's Metal Company produces screws that it sells to Ford, which uses the screws as a
component in its cars. In the national income accounts, the screws are classified as... -
...intermediate goods.
Classical economists argue that government should have no role in the economy. TRUE OR
FALSE? - FALSE. Classical economists argue that gov't should have a limited role in the economy.
What does it mean to call an economy "closed"? - An economy is closed if it does not engage in
financial transactions with other nations.
In the US, who determines monetary policy? - The Federal Reserve.
, In national income accounting, where are changes in inventories counted? - Changes in
inventory are counted in investment expenditure. They are still a part of production and should
be counted in the year they are produced. We treat them as though the firm bought them.
Consumer spending is spending my domestic households on final goods and services produced
domestically. TRUE OR FALSE? - FALSE. Consumer spending also includes spending by domestic
households on final goods produced abroad.
In the production function, Y = AF (K,N), what are A, K, and N? - A = total factor productivity
K = capital
L = labor
Does an increase in the real wage rate cause a shift in the labor demand curve or a movement
along the demand curve? Explain your answers briefly. - Movement along the demand curve
because it only changes the amount of labor demanded.
Suppose there has been an increase in labor supply with no shift in labor demand. Based on the
classical model, will the ratio Y?N increase, decrease, stay the same, or does it depend on the
situation? - An increase in the labor supply will shift the S curve to the right and cause an
increase in output. Because of diminishing marginal product, Y/N will decrease.
Holding all else constant, an invention that raises the future marginal product of capital would
cause an increase in desired investment, which would cause the investment curve to shift to the
__________ and would cause the real interest rate to __________. - Right; increase.
If we were to graph the government deficit by itself on the funds graph, it would be a... -
...vertical line.
certified answers
Which of the following is included in US GDP? - A newly constructed house.
Because government services are not sold in markets... - ...they are valued at their cost of
production.
Intermediate goods are... - ...goods that are used up in the production of other goods in the
same period that they were produced.
Marvin's Metal Company produces screws that it sells to Ford, which uses the screws as a
component in its cars. In the national income accounts, the screws are classified as... -
...intermediate goods.
Classical economists argue that government should have no role in the economy. TRUE OR
FALSE? - FALSE. Classical economists argue that gov't should have a limited role in the economy.
What does it mean to call an economy "closed"? - An economy is closed if it does not engage in
financial transactions with other nations.
In the US, who determines monetary policy? - The Federal Reserve.
, In national income accounting, where are changes in inventories counted? - Changes in
inventory are counted in investment expenditure. They are still a part of production and should
be counted in the year they are produced. We treat them as though the firm bought them.
Consumer spending is spending my domestic households on final goods and services produced
domestically. TRUE OR FALSE? - FALSE. Consumer spending also includes spending by domestic
households on final goods produced abroad.
In the production function, Y = AF (K,N), what are A, K, and N? - A = total factor productivity
K = capital
L = labor
Does an increase in the real wage rate cause a shift in the labor demand curve or a movement
along the demand curve? Explain your answers briefly. - Movement along the demand curve
because it only changes the amount of labor demanded.
Suppose there has been an increase in labor supply with no shift in labor demand. Based on the
classical model, will the ratio Y?N increase, decrease, stay the same, or does it depend on the
situation? - An increase in the labor supply will shift the S curve to the right and cause an
increase in output. Because of diminishing marginal product, Y/N will decrease.
Holding all else constant, an invention that raises the future marginal product of capital would
cause an increase in desired investment, which would cause the investment curve to shift to the
__________ and would cause the real interest rate to __________. - Right; increase.
If we were to graph the government deficit by itself on the funds graph, it would be a... -
...vertical line.
