Macroeconomics Exam Questions With 100% Correct Answers

Macroeconomics Exam Questions With 100% Correct Answers What is GDP? - answer(gross domestic product) the total dollar value of all final goods and services produced within the country's borders in a given year. Important features of GDP: - answerdollar value goods and services final products, within a country's borders, and in a given year 4 categories of spending: - answerconsumption investment government purchases Xnet (net exports) Suppose a house is built and sold in the year 2000. If the house is resold in the year 2013, is the value of the house included in Gross Domestic Product for 2013? - answerNo. GDP for 2013 includes only production that occurs during 2013 Which equation represents the relationship between GDP and the four major expenditure components? - answerY=C+I+G+NX What is the difference between the value of a firm's final product and the value added by the firm to the final product? - answerThe value of a firm's final product is the sale price; value added is the difference between the sale price and the price of intermediate goods. Would the service of a real estate agent who helped sell (or helped buy) the house be included in GDP for 2013? - answerYes. GDP for 2013 includes the market value of final goods and services. This includes real estate services. What are the four categories of income? - answerWages Interest Rent and Profit The circular flow diagram shows that _____ should equal _______ - answerTotal expenditure; Total income The circular flow diagram shows that all sources of income are owned by - answerhouseholds One major component of GDP that can be negative is - answernet exports The business cycle exists because: - answerproduction experience periods of increases and periods of decrease When would a recession occur? - answerwhen an economy experiences a period in which there is a decrease in total production Transfer payments are not included in GDP calculations because: - answerTransfer payments are simply transfers of income from one group to another and not a purchase of a new good or service How does the size of a country's GDP affect the quality of life of the country's people? - answerGenerally, the more goods and services people have, the better off they are GDP is an imperfect measure of economic well being because it fails to measure what types of production? - answerHousehold production and the underground economy Even if GDP included these types of production, why would it still be an imperfect measure of economic well-being? - answer1. Value or leisure not measured 2. GDP is not adjusted for pollution and it does not account for unequal income distribution 3. GDP is not adjusted for crime or other social problems Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next? - answerWhen nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities How does real GDP deal with the problem inflation causes with nominal GDP? - answer1. Real GDP separates price changes from quantity changes 2. Real GDP uses the prices of goods and services in the base year to calculate 3. By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced If firms find that consumers are purchasing more than expected, then? - answerAggregate expenditure will likely be greater than GDP A decrease in consumer confidence can put your job at risk if - answeraggregate expenditures fall