EC102 FINAL EXAM QUESTIONS WITH COMPLETE
DETAILED ANSWERS
1.GDP: the market value of all final goods and services produced within
a country in a year
2.GDP per capita: GDP/population
3.GDP deflator: nominal GDP / real GDP
4.What are the four components of GDP?: Y = C + I + G + NX
5.What is the equation that represents GDP called?: the expenditure metho
6.Government spending includes....: government purchases and
transfer pay- ments
7.a macroeconomist's definition of investment does NOT include what
three things: 1. a rare coin
2. savings
3. stocks/bonds
8.True or False: Investment is the largest sector of GDP: False,
consumption is the largest
9.True or False: Investment includes categories like residential, banking,
and stocks: False, stocks and bonds are not a part of investment
10.What are the determinants of consumption?: - price level - household
wealth
- expected future income
- current disposable income
- the interest rate
11.What are the determinants of investment?: - interest rates
- business expectations of future profitability
- taxes
- cash flow
12.What are the determinants of exports?: - real exchange rate (e)
- GDP of our trading partners (Yfor)
- prefs of people abroad
- trade policies
13.When a firm sells a good or a service, the sale contributes to US GDP,
as measured by the expenditure method
a. only if the buyer of the good or service is a household
b. only if the buyer of the good or service is a household or another firm
c. only if the good or service was produced within the U.S.
d. only if the good or service was sold within the U.S.: C
14.If GDP is growing at 5%, and the population is growing at 2%, what is
the growth rate of per capita GDP? (Round to the nearest whole number.):
, EC102 FINAL EXAM QUESTIONS WITH COMPLETE
DETAILED ANSWERS
2.5% (3%)
, EC102 FINAL EXAM QUESTIONS WITH COMPLETE
DETAILED ANSWERS
15.A steel company sells some steel to a bicycle company for $100. The
bicycle company uses the steel to produce a bicycle, which it sells for $200.
Taken together these two transactions contribute how much to GDP?: $200
to GDP
16.Why is the first transaction not included in GDP?: In this scenario,
steel is an intermediate good NOT a final good.
17.Which of the following statements about GDP is correct?
a. Nom GDP values production at current prices, and Real GDP at
constant prices
b. Nom GDP values production at constant prices, and Real GDP at
current prices
c. Nom GDP values production at market prices, and Real GDP values
produc- tion at cost of resources
d. Nom GDP is always higher than real GDP: A
18.Define Real GDP and Nominal GDP: Nominal (P x Y): GDP that does not
take into account inflation thus values production at current prices
Real (Y): GDP that takes inflation into account and values production at
base year (constant) prices
19.In Italy, only cranberries and cucumbers are produced. In 2017, 50
units of cranberries are sold at $20/unit, and 100 units of cucumbers are
sold at
$10/unit. The price of cranberries was $10/unit and the price of cucumbers
was $15/unit in 2016, which is the base year.
For 2017, the nominal GDP is , real GDP is , and the GDP deflator is
: $2000, $2000, and 100
20.What basket of goods is used to construct the CPI?: the goods and
services that are typically bought by consumers as determined by
government surveys
21.Year. Peaches. Pecans
2005. $11/ bushel
$6/bushel 2006. $9/bushel.
$10/bushel
Suppose the typical consumer basket consists of 10 bushels of peaches and
15 bushels of pecans, and 2005 is the base year.
Calculate the CPI for 2006: 120
22.Suppose the typical consumer basket consists of 10 bushels of
DETAILED ANSWERS
1.GDP: the market value of all final goods and services produced within
a country in a year
2.GDP per capita: GDP/population
3.GDP deflator: nominal GDP / real GDP
4.What are the four components of GDP?: Y = C + I + G + NX
5.What is the equation that represents GDP called?: the expenditure metho
6.Government spending includes....: government purchases and
transfer pay- ments
7.a macroeconomist's definition of investment does NOT include what
three things: 1. a rare coin
2. savings
3. stocks/bonds
8.True or False: Investment is the largest sector of GDP: False,
consumption is the largest
9.True or False: Investment includes categories like residential, banking,
and stocks: False, stocks and bonds are not a part of investment
10.What are the determinants of consumption?: - price level - household
wealth
- expected future income
- current disposable income
- the interest rate
11.What are the determinants of investment?: - interest rates
- business expectations of future profitability
- taxes
- cash flow
12.What are the determinants of exports?: - real exchange rate (e)
- GDP of our trading partners (Yfor)
- prefs of people abroad
- trade policies
13.When a firm sells a good or a service, the sale contributes to US GDP,
as measured by the expenditure method
a. only if the buyer of the good or service is a household
b. only if the buyer of the good or service is a household or another firm
c. only if the good or service was produced within the U.S.
d. only if the good or service was sold within the U.S.: C
14.If GDP is growing at 5%, and the population is growing at 2%, what is
the growth rate of per capita GDP? (Round to the nearest whole number.):
, EC102 FINAL EXAM QUESTIONS WITH COMPLETE
DETAILED ANSWERS
2.5% (3%)
, EC102 FINAL EXAM QUESTIONS WITH COMPLETE
DETAILED ANSWERS
15.A steel company sells some steel to a bicycle company for $100. The
bicycle company uses the steel to produce a bicycle, which it sells for $200.
Taken together these two transactions contribute how much to GDP?: $200
to GDP
16.Why is the first transaction not included in GDP?: In this scenario,
steel is an intermediate good NOT a final good.
17.Which of the following statements about GDP is correct?
a. Nom GDP values production at current prices, and Real GDP at
constant prices
b. Nom GDP values production at constant prices, and Real GDP at
current prices
c. Nom GDP values production at market prices, and Real GDP values
produc- tion at cost of resources
d. Nom GDP is always higher than real GDP: A
18.Define Real GDP and Nominal GDP: Nominal (P x Y): GDP that does not
take into account inflation thus values production at current prices
Real (Y): GDP that takes inflation into account and values production at
base year (constant) prices
19.In Italy, only cranberries and cucumbers are produced. In 2017, 50
units of cranberries are sold at $20/unit, and 100 units of cucumbers are
sold at
$10/unit. The price of cranberries was $10/unit and the price of cucumbers
was $15/unit in 2016, which is the base year.
For 2017, the nominal GDP is , real GDP is , and the GDP deflator is
: $2000, $2000, and 100
20.What basket of goods is used to construct the CPI?: the goods and
services that are typically bought by consumers as determined by
government surveys
21.Year. Peaches. Pecans
2005. $11/ bushel
$6/bushel 2006. $9/bushel.
$10/bushel
Suppose the typical consumer basket consists of 10 bushels of peaches and
15 bushels of pecans, and 2005 is the base year.
Calculate the CPI for 2006: 120
22.Suppose the typical consumer basket consists of 10 bushels of
