ECON 204 Review Sheet I
1. Assume that a tire company sells 4 tires to an automobile company for $400, another
company sells a compact disc player for $500, and the automobile company puts all of
these items in or on a car that it sells for $20,000. In this case, the amount from these
transactions that should be counted in GDP is:
A) $20,000.
B) $20,000 less the automobile company's profit on the car.
C) $20,900.
D) $20,900 less the profits of all three companies on the items that they sold.
2. If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657,
investment is $741, and government purchases are $1,098, then net exports are:
A) $131.
B) -$131.
C) $31.
D) -$31.
3. If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657,
investment is $741, and net exports are -$1,910, then government purchases are:
A) $2,977.
B) $1,910.
C) -$843.
D) $1,067.
4. If the unemployment rate is 6 percent and the number of employed is 188 million, then
the labor force equals ______ million.
A) 11.28
B) 176.72
C) 188
D) 200
5. If the consumption function is given by the equation
C
= 500 + 0.5
Y
, the production
function is
Y
= 50
K
0.5
L
0.5
, where
K
= 100 and
L
= 100, then
C
equals:
A) 1,000.
B) 2,500.
C) 3,000.
D) 5,000.
6. If the consumption function is given by
C
= 150 + 0.85
Y
and
Y
increases by 1 unit, then
C
increases by:
A) 0.15 unit.
B) 0.5 unit.
C) 0.85 unit.
D) 1 unit.
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