SolutionsMid1_EC202A1_F2010 - SOLUTIONS, MIDTERM 1 EC202...

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SOLUTIONS, MIDTERM 1 EC202 A1, Fall 2010 Instructor: Olivetti 1. Real GDP is GDP: a. in constant dollars. c. that considers income distribution. b. in current dollars. d. that includes the value of leisure. ANS: A PTS: 2 2. The implicit price level is: a. the ratio of nominal to real GDP. c. the ratio of real to nominal GDP b. the product of real and nominal GDP. d. the difference between real and nominal GDP. ANS: A PTS: 2 3. Personal consumption expenditure includes: a. services. c. imports. b. residential structures. d. all of the above. ANS: A PTS: 2 4. When the quality of a product changes over time, real GDP a. cannot be adjusted for this problem. c. can be adjusted by using a chain-weighted measure of GDP. b. can be adjusted by choosing a new base year each decade. d. can be adjusted by subtracting depreciation from nominal GDP. ANS: C PTS: 2 5. What is real GDP and what makes it “real?” ANS: Real GDP is GDP in constant dollars. It is “real” in the sense that is evaluated using prices of a base year. That means that any growth in real GDP from the base year is real growth and not caused by increase in prices. PTS: 3 6. Why should GDP measured by expenditures and by income each equal the same amount? Why, in practice, are they often not equal? ANS: In theory, the two are equal because the total expenditures in an economy are paid out as income to the participants in the economy. In practice, they are not equal because of net factor income from abroad and because of depreciation.
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PTS: 4 7. Growth accounting shows that economic growth depends on: a. controlling environmental pollution. c. increases in technology. b.
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This note was uploaded on 11/09/2010 for the course EC EC102 taught by Professor Soffritti during the Spring '08 term at BU.

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SolutionsMid1_EC202A1_F2010 - SOLUTIONS, MIDTERM 1 EC202...

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