Answer Key to the Practice First Exam

# Answer Key to the Practice First Exam - Answer Key to the...

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Answer Key to the Practice First Exam 1. C 2. D 3. D 4. False. Goods sold to households this year increase C this year (1/2 point) but I falls (inventories fall) by the same amount (1/2 point) so there is no change in GDP. 5. (1 Point) Nominal GDP in 2009 was (100 x 5) + (50 x 11) = \$1,050. (1 point) In 2010 nominal GDP was (120 x 7) + (60 x 14) = \$1,680. For real GDP, we calculate GDP for 2010 in 2009 dollars. (1 point) 2010 GDP in 2009 dollars would be (120 x 5) + (60 x 11) = \$1,260. (1 point) So while nominal GDP increased by 60 percent, real GDP only increased by 20 percent. 6. C 7. Discouraged workers 8. A 9. C 10. Answer: Suppose a highly skilled steel worker is laid off because his company shuts down its plant in his area and moves to a new location overseas. The worker would like to find a comparable job, but only low-wage, unskilled work is available in his town. Jobs are available, but not his kind of job; and the steel company will not come back. There is really no correct answer as to whether this is frictional or structural unemployment.

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