macro_tif1_ch07

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Unformatted text preview: $500. Answer: C Diff: 2 Type: MC Page Ref: To pic : 641-2/221-2 M S Analytical Objective: LO1: Explain how total production is measured AACSB Coding: Analytic Skills Special Feature: None 42. In the circular flow of income, the value of all the income in the economy is greater than the value of goods and services produced in the economy. Answer: True F Diff : 1 Type: TF Page Ref: To pic : 636-7/216-7 P S Conceptual Objective: LO1: Explain how total production is measured AACSB Coding: Analytic Skills Special Feature: None 43. Residenti al investment includes spending by firms on office buildings. Answer: True F Diff : 1 Type: TF Page Ref: To pic : 639/219 M S Conceptual Objective: LO1: Explain how total production is measured AACSB Coding: Reflective Thinking Special Feature: None 44. High- income countries such as the United States spend a greater amount on services as compared to goods. Answer: True F Dif f: 1 Type: TF Page Ref: To pic : 641/221 C S Conceptual Objective: LO1: Explain how total production is measured AACSB Coding: Reflective Thinking Special Feature: None 45. Why do we not count the value of intermediate goods and services in gross domestic product? Does the value of intermediate goods and services show up in gross domestic product? If so, how? Answer: We would double count if we counted directly the value of intermediate goods and services, because their value shows up in the value of the final Diff: 2 goods and services in which they are a part. Type: SA Page Ref: To pic : 635/215 M S Conceptual Objective: LO1: Explain how total production is measured AACSB Coding: Reflective Thinking Special Feature: None 46. People that inflation increases the cost of the goods and services and therefore reduces their purchasing power. complain If inflation and income grow at the same rate, is this complaint valid? Explain carefully. Answer: If inflation and income grow at the same rate, real income will be constant as inflation increases both total expenditures and total income by the same amount. All of the money that a business receives on the sale of its product must be paid out as income to the owners of the factors of production. If the prices of final goods and services increase (inflation), then there is more money for Diff: 3 the business es to pay out as income. Therefor e, on average the buying power of income will remain constant. The complai nt is not valid. Type: SA Page Ref: To pic : 636-7/216-7 M S Analytical Objective: LO1: Explain how total production is measured AACSB Coding: Reflective Thinking Special Feature: None 47. Table 7-6 Bottled Water Oranges 2,000 600 1.00 0.50 Refer to Table 7-6. Suppose that a simple economy produces only four goods and services: iPods, teeshirts, bottled water, and oranges. Calculate nominal GDP for this simple economy. Answer: Nominal GDP equals (20 x $250) + (100 x $20) + (2,000 x $1) + (600 x $0.50) Diff: 2 = $9,300. Type: SA Page Ref: To pic : 636/216 M S Analytical Objective: LO1: Explain how total production is measured AACSB Co...
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This note was uploaded on 09/21/2012 for the course ECON 2010 taught by Professor Roussel during the Spring '08 term at LSU.

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