QUIZ 1 AND 2 EXPLANATIONS.pdf - QUIZ 1 QUESTION 1 This...

This preview shows page 1 - 2 out of 4 pages.

QUIZ 1: QUESTION 1: This question test whether or not you understand when a transaction would show up in C, G, I, NX, GDP or GNP. EX A German citizen buys a truck produced in the United States by a Japanese company. As a result, In this version, a citizen of another country buys a product that was produced in the United States. This product would contribute to US GDP and show up in Net Exports. The fact that the firm is owned by Japanese citizens implies that not all value added will be paid to US factors but some will be paid to Japanese factors. Therefore: US GDP increases, US NX increase, Japanese GNP increases. QUESTION 2: This question tested you on your knowledge of the relationship between Nominal GDP, Real GDP and the GDP Deflator. We always assume the GPP Deflator is normalized to 1 unless otherwise specified. Version 1: If a country has current nominal GDP of $20 billion and a GDP deflator of 50, what is its real GDP? Using the formula RGDPt=NGDPt*P0/Pt, we have RGDPt=20 billion*100/50=40 billion QUESTION 3: This question tested you on your knowledge of the the distinction between GNP and GDP. GDP measues the value of goods produced within the borders while GNP captures the value of goods produced by a country s factors of production. Version 1: Alex, a U.S. citizen, works only in Canada. The value added to production from his employment is Measured in Canadian GDP and US GNP but not Canadian GNP nor US GDP.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture