Unit 2 Review

1. Unit 2 Review

2. Explain if this statement is True, False or Uncertain • “To ignore the production of intermediate goods when measuring the total production of a country means ignoring the work, the efforts, & the incomes of millions of citizens. This is a mistake & can be rectified only by including intermediate goods production in the GDP figures.” #1

3. Explain the statement • “A man diminishes GDP by marrying his cook.” #2

4. You read this headline: “Real GDP Rises 3% This Year: Further Increases Likely” • What does this headline mean? Be specific • Why do people care about the growth rate of real GDP? • What is the difference between Real & Nominal GDP? #3

5. In a year, the annual Unemployment rate is 6.1%. • Define the term “Unemployment Rate” & explain its meaning • What other information will you need to know before recommending a policy change to reduce the UR? Explain why you need that info. #4

6. Which of the following is a LEAKAGE from the Circular Flow of Economic Activity? • Saving • Investment • Export • Government Spending • Income #5

7. If the Price Index of a country were 100 for 2010 & 120 for 2015 & NGDP in 2015 were $480 billion, then RGDP for 2015 in 2010 dollars would be • $360 bill • 380 bill • $400 bill • $600 bill • Indeterminate #6

8. The value of GDP in 2010, in terms of 200 prices was • $600 • $700 • $1000 • $1200 • $1300 #7

9. If 2010 were made the base year for the GDP deflator, the value of the GDP deflator in 2000 (rounded to the nearest whole number) would be • 0 • 42 • 142 • 212 • 256 #8

10. What is the best measure of the production (output) of an economy? #9

11. The largest dollar amount of national income is • Rental payments • Gov’t expenditures on G/S • Profit • Net Interest • Wages & Salaries of employees #10