Chapter 2 week 3

The expenditure approach equation is

• C + I + G + (X + M)

• C + I + G - (X + M)

• C + I + G + (X - M)

• C + I + G - (X - M)

Peter builds some apartment buildings. This expenditure is

• residential consumption

• residential investment

• durable consumption

• inventory investment

Gross private domestic investment has three components

• non residential investment, residential investment and inventory investment

• business investment in plant and equipment, residential construction, net exports of machinery

• stocks , bonds and real estate

• purchases of new firms, purchases of existing firms, and purchases of residential house stock

GDP is 1200, consumption is 900, gross private domestic investment is 150, exports are 50 and imports are 125. Depreciation is 40. government spending is

• 15

• 75

• 225

• 265

The best measure of the total income received by household is

• GDP

• GNP

• National income

• personal income

if real GDP decreases from 2001 to 2002, we can conclude that

• production levels are lower in 2002

• price levels are lower in 2002

• there is less unemployment in 2002

• we need more information before commenting

GDP includes

• the market value of goods and services produced in underground economy

• the value of satisfaction derives from amusement parks

• the expenditure involved in changing aerosol production away from the use of CFC (cholrofluorocarbons)

• purchases of illegal substances that are produced in the US.

National income should be measured by adding ......... to avoid the double counting problem

• total sales of final and intermediate products

• total sales of intermediate product

• total sales of final product

• total cost of production

In calculating national income, the construction of a public hospital is classified as an

• investment expenditure

• government expenditure

• private consumption expenditure

• none of the above

Transfer payments refer to payment made ........

• as compensation to workers

• without any exchange of goods and services

• to workers on transfer from one job to another

• none of the above