1.The local Land Rover dealership has an increase in inventory of 10 SUVs in 2019. How will the sale of all 10 SUVs in 2020 affect the GDP?

a.The value of the cars will be counted as part of GDP in 2019 but not in 2020.

b.The value of the cars will not affect the 2019 GDP, but will be included in 2020 GDP.

c.The value of the cars will be included in both 2019 and 2020 GDP.

d.The value of the cars will not be included in GDP in 2019 or 2020.

2.Larissa buys and lives in a newly constructed home she paid $400,000 for in 2019. She sells the house in 2020 for $450,000. How is GDP impacted?

a.The 2020 sale increases 2020 GDP by $450,000 and does nothing to 2019 GDP.

b.The 2020 sale increases 2020 GDP by $50,000 and does nothing to 2019 GDP.

c.The 2020 sale does not increase 2020 GDP and does nothing to 2019 GDP.

d.The 2020 sale increases 2020 GDP by $450,000, and 2019 GDP is revised upward by $50,000.

3.A wind farm in Manitoba buys a large turbine generator from a Swedish-owned factory located in Ontario and using local workers. What happens as a result?

a.Canadian government spending and GDP increase by the same amount.

b.Canadian investment increases but GDP is unaffected.

c.Canadian investment and GDP increase by the same amount.

d.Canadian investment increases, but Canadian GDP increases by a smaller amount.

Table 5-1

Consider the following table for the country of Ophir:

Year Nominal GDP GDP Deflator

2018 $8000 100

2019 $8200 105

2020 $8400 110

4.Refer to Table 5-1. What can we conclude about real GDP from this information?

a.Real GDP was higher in 2020 than in 2019, and real GDP in 2019 was higher than in 2018.

b.Real GDP was higher in 2020 than in 2018, and real GDP in 2019 was higher than in 2020.

c.Real GDP was higher in 2018 than in 2019, and real GDP in 2019 was higher than in 2020.

d.Real GDP was higher in 2018 than in 2019, and real GDP in 2020 was higher than in 2019.

Table 6-2

Year Price of pork Price of corn

2018 $15 $10

2019 $20 $15

5.Refer to Table 6-2. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the inflation rate for 2019?

a.4.76 percent

b.25.00 percent

c.40.00 percent

d.41.18 percent

6.The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?

a.11 percent between the first and second year, 11 percent between the second and third year

b.11 percent between the first and second year, 12 percent between the second and third year

c.10 percent between the first and second year, 11 percent between the second and third year

d.10 percent between the first and second year, 12 percent between the second and third year

7.What are the categories of Canadian consumer spending, ranked from largest to smallest?

a.food, alcoholic beverages and tobacco products, shelter, transportation, and health and personal care

b.food, health and personal care, shelter, alcoholic beverages and tobacco products, and transportation

c.shelter, food, alcoholic beverages and tobacco products, transportation, and health and personal care

d.shelter, transportation, food, health and personal care, and alcoholic beverages and tobacco products

8.If the cost of shelter increases by 10 percent, then, other things the same, how much is the CPI likely to increase?

a.by about 1 percent

b.by about 3 percent

c.by about 7 percent

d.by about 10 percent

9.If the cost of health and personal care increases by 20 percent, then, other things the same, how much is the CPI likely to increase?

a.by about 1 percent

b.by about 2 percent

c.by about 3 percent

d.by about 4 percent

Short answer:For all the below questions, explain thoroughly and show your work

Exercise 1 (4 points)

Ryan is a Canadian resident who lives with his family in Victoria, Canada, but works for a small donut cafe in Seattle, U.S., where he commutes every day. On a typical day, Ryan produces 400 donuts that sell for $1 apiece. Of the revenue from selling the donuts, Ryan is paid $200 per day. The remaining $200 revenue is distributed as follows: $50 pays for inputs such as water, flour, sugar, butter, and energy, $100 is rent for using the facilities and interest for an initial loan to start the business, and $50 goes to salary to the manager and profit to the owner of the caf.

a) How much is the increase in U.S. and Canada GDP generated by the production of the 400 donuts?

b) How much is Ryan's contribution to the creation of the $400 value of donuts? Explain.

c) Since Ryan takes his income home to Canada, should the U.S. allow foreign workers such as Ryan to take jobs that might otherwise go to American workers? Explain.

Exercise 2 (5 points)

During last year, in 2020, Helen earned the following: $80,000 from employment, $2000 interest from bank accounts, and $25,000 profits and dividends. Of this income, she has spent $50,000 on food and other consumption goods, $20,000 on vacations abroad, saved $10,000 in her retirement account, spent $20,000 on purchasing extra shares and $10,000 on new computers for her business.

a)What was the increase in GDP generated by Helen's activity?

b) What was Helen's contribution to each category of GDP?

c) What is the value of production that was newly created by Helen's productive activity?