III. Multiple choice questions [20 points] Suppose a closed economy produces food and clothing only. Their outputs and prices in Years 1, 2, and 3 are shown in the table below. Based on the table and using Year 1 as the base year, answer Questions 1-3. Quantity of food Price of food Quantity of clothing Price of clothing - -m 120 units $13 per unit $25 per unit 1. From Year 2 to Year 3, the growth rate of real GDP is (a) 13.73% (b) 43.73% (c) 15.91% (d) 45.91% 2. Using CPI as the price index, the ination rate from Year 2 to Year 3 is 4. Which of the following is included in Hong Kong's GDP? (a) The sale of a new car from a manufacturer's inventory ) The purchase of a watch from a Swiss company ) The sale of a used car (d) The sale of a newly constructed house . If the price level decreased in three consecutive years from 130 to 120 to 110, then the annual ination rate over those years would (3-) (b) (C) (d) equal to 40% increase decrease remain the same . Suppose the majority of the shares of Apple Inc. were sold to a Japanese rm. If everything else remains unchanged, this would (a improve the US's nancialaccount balance. ) (b) improve the US's current-account balance. ) ) (c worsen the US's trade balance. ((1 lead to a decit in the US's balance of payments. . A Canadian oil company hires geological survey services from the United States. If everything else remains unchanged, this would _______ of the US. (a) (b) (C) ) (d improve the current-account balance increase the net transfer decrease the net exports worsen the nancialaccount balance . Milton Friedman's permanent income hypothesis states that the marginal propensity to consume (MPG) out of a permanent change in income (a) equals zero (13) ) is between zero and one ) (c (d is negative 9. A country would NOT be able to improve its trade balance via devaluation of its currency if (a) the foreign demand for the country's export goods is inelastic (b) the domestic people's demand for imported goods is inelastic (c) all of the above (d) none of the above 10. By "twin deficits," we mean the coexistence of and (a) current-account deficit; financial-account deficit (b) checking-account deficit; saving-account deficit (c) fiscal (budget) deficit; trade deficit (d) government-account deficit; business-account deficit