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national income identity and cost of living 1. If household consumption is $2.5m, government spending is $1.5m, GDP is $5m, and net exports amount to

national income identity and cost of living

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1. If household consumption is $2.5m, government spending is $1.5m, GDP is $5m, and net exports amount to $2m, domestic investment must be (a) $im (b) $4m (c) -$2m (d) -$1m (e) None of the above. 2. According to question 1, imports must be greater than exports. (a) True. (b) False. 3. Suppose a nation with a population of 10k people has a nominal and real national income that are worth $105m and $10om respectively, real per capita income must be (a) $10k. (b) $10.5k. (c) $20k. (d) $5k. (e) $1k. 4. Suppose the nominal GDP of a nation in 1999 is $105m, assuming that the average rate of inflation is 3%, real GDP must be (a) $102m. (b) $92m (c) $88m (d) $98m. 5. Imagine that Povaria has a labor force of 205 million people. If 10 million Povarian workers are unemployed, the employment rate must be (a) 4%. (b) 5%. (c) 96%. (d) 95%. 6. Alluding to Question 5, which of the following is most likely to be the macroeconomic situation in Povaria? (a) A recession (b) A depression (c) An expansion. (d) A financial crisis. 7. Suppose the unemployment rate for the US in quarter 1 was 4%. An unemployment rate of 4.2% in the 4th quarter will suggest that the unemployment rate has (a) grown by 2% (b) fallen by 2% (c) grown by 5%. (d) fallen by 6%. 8. Referring to Question 7, if the Fed policymakers do not like the unemployment situation, it is most likely that they will (a) sell securities (b) buy securities (c) increase taxes. (d) decrease taxes. 9. If the Consumer price index of a country is 100 in 1999, a consumer price Index of 103 in 2005 will suggest (a) a recession of 4%. (b) a depression of 5%. (c) an inflation of 3%. (d) a deflation of 3%. 10. Headline inflation measures consumer inflation with the effects of food and energy prices. (a) True. (b) False. 11. Which of the following indices does not control for substitution effects? (a) CPI (b) PCE. (c) PPI. 12. Suppose a bundle of goods costs $6,000 in 1994, if the price level in 2022 is 102, by 2022 standards the cost of the bundle of goods would have been (a) $5002 in 1994. (b)$4,995 in 1994. (c) $5,250 in 1994. (d) $6,120 in 1994. (d) None of the above. 13. Suppose the average per unit price of bread for 10,000 people is $2 in 1999; the average cost of detergent for 2000 people is $5 per unit in 1999; and 10,000 people spent an average of $100 in entertainment. Imagine that the prices of the item rose to$2.5, $6, and 125 respectively in 2000; the chain-weight of inflation in 2000 must be (a) 25%. (b) 4%. (c) 30%. (d) 2%$. (e) 1% Part 2: Production and Growth 14. Savings contribute to capital accumulation (a) True. (b) False. 15. Which of the following does not necessarily contribute to economic growth? (a) Technological improvement. (b) Saving. (c) Human capital (d) Population growth 16. According to Rev. Thomas Malthus Population grows in arithmetic progression. (a) True. (b) False

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