Question 1

A Japanese firm manufactures cars in the US. Assume that each car sells for $20,000 to a consumer in the US. Also assume that from the sale of each car the Japanese manufacturer earns $2000 in profits and remits those to the holding company in Japan. Assume that the car is manufactured with US made parts only.

What is the contribution of each car to the GDP of JAPAN?

1. 20,000
2. 18,000
3. 2,000
4. Zero

Question 2

If we assume that a 1 year CD account pays about 1% interest and inflation is expected to be about 3% over the course of next year, what will the expected real rate of return on the CD account be?

1. Positive 2%
2. Negative 2%
3. Positive 1%
4. Negative 4%
5. None of the above

Question 3

Assuming that the value of the currency is determined by market forces, a rise in the level of exports would cause the nation's currency to

1. Appreciate (increase in value against other currencies)
2. Depreciate (decline in value against other currencies)
3. Remain unaffected, as there is no relationship between the exchange rate and the trade balance

Question 4

Everyone in the economy feels inflation the same way

1. True
2. False

Question 5

If we assume that everyone in our class pays the same tuition then we can state that everyone experiences the same economic cost of the class.

1. True
2. False

Question 6

Which of the following will NOT cause the AD in the US to decrease?

1. A decline in the US business confidence
2. A decline in theUS consumer confidence
3. A recession in a major trading partner economy that purchases US goods
4. A depreciation of the US dollar in the forex market

Question 7

During sustained economic expansions, the number of discouraged workers tends to decrease.

1. True
2. False