Download Homework 2

ECON 2100
Quiz 5
10 points
Name:__________________________________________
CLEARLY WRITE YOUR ANSWERS ON THE LINES PROVIDED.
TRUE/FALSE (0.5 POINTS EACH)
_____1. Fiat money is paper money that is backed by gold, silver or some other commodity.
_____2. When you voluntarily cook dinner for your family every Sunday night, the value of that service is included in
gross domestic product (GDP).
_____3. Total household income will be equal to total output in an economy.
_____4. If your mom buys you a new book from Amazon.com for Christmas 2015, her purchase will be included in gross
domestic product (GDP) for 2015.
_____5. If the marginal propensity to consume (MPC) is 0.4, then when disposable income rises by $1 consumption
spending will increase by $0.60.
MULTIPLE CHOICE (0.5 POINTS EACH)
_____6. We discussed 3 problems with our measurement of GDP. Which of the following will not affect the accuracy of
our measurement?
a. Underground Economy
b. Inflation
c. Quality Changes
d. Household Production
_____7. Which of the following is NOT a component of private investment (I)?
a. Human capital investment
b. Changes in inventories
c. New home construction
d. Purchases of plant, equipment & software
_____8. Which variable has the most influence on consumption spending (C)?
a. Interest rate
b. Wealth
c. Disposable income
d. Expectations/Consumer Confidence
_____9. Which of the following goods/services could be included in the CPI but not the GDP deflator?
a. Cable internet service from Charter Communications
b. A (used) Coach purse bought at a consignment shop
c. A new couch for your dorm room
d. New textbooks for your spring classes
_____10. Which of the following is not a way the CPI is used to measure the performance of the economy?
a. To index payments
b. To determine profits
c. To translate from nominal to real values
d. As a policy target (gauge inflation)
_____11. Suppose that real wages increased from 2010 to 2015. We would conclude that
a. Inflation decreased
b. Inflation increased
c. Purchasing power increased
d. Purchasing power decreased
e. Purchasing power stayed the same
SHORT ANSWER
12. (0.5 POINTS) What is the unit of account in the United States?
13. (0.5 POINTS) Give 2 examples of means of payment in the United States.
14. (1 POINT) Match the factor of production with its appropriate factor payment.
_____ Entrepreneurship
_____ Labor
_____ Capital
A.
Wages and Salaries
B.
Rent
C.
Interest
D.
Profit
_____ Land
15. (1 POINT) If the nominal interest rate on a loan is 14%, and inflation is expected to be 5%, what is the real interest
rate?
Who would benefit if inflation were actually 8%? (circle your answer)
Borrower
Lender
16. (1.5 POINTS) Use the expenditure approach to calculate GDP for the economy detailed below. Write your answers in
the spaces provided.
Imports
$3.0 mil
Exports
$2.0 mil
Gov’t purchases of G/S
$4.0 mil
Gov’t transfer payments
$2.5 mil
Land Purchases
$1.5 mil
Private investment
$5.0 mil
Consumption expenditures
$7.5 mil
Stocks & Bonds purchases
$1.5 mil
C =_____________
I =_____________
G =_____________
NX =_____________
GDP = $____________