Download THE GEORGE WASHINGTON UNIVERSITY

NAME:_________________________________________
THE GEORGE WASHINGTON UNIVERSITY
Department of Economics
Economics 280
Prof. Steve Suranovic
Spring 2010
Quiz #1 – Answers
1. (9) Write the term that is described by each of the following statements. Note that the
answer relates to the italicized word or phase.
A. the measure of national output that
accounts for all production within the
borders of the country during the year.
GDP
B. the approximate value of US GDP in
2008.
$14 trillion
(accept 12-16 trillion)
C. the approximate value of world GDP
today
$70 trillion
(accept 60-80 trillion)
D. approximately, the US unemployment
rate today AND the highest US
unemployment rate during the Great
Depression
10% AND 25%
(accept 9-12 AND 20-30)
E. approximately, the highest US
unemployment rate in the post WWII era.
10.8%
(accept 10-12%)
F. term used in the balance of payments
accounts to describe profit earned by a
domestic resident on business operations
abroad.
Income receipts
G. In what category and in which account
are remittances recorded in the balance of
payments.
Unilateral transfers in the current account
H. The value of a country’s GDP if,
consumption is $30 billion,
government spending is $10 billion,
investment is $15 billion,
tax revenues are $8 billion,
the goods and services balance has a
surplus of $10 billion and
private saving is $15 billion.
I. The value of a country’s budget deficit
if
consumption is $30 billion,
government spending is $10 billion,
investment is $15 billion,
tax revenues are $8 billion,
transfer payments are $4 billion and
private saving is $15 billion.
C + I + G + Trade surplus =
$65 billion
G + TR – T =
10 + 4 – 8 =
$6 billion
2. (2) In your opinion, what is the most important aspect of national economic well-being that is
not captured adequately by the gross domestic product.
A. does not include income per capita or per household
B. does not describe distribution of income
C. considers only income, not national wealth
D. measures output but not domestic spending (C + I + G)
E. does not consider negative social effects of things like pollution
F. includes reconstruction after natural disasters
G. does not consider negative effects of some production, like military
H. “nominal” GDP value does not consider inflation effects.
I. Does not include many things that affect quality of life.
J. Does not include non-market activity – housework, barter, etc.
K. Et.al…….
3. A. (2) Use the twin deficit identity to fill in the blanks for the two fictitious countries of
Alpha and Beta. Each entry is given as a percentage of GDP. Assume there are no errors in
measurement.
Country
Private
Saving
Investment
CA Deficit
Govt. Budget
Deficit
Alpha
Beta
25%
35%
15%
33.0%
-10%
8%
0%
10%
A. (1) Which country may be financing its government budget
deficit mostly by borrowing from the rest of the world?
B. (1) Which country may be saving a portion of its money in
the rest of the world?
Beta
Alpha