Question

1. TRUE/FALSE( 1 mark per question, 20 marks in total) [1) An economy's income is the same as its expenditure because every transaction has a buyer and a seller. 2) GDP is the market value of all final goods and services produced by a country's citizens in a given period of time. [3) If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is 125. 14) Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person. Is] When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living. t61 Economists use the term inflation to describe a situation in which the economy' s overall price level is rising. 17 When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being. [8] The real interest rate is the interest rate corrected for inflation. 19] Like physical capital, human capital is a produced factor of production. rioj When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving. 11] An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving. , national saving is reduced, interest [12) W hen the government budget deficit rises rates rise, and investment falls. buys a paint sprayer and a lift for her car customizing shop. [13) Alberta macroeconomist would refer to these purchases as investment. [14] Some degree of unemployment is inevitable in a complex economy [1sJ The natural rate of unemployment is a type of unemployment that doesn away on its own even in the long run. [16 Full-time students and homemakers are included in the Bureau of tirs "unemployed" category

Answer 1

Answering only first four parts as per HomeworkLib policy

Answer 1) true

transaction contributes equally towards economy’s income and expenditure.

For any economy, income must equal expenditure since Every transaction has a buyer and a seller. – Every dollar of spending by some buyer is a dollar of income for some seller.

Answer 2) True

GDP is defined as total value of the goods & services produced domestically in a given time frame.

Answer 3) true

As GDP deflator =( nominal GDP/ real GDP) * 100

= (10000/8000 )*100 = 125

Answer 4) true

As higher income levels imply higher spending , thus higher living standard, since higher expenditure takes place on health & education

So literary rate & life expectancy is also higher with higher per capita GDP levels

Answer 5) true

CPI falls, so with the given money income, more of the goods can be bought or with falling price level, less income is needed to buy same amount of goods

inswer 6) true

Inflation is defined as a rise in general price level in an economy