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 1s] When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living. 161 Economists use the term inflation to describe a situation in which the economy' s overall price level is rising. (7] 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. rate and increases the equilibrium level of saving. rates rise, and investment falls. 11 An increase in the demand for loanable funds increases the equilibrium interest onal saving is reduced, interest [12) When the government budget deficit customizing shop. [13) Alberta buys a paint sprayer and a lift for her car macroeconomist would refer to these purchases as investment. [1) Some degree of unemployment is inevitable in a complex economy. 1s] The natural rate of unemployment is a type of unemployment that does n away on its own even in the long run. [16 Full-time students and homemakers are included in the Bureau of irs "unemployed" category

Answer 1

1. True. As an economy as a whole, every dollar spent by some buyer is a dollar income of some seller
2. True.
3. True. GDP deflator = Nominal /Real*100 = (10000/8000)*100 = 125
4. True. As the purchasing power is more with high real GDP which would have better medical and other facilities than low real GDP nation
5. True. As the cost reduces
6. True
7. False. It reduces the cost of living as the competition would be more
8. True
9. True.
10. False. It means resources are devoted to increasing future output
11. True
12. True
13. True
14. True. As people would constantly look for better opportunities
15. True