Aggregate Output, Prices, and Economic Growth

11 questions

1. 1. Which of the following is the largest component of GDP measured by the expenditures approach?
   ConsumptionInvestment Government spending
2. 2. Which of the following is not included in the calculation of GDP under the expenditure approach?
   Gross private domestic investmentThe difference between exports and importsTransfer payments by the government
3. 3. We have the following information about a fictitious country:

   • Consumption (C) = $400.

   • Investment (I) = $100.

   • Government Consumption (G) = $80.

   • Net Export (X -- M) = - $10.

   Calculate the country's GDP.

   $570$580$590
4. 4. In calculating GDP, economists use the value of final goods and services because:
   By using final goods and services, they avoid double counting.GDP is underestimated if intermediate goods are used instead.Final goods can be exported to other countries.
5. 5. Assume that the GDP of a country in 2013 based on 2013 prices is $2 billion and the GDP calculated using 2012 prices is 1.5 billion. Considering 2012 as the base year, calculate the GDP deflator.
   7525133.33
6. 6. The IS curve shows the combinations of output and the real interest rate for which
   The goods market is in equilibrium.The labor market is in equilibrium.The financial asset market is in equilibrium.
7. 7. Any change that reduces desired saving relative to desired investment (for a given level of output) causes the real interest rate to _____ and shifts the IS curve _____.
   increase; down and to the left increase; up and to the right decrease; up and to the right
8. 8. A change that increases the real money supply relative to real money demand causes:
   The LM curve to shift down and to the right. The LM curve to shift up and to the left. The IS curve to shift down and to the left.
9. 9. Suppose consumption decreases at each price level. As a result, aggregate demand __________, and the aggregate demand curve shifts __________.
   increases; leftwarddecreases; leftwardincreases; rightward
10. 10. The short-run aggregate supply curve is upward sloping because
    A lower price level creates a wealth effect.Lower taxes motivate people to work more.Money wages do not immediately change when the price level changes.
11. 11. The aggregate supply curve shifts to the right when:
    Consumers, with no change in nominal GDP, save less and consume more People, with no change in the price level, decrease their supply of labor People, with no change in the price level, increase their supply of labor