Question

1) We calculate net national product (NNP) by taking GNP and then subtracting __________________over the course of a year.

Select the correct answer below:

a) the value of how much financial capital is worn out

b) the value of all physical capital in the economy

c) the value of how much physical capital is worn out

d) the value of how much human capital is worn out

2) Which of the following is among the issues caused by the uncertainty of future inflation rates?

Select the correct answer below:

a) investing in real estate ensures that inflation will not affect the value of the investment

b) people saving for retirement may not know how much to save today to ensure a desired future standard of living

c) borrowing at fixed interest rates is beneficial when high future inflation is expected

d) high inflation increases the value of real assets such as land, buildings, gold, etc.

3) Pensions are referred to as defined benefits plans because __________.

Select the correct answer below:

a) they are a benefit to the company

b) they are defined by the company and imposed on the worker

c) they set a fixed real dollar amount per year at retirement

d) they set a fixed nominal dollar amount per year at retirement

4) Since inflation is a time when the buying power of money in terms of goods and services is _________, deflation will be a time when the buying power of money in terms of goods and services ___________.

Select the correct answer below:

a) reduced; falls

b) increased; rises

c) reduced; increases

d) increased; reduces

5) Education for girls is a good investment because it is an investment in _______________ with benefits beyond the current generation.

Select the correct answer below:

a) diversity and inclusion

b) economic growth

c) labor productivity

d) social progress

Answer 1

(1) (c)

NNP = GNP - Depreciation of physical capital during the period

(2) (b)

Since inflation erodes purchasing power, people living on fixed income cannot estimate exact real value of future income if inflation rate is uncertain.

(3) (d)

As per defined benefit plan, companies determine a fixed rate of employee's nominal salary as monthly or annual contribution to the employee's retirement benefit plan which will be paid at time of retirement.

(4) (c)

During inflation, price levels rise, so purchasing power falls. During deflation, price levels falls, so purchasing power rises.

NOTE: As per Answering Policy, 1st 4 parts are answered.