Question

1) As discussed in the lecture, which of the following is not a part of "I" for US GPD in the year 2020

a. The value of a new house built in 2020

b. Software and equipment

c. 500 produced cars by Ford in the year but not sold

d. none of the above

2) Two houses are sold; one that is brand new construction (never lived in) and one that was built and sold in 1980. The new house sold for $400,000; the 1980 house sold for $500,000. Which of the following is correct

a. GDP would increase by $900,000 and the increase would show up as part of "C"

b. GDP would increase by $400,000 and the increase would show up as part of "C"

c. GDP would increase by $500,000 and the increase would show up as part of "I"

d. GDP would increase by $500,000 and the increase would show up as part of "I"

3) Which of the following was not one of the determinants of how fast an economy can grow (as discussed in chapter 11)

a. Human capital

b. Technological change

c. The overall price level

d. Actually, none of the above were determinants of economic growth as discussed in chapter 11

4) Based on the business cycle theory and US current GPD growth rate, the US economy is in

a. Contraction

b. Trough

c. Peak

d. Expansion

Answer 1

1. Answer is “The value of a new house build in 2020”

Equipment and inventory are part of Investment in Current year

2. Answer is “GDP would increase by $400,000 and the increase would show up as part of "C"”

Only new houses purchases will be recorded in current GDP.

3. Answer is “the overall price level”

The overall price level does not determine the economic growth rate in long run

4. Answer is “Contraction”

The US economy is in contraction stage where growth rate is negative.