1 TRUEFALSE 1 mark per question 20 marks in total 1 An econo

1. TRUE/FALSE( 1 mark per question, 20 marks in total) [1] An economy\'s income is the same as its expenditure because every [2] GDP is the market value of all final goods and services produced by a 131 If nominal GDP is $10,000 and real GDP is $8,000, then the GDP 14] Other things equal, in countries with higher levels of real GDP per transaction has a buyer and a seller. country\'s citizens in a given period of time. deflator is 125 person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person. fewer dollars to maintain the same standard of living. economy\' s overall price level is rising. [5] When the consumer price index falls, the typical family has to spend [6] Economists use the term inflation to describe a situation in which the 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. 18] The real interest rate is the interest rate corrected for inflation. 9) Like physical capital, human capital is a produced factor production.

Solution

1) True

Every transaction done in the economy involves two different individual one a buyer and other a seller, what is expenditure for the buyer is income for the seller.

2) False

A countries citizen might be living somewhere else in the world, his production will not be counted in the GDP but any foreign national living in the nation will also contribute to the GDP. It takes into account anything produced within the boundary of the nation i.e. domestically no matter who produced it.

3) True

GDP deflator is calculated by dividing Nominal GDP by real GDP. In the question given above nominal GDP is 10,000 and real GDP is 8000. The GDP deflator will be 125.

4) True

A higher level of real GDP per person reflects the higher income of an individual in that country. That also means better education and health services in the country.