Suppose investment is equal to $950 billion, purchases of newly produced capital goods is $670 billion, and changes in business inventories is -$120 billion. What does purchases of new residential housing equal?
A. $1,500 billion
B. $100 billion
C. $160 billion
D. $400 billion
Answer: D. $400 billion
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Suppose Gerald works for Lola as a production assistant. Gerald and Lola fall in love, get married and have children. Gerald stops working for Lola in order to care for the children. What will be the effect of this scenario on GDP?
A) GDP will increase. B) GDP will decrease. C) GDP will not change. D) GDP may increase or decrease depending on the rate of inflation.
Why does the gravity model work?
A) Large economies became large because they were engaged in international trade. B) Large economies have relatively large incomes, and hence spend more on government promotion of trade and investment. C) Large economies have relatively larger areas which raises the probability that a productive activity will take place within the borders of that country. D) Large economies tend to have large incomes and tend to spend more on imports. E) Large economies tend to avoid trading with small economies.
The policy of keeping tax rates stable as government spending fluctuates is known as ________
A) Ricardian equivalence B) tax smoothing C) crowding-out D) a tax smoothie
Balance of payments deficits arise whenever the exchange rate is pegged at an artificially high level.
Answer the following statement true (T) or false (F)