Quiz #629 answers

• 1. Which of the following would add to GDP in any on period?
  
  1. (a) The purchase of some strawberries from the supermarket.
  2. (b) The payment by the national government for public servants in the tax department.
  3. (c) The payment by the national government to an aged pension recipient.
  4. (d) The purchase of a old model car from a car dealer.
  5. (e) The purchase of some house paint by an owner occupier as part of a refurbishment project.
  6. (f) The purchase of some house paint by a professional painting tradesperson as part of a refurbishment project.
  7. (g) The sale of some military equipment to another country.
  8. (h) The purchase of some shares in an airline company.

Answer: a, b, e, g

• 2. Suppose an economy produces two products: Product A and Product B. This is the data for two years. By how much has the economy grown between Year 1 and Year 2?
  
  

  Product	Year 1 Price Per Unit ($)	Year 1 Output (units)	Year 2 Price Per Unit ($)	Year 2 Output (units)
  Product A	1.00	20	2.50	10
  Product B	2.00	15	3.00	25

Answer: 20 per cent

• 3. If the output an economy can achieve when all resources are productively employed is $120 billion and in the current year actual real GDP is on $114 billion, the output gap would be:

Answer: 5 per cent

• 4. The reason that economy-wide wage cuts will not reduce unemployment relates to the observation that:

Answer: Wages are both an income to workers and a cost to firms.

• 5. Which nations will be considered to have the highest GDP over the year?
  
  
  1. (a) A military-inclined nation that produces $130 billion worth of new tanks and jet fighters in addition to $100 billion worth of all other final goods and services.
  2. (b) A nation that produces no military equipment, but instead, creates a new renewable industry that produces $200 billion worth of new solar panels, pays $20 billion out to old aged pensioners, and produces and additional $30 billion worth of all other final goods and services.
  3. (c) A social democratic nation that produces $10 billion worth of new military equipment, builds $50 billion worth of new schools and universities, and produces an addition $170 billion worth of all other final goods and services.
  4. (d) A nation where the government spends $40 billion in environmental restoration projects, businesses purchase new machinery and equipment worth $30 billion, export sales to the rest of the world equal $60 billion and consumers purchase $100 billion worth of final goods and services.

Answer: They all have the same level of production