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ECS 1601 Study Unit 5 Quiz

Multiple Choice Questions (MCQ’s)

• 1. In 2009, Ozzie purchased a 1999 Opel Corsa Lite from his neighbour for his son, he purchased a 1999 Camry from Larchmont Toyota for his wife, and he bought a 2009 new Ford for himself, he also sold his 1993 Dodge Caravan. Which, if any, of these transactions will be included in GDP in 2009?

 [1] Only the purchase of the Ford [2] the purchase of the Ford and the Caravan [3] all four transactions [4] all three purchases but not the sale
• 2. Study the following table and answer the question that follows.

 2006 2009 Product Price Quantity Price Quantity Camera 10 12 100 120 Legal Services 15 20 50 45 Books 40 45 200 210

Suppose that a very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2006 and 2009 are shown in the table above. What is real GDP in 2006, using 2009 as the base year?

 [1] R28 885 [2] R11 790 [3] R10 275 [4] R11 200
• 3. Which of the following is NOT a final good?

 [1] a purse sold to a foreign visitor [2] a new computer sold to a UNISA student [3] a hot dog sold to a spectator at a Chicago Bears football game [4] a new car sold to Avis for use in their fleet of rental cars
 4. In years with inflation, nominal GDP increases real GDP [1] at the same rate as [2] faster than [3] slower than [4] sometimes faster, sometimes slower, and sometimes at the same rate as

ECS 1601 Study Unit 5 Quiz

True and False

• 5. Indicate whether the following statements are true/false and explain why.

 5.1 Subsidies on products will in a difference between the price paid for a good and the cost of production and income earned by the factors of production 5.2 Double counting can be avoided by only counting the value of those sales where a good or service reaches its final destination 5.3 The production, income and expenditure methods for measuring GDP will have different results as they calculate GDP differently 5.4 The difference between real and nominal GDP is that certain factors of production are excluded in the calculation of nominal GDP Long Questions 6. Calculate the GDP for a hypothetical economy that produces two goods (computers and gasoline). The prices and quantities produced in each year are provided in the following table: 2006 2007 2008 Prices Computers R2 000 R1 900 R1 200 Petrol R50 per liter R100 per liter R400 per liter Quantities Computers 10 16 40 Petrol 100 liters 120 liters 110 liters 6.1 Compute the nominal GDP for each of the three years. 6.2 Compute the real GDP for each of the three years, taking 2006 as the base year. 6.3 How does the real GDP in 2006 compare to the nominal GDP in 2006 when 2006 is used as the base year? 6.4 Based on your calculations, comment on the economic well-being of the above two- good economy. Have things improved over time for this country (in terms of real-GDP)? 7. List the five macroeconomic objectives and describe what these objectives aim to achieve. 8. Define the following concepts 8.1 Gross Domestic Product 8.2 Quantile Ratio 8.3 Consumer Price Index
• 9. Draw a Lorenz curve and explain how the Gini Coefficient can be obtained making use of the curve

ECS 1601 Study Unit 5 Quiz

• 10. Study the table below and answer the questions that follow:

 2006 in 2007 in millions millions Final Consumption expenditure by households 17 432 18 382 Net exports 39 456 37 325 Primary income payments to the rest of the world 20 489 19 598 Primary income payments from the rest of the world 18 563 18 456 Final consumption expenditure by government 79 489 80 258 Gross capital formation 14 569 17 598
• 10.1 Calculate GDE for 2006 and 2007

• 10.2 Calculate GDP for 2006 and 2007

• 10.3 Calculate GNI at factor cost for 2006 and 2007