Economics: Investment
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Questions and Answers

What is the primary distinction between government purchases and transfer payments?

  • Government purchases are always made in cash, while transfer payments are always made in kind.
  • Government purchases are typically made during times of economic recession, while transfer payments are made during times of economic boom.
  • Government purchases are spending on goods and services, while transfer payments are support provided to individuals. (correct)
  • Government purchases are made at the federal level, while transfer payments are made at the state and local levels.

    • Which of the following would be considered investment spending?

  • A business buying a new piece of equipment. (correct)
  • A consumer purchasing a new car.
  • A homeowner purchasing a new house.
  • A government agency buying a new building.

    • What is the term for goods produced but not yet sold?

  • Residential capital.
  • Inventory accumulations. (correct)
  • Business capital.
  • Gross domestic product.

    • Which of the following is NOT a type of investment?

    <p>Buying a new bond.</p> Signup and view all the answers

    What is the term for spending on goods and services purchased by the government?

    <p>Government purchases.</p> Signup and view all the answers

    Which of the following would be considered a type of residential capital?

    <p>A landlord's apartment building.</p> Signup and view all the answers

    What is the effect on Net Exports (NX) when Nylah spends $1,200 on a new smartphone built in China?

    <p>NX falls by $1,200</p> Signup and view all the answers

    What happens to GDP when Joseph spends $800 on a tablet to use in his editing business?

    <p>GDP remains unchanged</p> Signup and view all the answers

    When GM builds $500 million worth of cars, but consumers only buy $470 million of them, what happens to Inventory Accumulations (I) and GDP?

    <p>I rises by $30 million, GDP rises by $500 million</p> Signup and view all the answers

    What is the effect on Investment Spending (I) when Jahzara spends $300 to buy her husband dinner at the finest restaurant in Boston?

    <p>I remains unchanged</p> Signup and view all the answers

    What happens to Gross Domestic Product (GDP) when Nylah spends $1,200 on a new smartphone built in China?

    <p>GDP remains unchanged</p> Signup and view all the answers

    What is the effect on Government Purchases (G) when Jahzara spends $300 to buy her husband dinner at the finest restaurant in Boston?

    <p>G remains unchanged</p> Signup and view all the answers

    What type of purchases are excluded from the consumption component of GDP?

    <p>Purchases of new housing</p> Signup and view all the answers

    Which of the following is NOT a component of investment in GDP?

    <p>Spending on government purchases</p> Signup and view all the answers

    What is the term for the value of goods and services produced domestically and sold abroad minus the value of goods and services produced abroad and sold domestically?

    <p>Net exports</p> Signup and view all the answers

    What is the purpose of using constant base-year prices in real GDP?

    <p>To eliminate the effect of inflation</p> Signup and view all the answers

    Which of the following is a limitation of using GDP as a measure of economic well-being?

    <p>It excludes the value of leisure and the value of a clean environment</p> Signup and view all the answers

    What is the term for the ratio of nominal GDP to real GDP?

    <p>GDP deflator</p> Signup and view all the answers

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