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Questions and Answers

There is just one approach for the computation of GDP.

There are three approaches: the expenditure (Y=C+I+G+X-M), the income (sum of wages, rents, interest and profits) and the production approach (sum of gross value added across sectors).

Real appreciations increase exports and decrease imports, thus deteriorating the current account balance.

False. Real appreciations increase the relative price of domestic goods versus foreign goods leading to lower price competitiveness, less exports, more imports and a deterioration in the trade balance.

In a single country it is not possible to have more than one asset performing simultaneously the role of money.

True. Money is characterized by performing simultaneously three tasks: unit of account, reserve of value and being widely accepted as a means of payment. The latter task is performed by a single asset at each moment in time.

In the Keynesian models, the higher the households’ savings rate, the higher the impact of fiscal policy on GDP.

<p>False. The higher savings rate corresponds to lower marginal propensity to consume. Therefore, the Keynesian multiplier is lower, reducing the impact of fiscal policy. Illustrate with a graph with a reduction in the marginal propensity to consume.</p> Signup and view all the answers

Total income ni the economy, obtained by summing wages, rents, interest payments and profits, si larger than total value added in the economy.

<p>False. Total income is equal to total value added generated in the economy, these are two of the three approaches of GDP measurement (the one missing is the expenditure approach).</p> Signup and view all the answers

If GDP yesterday was 10, GDP today si 13 and GDP today at prices of yesterday si 11, then the real growth of GDP today was 10%.

<p>True. The real growth rate of GDP si obtained by measuring its evolution at prices of a same year (the year before), thus it is (11-10)/10=0,1 =10%</p> Signup and view all the answers

There is a positive relationship between the price of bonds and the interest rate.

<p>False. When the price of bonds increases this is equivalent to saying that interest rates decrease. If an agent buys (holds) for a higher price a bond that wil pay a given amount at maturity, the implicit rate of return (interest rate) is smaller.</p> Signup and view all the answers

High domestic savings make it more likely that the economy records a surplus in the external accounts.

<p>True. Given the fundamental identity of macroeconomics (S-1)+(t-G)=(X-M), the larger the S, the more likely is (X-M) a positive number.</p> Signup and view all the answers

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