## Monday, September 21, 2009

### Chapter 5 Practice Problems

CHAPTER 5

#1) Macroeconomists study decisions of economy wide phenomena. (T/F)
TRUE

#2)The basic tools of supply and demand are central to microeconomic analysis, but seldom used in macroeconomic analysis (T/F)
FALSE

#3) Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP.

Therefore, GDP is not a useful measure of society's welfare. (T/F)

FALSE

#4) In a certain economy in 2005, households spent \$1,200 on goods and services; purchases of capital equipment, inventories, and structures amounted to \$250; government spent \$350 on goods and services; and the value of imports exceeded the value of exports by \$50. ( or NX =-50) It follows that 2005 GDP for this economy was:

ans: \$1750 C =1200 I =250 G = 350 NX =-50
1200+250+350+(-50) =1750

#5) Write the equation that includes the four components of GDP and identify each component.

Y = C + I + G + NX

Y = GDP
C= consumption
I= investment
G= government purchases
NX= net exports