5. The salary of an American citizen working in London is part of U.K. GNP and U

Question

5. The salary of an American citizen working in London is part of U.K. GNP and U.S. GDP U.K. GNP and U.S. GNP U.K. GDP and U.S. GDP U.K. GDP and U.S. G . 6. Suppose that a company conducts an IPO (initial public offering) by selling new stock to a) c) the public. This transaction: is a form of investment as defined in class and it also contributes towards GDP b s not a form of investment as defined in class but it does contribute towards GDP is a form of investment as defined in class but it does not contribute towards GDP is not a form of investment as defined in class and it does not contribute towards GDP d) 7. Let denote the spending multiplier where there no marginal tax rate. Let b denote the marginal propensity to consume. Which of the following is true? a) 0

Explanation / Answer

Answer:

5.

D.

Salary is the part of UK GDP as it is earned in UK. But, the US citizen will transfer the funds back to the USA and it will be considered as factor income from abroad for the USA economy. Hence, it will be the part of USA GNP.

6.

C.

Buying new stocks on offer is considered as investment in the class of finance. But, it is not the part of GDP as it is only the change in possession of funds.

7.

B.

Spending multiplier = 1/(1-b) here b = MPC

Hence, Spending multiplier is greater than 1.

8.

A

If prices are doubled and nominal GDP does not change, it means that the output has come down by 50%. Hence, Real GDP has fallen by 50%.

9.

B

A salary being earned by a US citizen in the USA will become the part of GDP. Further, GNP will also include GDP in its calculation. Hence, this salary is the part of GDP and GNP both.

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