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Use the concepts of gross investment and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. In 1933 net private domestic investment was minus $6 billion. This means that in that particular year the economy produced no capital goods at all.

This statement is

a.)incorrect because negative net investment does not mean the economy produced no new capital goods in that year.

b.)correct because gross investment exceeded depreciation.

c.)incorrect because gross investment exceeded depreciation.

d.)correct because negative net investment means the economy produced no new capital goods in that year.

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4 Sep 2018

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Related questions

1. What are the five factors that influence comparative advantage?

2. How can the government use different fiscal policies to [a] lower unemployment and [b] reduce inflation?

3. Some economists believe that creeping inflation cannot be accepted because a gradual increase in prices leads to an ever-rising rate of inflation. Other economists argue that in order to achieve economic growth, some moderate price increases are necessary. Contrast and evaluate these two points of view.

4. Use the concepts of gross investment and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. Explain:

Question 1 Gross domestic product (GDP) measures the economy's production of

A) final goods and services.

B) intermediate goods.

C) consumer goods and services.

D) capital goods.

Question 2 Because GDP is measured in dollars per year, GDP is called a

A) stock.

B) flow.

C) cycle.

D) chain.

Question 3 Which of the following would not be included in the gross private domestic investment (I) category of GDP?

A) A retailer's additions to its inventories.

B) A bakery's purchase of a new oven.

C) A trader's purchase on NASDAQ stocks.

D) Newly built residential construction.

Question 4 Which of the following government payments would be included in the government consumption expenditures and gross investment (G) category of GDP?

A) A firefighter's monthly paycheck.

B) A retired grandmother's Social Security check.

C) A retired colonel's veteran's benefits.

D) A laid-off auto worker's unemployment conpensation check.

Question 5 The largest component in the income approach to measuring GDP is

A) compensation of employees.

B) rents.

C) profits.

D) net interest.

Question 6 Which approach to calculating GDP attempts to measure employee compensation, rents, profits, and net interest?

A) The circular-flow approach.

B) The product-market approach.

C) The income approach.

D) The expenditure approach.

Question 7 In recent years, people have benefited from greater amounts of leisure time. This trend

A) has caused GDP to rise.

B) has caused GDP to fall.

C) made GDP fluctuate randomly.

D) is not accounted for in the GDP statistic.

Question 8 National income (NI) is calculated by adjusting GDP for

A) depreciation of capital.

B) investment and net exports.

C) Social Security insurance contributions and transfer payments.

D) corporate and personal income taxes.

Question 9 If an economy's real GDP has increased, we can conclude that the economy

A) is inflationary.

B) has increased its production.

C) suffers from recession.

D) needs a tax cut.

Question 10 In the circular flow model, investment, government spending, and exports are classified as

A) injections.

B) leakages.

C) transfers.

D) consumption expenditures.




1. which of the following would be counted as gross domestic

investment?


  • GM issues 1 million shares of stock



  • consolidated construction purchases 1,000 acres of land for a


regional shopping center it plans to build in a few years.


  • a walmart store adds 1,000 T-shirts to ti's


inverotry


  • A college buys computers for it's office staff



  • you and your significant other buy a house



  • you put money into a saving accountÂ









2. a car company currently has a capital stock of $100 million

and desires a capital stock of $110 million


a. if it experiences no depreciation how mch will it need to

invest to get to its desired level of capital stock

b. if its annual depreciation is 5% how much will it need to

invest to get to its desired level

c. if its annual depreciation is 10% how much will it need to

invest to get to its desired level









3. use the information below to compute the levels of gross and

net private domestic investment data are in billions of dollars

a. change in business inventories $59.3

b. residental cinstruction 369.6

c. producers durable equipment 691.3

d. nonresidential structures 246.9

e. depreciation 713.9



4. complete the table which shows investment in the united

states in billions of 2000 chained dollars


year 2005 gross domestic investment 1,873.5 depreciation 1,266.6 net private domestic investment ?

year 2006 gross domestic investnment ? depreciation 1,2161 net priavte domestic investment 696.4

year 2007 gross domestic investment 1,809.7 depreciation ? net priavate domestic investment 546.7










5. which of the following is part of M1 and M2

a. $0.27 that has accumulated under a couch cushion

b. your $2,000 line of credit with your visa account

c. $210 balance in your checking account

d. $417 in your savings account

e. 10 shares of the recently issued facebook stock that your

grandma gave you

f. $200 in travelers checks you purchased before your summer

trip to italy









6. suppose a banks balance sheet looks as follows:



assets


reservers

$2,700




property

$ 4,500


liabilities

deposits $7,200


and banks the reserve requirement is 20 percent

a. how much is excess reserves ratio 20 percent

b. how much can this bank lend






7. suppose a bank A with 25% reserve requirement has $50 million

in reserves and $200 million in checkable deposits one of the banks

depositors a major corporation writes a check to another

corporation for $5 million the check is deposited in another bank

(bank B)

a. explain how the withdrawl affects the banks reserves and

checkable deposits

b. by how much must bank A have to reduce lending?






8. assume the bank of america has access reserves of $30

milllion and outstanding transaction (checking) deposits of $180

million if the reserve ratio is 10% what is the size of the bank of

america total reserves?






9 banks fail when all depositors try to withdraw money at the

same time one way to prevent this problem would be to require bank

to hold 0 of deposits on hand

a. why would this not be desirable thing to do

b. what would happen to the banking system

c. explain how the law which requires banks to purchase fdic

insurance makes 100% reserve system unnecessary.



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