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Free CFA-Level-I Exam Braindumps (page: 336)

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The phrase, "GDP equals what you eat plus what you invest plus what you export" characterizes which of the following methods?

  1. Expenditure approach.
  2. Income-cost approach.
  3. Consumption-investment approach.
  4. Resource cost-income approach.

Answer(s): A

Explanation:

The Expenditure approach has four components:
1. Personal consumption expenditure.
2. Gross private domestic investment (investments by people residing outside the country are ignored, even if they happen to be citizens of the country).
3. Government consumption & investment.
4. Net exports.
These can be summarized as "GDP equals what you eat plus what you invest plus what you export."



The current account trade balance + the capital account trade balance =

  1. the currency balance at the World Bank
  2. GDP
  3. the foreign exchange rate
  4. GNP
  5. the trade deficit/surplus
  6. zero

Answer(s): F

Explanation:

By accounting identity, the capital account and current account must balance to zero. If there is a deficit in one, there must be a surplus in the other. This is one reason why if a nation has a government budget deficit, which amounts to negative domestic investment, the shortfall could be made up by foreigners, causing a capital account surplus. Conversely there must be a current account deficit in such a situation. This is one reason why budget deficits and trade deficits are linked. Note that the term "trade balance" usually refers to the current account.



Mathematically, the marginal propensity to consume is

  1. income divided by consumption.
  2. additional consumption divided by additional income.
  3. consumption divided by income.
  4. additional income divided by additional consumption.

Answer(s): B

Explanation:

The marginal propensity to consume is found according to the following equation:
MPC = total change in consumption / total change in income



The rate of unemployment is equal to:

  1. the number of unemployed people as a fraction of the total labor force.
  2. the number of unemployed people as a fraction of the total population.
  3. none of these answers.
  4. the number of unemployed people as a fraction of the total population eligible to work.

Answer(s): D

Explanation:

The labor force of an economy consists of adults (defined as being of age 16 and above) who are either employed or actively seeking employment. The unemployment rate is then the fraction of the labor force that is not employed.






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