Practice: True or False 1. Investment spending is spending on financial assets like stocks and bonds F 2. Transfer payments are not counted in the calculation of GDP 3. If the nominal GDP increases then the economy is definitely experiencing inflation 4. An economy is not at full employment unless there is no unemployment 5. Countries that have generous unemployment benefits tend to have higher natural rates of unemployment 6. Lumberjacks are structurally unemployment when they are replaced by machines

1. False

2. True

3. False

4. False

5. True

6. True

Explanation:

1. False: Investment spending is spending on financial assets like stocks and bonds.

2. True: Transfer payments are not counted in the calculation of GDP.

3. False: If the nominal GDP increases then the economy is definitely experiencing inflation.

4. False: An economy is not at full employment unless there is no unemployment.

5. True: Countries that have generous unemployment benefits tend to have higher natural rates of unemployment. 6. True: Lumberjacks are structurally unemployment when they are replaced by machines.

1. False

2. True

3. False

4. False.

5. True

6. True

Explanation:

Investment spending is the purchases of land, machinery, infrastructure or production inputs. Investment spending is different from investment, which is the purchase of financial instruments like bonds, stocks, and derivatives.

Transfer payments are not calculated in the GDP. An example of a transfer payment is a welfare check that is received by a household. Transfer payments are not included because nothing gets produced as money is simply just transferred from one group to another.

Nominal GDP increases due to a positive economic growth. The nominal GDP could increase because production has increased and due to increase in in the price.

Full employment means that the unemployment has fallen to a lowest possible level which won't cause inflation. Full employment does not mean there won't be unemployment at all in the economy.

Countries that have generous unemployment benefits tend to have higher natural rates of unemployment unemployment because the workers are always coming and going, looking for better jobs.

Lumberjacks are structurally unemployment when they are replaced by machines because it is an unemployment that results.from industrial reorganization, due to technological change.

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