Determine whether following statements are true or false. Right answer is worth

Question

Determine whether following statements are true or false. Right answer is worth 0.5 points and wrong answer costs 0.5 points. The total points cannot be negative however. There is a single right answer to each item. 1. Gross national product of Finland includes profits from a plant which is located in China but owned by a Finnish firm 2. A good is an inferior good if the substitution effect dominates the income effect 3. Unemployment rate means the ratio of unemployed people to working age population . Current account is by definition equal to net exports 5. The government purchases of national income accounts include e.g. defense costs, costs of public education and unemployment benefits. 6. A)Ricardian equivalence does not hold if there is proportional taxation of labor income B)Productivity growth does not affect growth of the economy in the Solow model . Inflation mean growth rate of price level

Explanation / Answer

1. True

Explanation: Gross national product includes the market value of all goods and services produced by the citizens of a country. So, the profits from a plant located in China but owned by a Finnish firm is included in the GNP of Finland.

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