Question 1

The CPI tends to understate inflation.

Accepted Answer

A) True 
 B)False

Question 2

To be included in GDP, an activity has to involve a market transaction.

Accepted Answer

A) True 
 B)False

Question 3

If prices were kept constant at 2016 levels, then according to the data in Exhibit 18-5, production between 2016 and 2017 changed by

Accepted Answer

A) 20 percent. 
B) 28 percent. 
C) 25 percent. 
D) 60 percent. 
E) 30 percent. 
A) 20 percent. 
B) 28 percent. 
C) 25 percent. 
D) 60 percent. 
E) 30 percent.

Question 4

When there is inflation, the reliability of changes in GDP as an indicator of changes in production

Accepted Answer

A) improves. 
B) is not affected. 
C) declines. 
D) is not affected, unless the change in prices is extreme. 
E) None of these 
A) improves. 
B) is not affected. 
C) declines. 
D) is not affected, unless the change in prices is extreme. 
E) None of these

Question 5

GDP is unaffected by changes in the quality of a good or service.

Accepted Answer

A) True 
 B)False

Question 6

What is the role of weights in computing GDP?

Accepted Answer

A) The weights take into account the different time periods in which the goods are produced. 
B) The weights take into account the different uses of the goods and services produced. 
C) The weights take into account the different locations in which the goods are produced. 
D) The weights enable the adding up of different products. 
E) The weights take into account whether the goods and services are for private or government use. 
A) The weights take into account the different time periods in which the goods are produced. 
B) The weights take into account the different uses of the goods and services produced. 
C) The weights take into account the different locations in which the goods are produced. 
D) The weights enable the adding up of different products. 
E) The weights take into account whether the goods and services are for private or government use.

Question 7

Exhibit 18-5
  
-According to the data in Exhibit 18-5, nominal GDP in 2011 equaled

Accepted Answer

A) $500. 
B) $800. 
C) $640. 
D) $625. 
E) $1,000. 
A) $500. 
B) $800. 
C) $640. 
D) $625. 
E) $1,000.

Question 8

Exhibit 18-7
  
-The information in Exhibit 18-7 gives the 2011 base period market basket and prices used to construct the CPI for a small nation. It also has the 2016 prices. What is the value of the CPI for the period 2016?

Accepted Answer

A) 1.00 
B) 1.40 
C) 1.33 
D) 0.71 
E) 1.25 
A) 1.00 
B) 1.40 
C) 1.33 
D) 0.71 
E) 1.25

Question 9

It is easier to measure GDP in a centrally planned economy than in a market economy.

Accepted Answer

A) True 
 B)False

Question 10

When computing GDP using the production approach, one must count only the value added by each business, as opposed to the total value of output produced by each business, in order to avoid double counting.

Accepted Answer

A) True 
 B)False

Question 11

Determine whether each of the following would be included in GDP, and explain why or why not.

Accepted Answer

The answer of Determine whether each of the following would...

Question 12

Suppose that the following data explain the economic activity in a country in the year 2010.   Given these data, calculate the following:

Accepted Answer

The answer of Suppose that the following data explain the...

Question 13

GDP is

Accepted Answer

A) a measure of the value of all newly produced final goods and services in a country during some period of time. 
B) a measure of the value of all goods and services produced in a country during some period of time, corrected for inflation. 
C) a measure of the value of all goods and services sold in a country during some period of time. 
D) a measure of the value of all goods and services produced by the nation's citizens during some period of time. 
E) a measure of the value of all goods and services produced by the nation's citizens during some period of time, corrected for inflation. 
A) a measure of the value of all newly produced final goods and services in a country during some period of time. 
B) a measure of the value of all goods and services produced in a country during some period of time, corrected for inflation. 
C) a measure of the value of all goods and services sold in a country during some period of time. 
D) a measure of the value of all goods and services produced by the nation's citizens during some period of time. 
E) a measure of the value of all goods and services produced by the nation's citizens during some period of time, corrected for inflation.

Question 14

Which of the following statements is false?

Accepted Answer

A) Some of the data needed for computing GDP come from the IRS. 
B) Revisions of GDP are inevitable. 
C) The statistics on GDP are frequently revised. 
D) Revisions in GDP can lead to mistakes. 
E) The data for GDP can be collected quickly. 
A) Some of the data needed for computing GDP come from the IRS. 
B) Revisions of GDP are inevitable. 
C) The statistics on GDP are frequently revised. 
D) Revisions in GDP can lead to mistakes. 
E) The data for GDP can be collected quickly.

Question 15

Suppose that a car dealer had an inventory of 150 cars on December 31, 2015, got 35 new cars shipped from the factory during 2016, and sold 20 cars to consumers during the year, making the dealer's inventory equal to 165 cars on December 31, 2016. What was the contribution of the car dealer to inventory investment for 2016?

Accepted Answer

A) 165 cars 
B) 35 cars 
C) 15 cars 
D) None of these 
A) 165 cars 
B) 35 cars 
C) 15 cars 
D) None of these

Question 16

Holly has recently graduated from college and has bought a house that was built 50 years ago for $100,000. She used a real estate agent to help her find and purchase the house, and the real estate agent received 5 percent of the value of the sale, or $5,000, to be paid by the seller of the house. The value of GDP in this case would

Accepted Answer

A) increase by $100,000. 
B) increase by $95,000. 
C) increase by $105,000. 
D) increase by $5,000. 
E) not be affected because the house was not produced in the current time period. 
A) increase by $100,000. 
B) increase by $95,000. 
C) increase by $105,000. 
D) increase by $5,000. 
E) not be affected because the house was not produced in the current time period.

Question 17

Over the past 20 years, the CPI values have been less volatile than the GDP deflator values for the U.S. rate of inflation.

Accepted Answer

A) True 
 B)False

Question 18

What are the three ways to measure GDP? Explain what they mean.

Accepted Answer

One technique is the spending approach.

Question 19

Suppose that real GDP grew more slowly than nominal GDP between year 1 and year 2. What must have happened to prices on average?

Accepted Answer

Prices must have increased. Since nomina

Question 20

Government purchases are defined as

Accepted Answer

A) purchases of goods and services by the federal government. 
B) purchases of new goods and services and transfer payments by the federal government. 
C) purchases of new goods and services and transfer payments by federal, state, and local governments. 
D) purchases of new goods and services by federal, state, and local governments. 
E) purchases of goods and services by federal and foreign governments. 
A) purchases of goods and services by the federal government. 
B) purchases of new goods and services and transfer payments by the federal government. 
C) purchases of new goods and services and transfer payments by federal, state, and local governments. 
D) purchases of new goods and services by federal, state, and local governments. 
E) purchases of goods and services by federal and foreign governments.

Exam 18: Measuring the Production, Income, and Spending of Nations

The CPI tends to understate inflation.

To be included in GDP, an activity has to involve a market transaction.

If prices were kept constant at 2016 levels, then according to the data in Exhibit 18-5, production between 2016 and 2017 changed by

When there is inflation, the reliability of changes in GDP as an indicator of changes in production

GDP is unaffected by changes in the quality of a good or service.

What is the role of weights in computing GDP?

Exhibit 18-5 -According to the data in Exhibit 18-5, nominal GDP in 2011 equaled

Exhibit 18-7 -The information in Exhibit 18-7 gives the 2011 base period market basket and prices used to construct the CPI for a small nation. It also has the 2016 prices. What is the value of the CPI for the period 2016?

It is easier to measure GDP in a centrally planned economy than in a market economy.

When computing GDP using the production approach, one must count only the value added by each business, as opposed to the total value of output produced by each business, in order to avoid double counting.

Determine whether each of the following would be included in GDP, and explain why or why not.

Suppose that the following data explain the economic activity in a country in the year 2010. Given these data, calculate the following:

GDP is

Which of the following statements is false?

Over the past 20 years, the CPI values have been less volatile than the GDP deflator values for the U.S. rate of inflation.

What are the three ways to measure GDP? Explain what they mean.

Suppose that real GDP grew more slowly than nominal GDP between year 1 and year 2. What must have happened to prices on average?

Government purchases are defined as

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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