Question 1

The relationship between real and nominal interest rates can be expressed by:

Accepted Answer

A) real interest rate = nominal interest rate + inflation. 
B) real interest rate = inflation − nominal interest rate. 
C) real interest rate = nominal interest rate − inflation. 
D) The real interest rate cannot be calculated. 
A) real interest rate = nominal interest rate + inflation. 
B) real interest rate = inflation − nominal interest rate. 
C) real interest rate = nominal interest rate − inflation. 
D) The real interest rate cannot be calculated.

Question 2

The distinction between consumption and investment is:

Accepted Answer

A) that only households consume and only businesses invest. 
B) somewhat arbitrary, since investment includes housing investment, which does not increase future productive capacity. 
C) that investment always increases future productive capacity, while consumption does not. 
D) arbitrary, since the same expenditure may be counted as a consumption item in one year and an investment in another. 
A) that only households consume and only businesses invest. 
B) somewhat arbitrary, since investment includes housing investment, which does not increase future productive capacity. 
C) that investment always increases future productive capacity, while consumption does not. 
D) arbitrary, since the same expenditure may be counted as a consumption item in one year and an investment in another.

Question 3

Inflation is a sustained rise in the general price level.

Accepted Answer

A) True 
 B)False

Question 4

If the prices used in two countries are exactly the same, then a comparison of the per capita GDPs of the two countries provides:

Accepted Answer

A) no insight into living standards. 
B) some insight into living standards depending on the extent of non-market activities in each country. 
C) some insight into living standards depending on the accuracy of purchasing power parity. 
D) an exact comparison of living standards. 
A) no insight into living standards. 
B) some insight into living standards depending on the extent of non-market activities in each country. 
C) some insight into living standards depending on the accuracy of purchasing power parity. 
D) an exact comparison of living standards.

Question 5

In what category of national income accounting is the purchase of a computer by a business?

Accepted Answer

A) It is ignored because computers are considered intermediate goods-an input in the production of other goods and services. 
B) It is considered consumption. 
C) It is a form of investment spending. 
D) It is a form of savings. 
A) It is ignored because computers are considered intermediate goods-an input in the production of other goods and services. 
B) It is considered consumption. 
C) It is a form of investment spending. 
D) It is a form of savings.

Question 6

What is gross private investment?

Accepted Answer

Gross private investment is bu

Question 7

If an economy produces 100 pencils and 100 pens, and pencils sell for twice as much as pens:

Accepted Answer

A) pencils are weighted as twice as important in the economy compared to pens. 
B) pens are weighted as twice as important in the economy compared to pencils. 
C) pencils are weighted as equally important in the economy as pens. 
D) nothing can be said about the relative importance of pens and pencils in the economy. 
A) pencils are weighted as twice as important in the economy compared to pens. 
B) pens are weighted as twice as important in the economy compared to pencils. 
C) pencils are weighted as equally important in the economy as pens. 
D) nothing can be said about the relative importance of pens and pencils in the economy.

Question 8

If there are only two goods in the economy, one whose price rises by 3 percent and one by 5 percent, it is possible that inflation is:

Accepted Answer

A) 3 percent. 
B) 4 percent. 
C) 5 percent. 
D) 7 percent. 
A) 3 percent. 
B) 4 percent. 
C) 5 percent. 
D) 7 percent.

Question 9

Which of the following is not counted in GDP?

Accepted Answer

A) The services provided by a maid 
B) An increase in inventories held by firms 
C) The change in Social Security payments received by individuals 
D) The commissions earned by a salesman 
A) The services provided by a maid 
B) An increase in inventories held by firms 
C) The change in Social Security payments received by individuals 
D) The commissions earned by a salesman

Question 10

Aggregate accounting:

Accepted Answer

A) is used primarily by microeconomists. 
B) provides a way of measuring total or aggregate production. 
C) was first developed in the 1970s. 
D) cannot be used to measure national consumption. 
A) is used primarily by microeconomists. 
B) provides a way of measuring total or aggregate production. 
C) was first developed in the 1970s. 
D) cannot be used to measure national consumption.

Question 11

Per capita gross domestic product (GDP)in the United States is roughly:

Accepted Answer

A) $15,000. 
B) $45,000. 
C) $60,000. 
D) $75,000. 
A) $15,000. 
B) $45,000. 
C) $60,000. 
D) $75,000.

Question 12

The key to the equality of output and income is:

Accepted Answer

A) employee compensation. 
B) profit. 
C) business taxes. 
D) transfer payments. 
A) employee compensation. 
B) profit. 
C) business taxes. 
D) transfer payments.

Question 13

The price index that measures the average rate of change in the prices received by domestic producers of goods and services is called the:

Accepted Answer

A) PCE deflator. 
B) CPI. 
C) GDP deflator. 
D) PPI. 
A) PCE deflator. 
B) CPI. 
C) GDP deflator. 
D) PPI.

Question 14

If depreciation is zero, then net domestic product:

Accepted Answer

A) exceeds gross domestic product. 
B) equals gross domestic product. 
C) is less than gross domestic product. 
D) cannot be defined. 
A) exceeds gross domestic product. 
B) equals gross domestic product. 
C) is less than gross domestic product. 
D) cannot be defined.

Question 15

When someone stops mowing his lawn and hires a teenager for cash that is unreported, what happens to GDP?

Accepted Answer

A) It rises because a nonmarket activity is now a legal market activity. 
B) It rises because GDP includes the value of the additional leisure time that dad gets by hiring a noncitizen. 
C) It falls because production by noncitizens is counted in their home country, not in the United States. 
D) It probably does not change. Production has shifted from nonmarket to the underground economy and neither is counted. 
A) It rises because a nonmarket activity is now a legal market activity. 
B) It rises because GDP includes the value of the additional leisure time that dad gets by hiring a noncitizen. 
C) It falls because production by noncitizens is counted in their home country, not in the United States. 
D) It probably does not change. Production has shifted from nonmarket to the underground economy and neither is counted.

Question 16

Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information, what is real GDP?

Accepted Answer

A) $9.8 trillion 
B) $11.4 trillion 
C) $13.8 trillion 
D) $15.2 trillion 
A) $9.8 trillion 
B) $11.4 trillion 
C) $13.8 trillion 
D) $15.2 trillion

Question 17

Net domestic product equals:

Accepted Answer

A) consumption + investment + government purchases + net exports - net foreign factor income. 
B) consumption + investment + government purchases + net exports - depreciation. 
C) consumption + investment + government purchases + net exports - profits. 
D) consumption + investment + government purchases + net exports - change in inventories. 
A) consumption + investment + government purchases + net exports - net foreign factor income. 
B) consumption + investment + government purchases + net exports - depreciation. 
C) consumption + investment + government purchases + net exports - profits. 
D) consumption + investment + government purchases + net exports - change in inventories.

Question 18

Real GDP would increase by 3 percent if nominal GDP increased by:

Accepted Answer

A) 1 percent and inflation increased by 2 percent. 
B) 6 percent and inflation increased by 2 percent. 
C) 2 percent and inflation increased by 1.5 percent. 
D) 5 percent and inflation increased by 2 percent. 
A) 1 percent and inflation increased by 2 percent. 
B) 6 percent and inflation increased by 2 percent. 
C) 2 percent and inflation increased by 1.5 percent. 
D) 5 percent and inflation increased by 2 percent.

Question 19

The genuine progress indicator provides a measure of social progress that:

Accepted Answer

A) ignores economic activity. 
B) focuses entirely on economic activity. 
C) is explicitly based on value judgments. 
D) is explicitly not based on value judgments. 
A) ignores economic activity. 
B) focuses entirely on economic activity. 
C) is explicitly based on value judgments. 
D) is explicitly not based on value judgments.

Question 20

What is real GDP?

Accepted Answer

Real GDP is real gross nationa

Exam 25: Measuring and Describing the Aggregate Economy

The relationship between real and nominal interest rates can be expressed by:

The distinction between consumption and investment is:

Inflation is a sustained rise in the general price level.

If the prices used in two countries are exactly the same, then a comparison of the per capita GDPs of the two countries provides:

In what category of national income accounting is the purchase of a computer by a business?

What is gross private investment?

If an economy produces 100 pencils and 100 pens, and pencils sell for twice as much as pens:

If there are only two goods in the economy, one whose price rises by 3 percent and one by 5 percent, it is possible that inflation is:

Which of the following is not counted in GDP?

Aggregate accounting:

Per capita gross domestic product (GDP)in the United States is roughly:

The key to the equality of output and income is:

The price index that measures the average rate of change in the prices received by domestic producers of goods and services is called the:

If depreciation is zero, then net domestic product:

When someone stops mowing his lawn and hires a teenager for cash that is unreported, what happens to GDP?

Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information, what is real GDP?

Net domestic product equals:

Real GDP would increase by 3 percent if nominal GDP increased by:

The genuine progress indicator provides a measure of social progress that:

What is real GDP?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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