Question 1

Suppose that the consumer price index at year-end 2010 was 180 and by year-end 2011 had risen to 189. What was the inflation rate during 2011?

Accepted Answer

A) 4.8 percent 
B) 5 percent 
C) 6 percent 
D) 9 percent 
A) 4.8 percent 
B) 5 percent 
C) 6 percent 
D) 9 percent

Question 2

The GDP deflator is designed to adjust nominal GDP

Accepted Answer

A) for changes in the unemployment rate. 
B) for changes in prices. 
C) for problems that arise because of externalities. 
D) for changes in interest rates. 
A) for changes in the unemployment rate. 
B) for changes in prices. 
C) for problems that arise because of externalities. 
D) for changes in interest rates.

Question 3

Which of the following would not be included in GDP?

Accepted Answer

A) the real estate commission on the sale of a used home 
B) an attorney's fee for handling the sale of a used home 
C) the value of a used home, at its sale price 
D) fees paid to have the house cleaned 
A) the real estate commission on the sale of a used home 
B) an attorney's fee for handling the sale of a used home 
C) the value of a used home, at its sale price 
D) fees paid to have the house cleaned

Question 4

Figure 9-3  
-Accurate measurement of GDP is important to business decision-makers because this information will help them better determine the

Accepted Answer

A) general happiness of a country's citizens. 
B) course of the economy and the direction of demand for their products. 
C) economic well-being of a particular group within a country. 
D) amount of leisure time available and the quality of life in a country. 
A) general happiness of a country's citizens. 
B) course of the economy and the direction of demand for their products. 
C) economic well-being of a particular group within a country. 
D) amount of leisure time available and the quality of life in a country.

Question 5

An important difference between the GDP deflator and the consumer price index is that

Accepted Answer

A) the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
B) the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers. 
C) the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers. 
D) the GDP deflator reflects the prices of all goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of final goods and services bought by consumers. 
A) the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
B) the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers. 
C) the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers. 
D) the GDP deflator reflects the prices of all goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of final goods and services bought by consumers.

Question 6

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Accepted Answer

A) a greater share of their total production in the household sector, which understates their GDP relative to developed countries. 
B) a smaller share of their total production in the household sector, which understates their GDP relative to developed countries. 
C) a greater share of their total production in the household sector, which overstates their GDP relative to developed countries. 
D) a smaller share of their total production in the household sector, which overstates their GDP relative to developed countries. 
A) a greater share of their total production in the household sector, which understates their GDP relative to developed countries. 
B) a smaller share of their total production in the household sector, which understates their GDP relative to developed countries. 
C) a greater share of their total production in the household sector, which overstates their GDP relative to developed countries. 
D) a smaller share of their total production in the household sector, which overstates their GDP relative to developed countries.

Question 7

Table 7-9
  
-Refer to Table 7-9. During which of the above years was the purchasing power of the president's salary highest?

Accepted Answer

A) 1920 
B) 1940 
C) 1960 
D) 1980 
E) 2000 
A) 1920 
B) 1940 
C) 1960 
D) 1980 
E) 2000

Question 8

Table 7-5
  
-Refer to Table 7-5. National income equals

Accepted Answer

A) $1,380. 
B) $1,530. 
C) $1,860. 
D) $4,170. 
A) $1,380. 
B) $1,530. 
C) $1,860. 
D) $4,170.

Question 9

Which of the following transactions would enter directly into the determination of GDP?

Accepted Answer

A) a bicycle you purchased at a garage sale 
B) the retirement check your uncle received for spending 25 years in the Marine Corps 
C) the DVD player you purchased from Best Buy 
D) the five shares of Microsoft stock your grandparents gave you for making an A in economics 
A) a bicycle you purchased at a garage sale 
B) the retirement check your uncle received for spending 25 years in the Marine Corps 
C) the DVD player you purchased from Best Buy 
D) the five shares of Microsoft stock your grandparents gave you for making an A in economics

Question 10

Why is it important to use real rather than nominal GDP figures when making comparisons of output across time periods?

Accepted Answer

A) The real GDP figures are a better measure of changes in the general level of prices. 
B) The real figures will reflect changes in the quantity of output and not changes in the general level of prices. 
C) The real figures will reflect changes in the general level of prices as well as changes in the quantity of output. 
D) The real GDP figures adjust for changes in the level of employment. 
A) The real GDP figures are a better measure of changes in the general level of prices. 
B) The real figures will reflect changes in the quantity of output and not changes in the general level of prices. 
C) The real figures will reflect changes in the general level of prices as well as changes in the quantity of output. 
D) The real GDP figures adjust for changes in the level of employment.

Question 11

The price of a gallon of gasoline was $2.01 in May 2004 compared to 39 cents in 1973. However, the Consumer Price Index was 44.4 in 1973 compared to 189.1 in May 2004 (1980 -1984 = 100). In terms of the purchasing power of the dollar in 2004, the 1973 price of gasoline was

Accepted Answer

A) $0.39. 
B) $0.44. 
C) $1.66. 
D) $2.15. 
A) $0.39. 
B) $0.44. 
C) $1.66. 
D) $2.15.

Question 12

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

Accepted Answer

A) U.S.investment and GDP increase, but German GDP is unaffected. 
B) U.S.investment and German GDP increase, but U.S.GDP is unaffected. 
C) U.S.investment, U.S.GDP, and German GDP are unaffected, because tractors are intermediate goods. 
D) U.S.investment, U.S.GDP, and German GDP all increase. 
A) U.S.investment and GDP increase, but German GDP is unaffected. 
B) U.S.investment and German GDP increase, but U.S.GDP is unaffected. 
C) U.S.investment, U.S.GDP, and German GDP are unaffected, because tractors are intermediate goods. 
D) U.S.investment, U.S.GDP, and German GDP all increase.

Question 13

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

Accepted Answer

A) Additional expenditures on security designed to protect individuals from terrorist attacks are subtracted from GDP. 
B) Additional expenditures on security designed to protect individuals from terrorist attacks are added to GDP as part of output. 
C) Since expenditures on the prevention of terrorism do not contribute to the well-being of individuals, they exert no impact on GDP. 
D) Since terrorism is merely a redistribution of output, expenditures on the prevention of terrorism do not contribute to GDP. 
A) Additional expenditures on security designed to protect individuals from terrorist attacks are subtracted from GDP. 
B) Additional expenditures on security designed to protect individuals from terrorist attacks are added to GDP as part of output. 
C) Since expenditures on the prevention of terrorism do not contribute to the well-being of individuals, they exert no impact on GDP. 
D) Since terrorism is merely a redistribution of output, expenditures on the prevention of terrorism do not contribute to GDP.

Question 14

If a used car dealer purchases a used car for $3,000, makes repairs and refurbishes it, then sells it for $8,000, the

Accepted Answer

A) dealer contributes value added equal to $5,000, but nothing is added to GDP. 
B) dealer contributes value added equal to $5,000, and consequently $5,000 is added to GDP. 
C) dealer contributes nothing to production because only existing goods are involved. 
D) dealer contributes value added equal to $8,000, but only $5,000 is added to GDP. 
A) dealer contributes value added equal to $5,000, but nothing is added to GDP. 
B) dealer contributes value added equal to $5,000, and consequently $5,000 is added to GDP. 
C) dealer contributes nothing to production because only existing goods are involved. 
D) dealer contributes value added equal to $8,000, but only $5,000 is added to GDP.

Question 15

The real GDP data could be properly thought of as

Accepted Answer

A) an index of our economic well-being. 
B) a measure of the total wealth of a nation. 
C) an index of total output or productive activity. 
D) an index that measures the size of government. 
A) an index of our economic well-being. 
B) a measure of the total wealth of a nation. 
C) an index of total output or productive activity. 
D) an index that measures the size of government.

Question 16

Which of the following would not affect this year's GDP?

Accepted Answer

A) the paint you purchased when painting your house 
B) the new car your parents purchased and gave to you as a birthday present 
C) a Gateway computer purchased by the U.S.government 
D) the value of a used car you purchased, at its sale price 
A) the paint you purchased when painting your house 
B) the new car your parents purchased and gave to you as a birthday present 
C) a Gateway computer purchased by the U.S.government 
D) the value of a used car you purchased, at its sale price

Question 17

Which one of the following transactions would be included in GDP?

Accepted Answer

A) Ava pays $50 for a used picture frame at a neighborhood garage sale. 
B) Ethan donates $500 to his town's junior college scholarship fund. 
C) Emily pays $500 to fix the front end of her car damaged in a recent accident. 
D) Mia pays $5,000 to purchase 100 shares of Microsoft stock. 
A) Ava pays $50 for a used picture frame at a neighborhood garage sale. 
B) Ethan donates $500 to his town's junior college scholarship fund. 
C) Emily pays $500 to fix the front end of her car damaged in a recent accident. 
D) Mia pays $5,000 to purchase 100 shares of Microsoft stock.

Question 18

Which of the following statements about gross domestic product and gross national product is true?

Accepted Answer

A) Gross domestic product includes income payments to foreigners for their work domestically; gross national product does not. 
B) Gross domestic product includes the income earned abroad by domestic citizens; gross national product does not. 
C) Gross domestic product includes exports; gross national product does not. 
D) GDP and GNP are equal. 
A) Gross domestic product includes income payments to foreigners for their work domestically; gross national product does not. 
B) Gross domestic product includes the income earned abroad by domestic citizens; gross national product does not. 
C) Gross domestic product includes exports; gross national product does not. 
D) GDP and GNP are equal.

Question 19

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?

Accepted Answer

A) Sweden and the United States 
B) The United States because it was sold there 
C) The United States because GM is a U.S.company 
D) Sweden because it was produced there 
A) Sweden and the United States 
B) The United States because it was sold there 
C) The United States because GM is a U.S.company 
D) Sweden because it was produced there

Question 20

Which of the following events will leave GDP unchanged?

Accepted Answer

A) You purchase 100 shares of Wal-Mart stock. 
B) You pay $500 to repair the damage done to your car by an uninsured motorist. 
C) You decide to work five more hours per week at your job to pay for the repairs performed on your car. 
D) You purchase a new car at an auction. 
A) You purchase 100 shares of Wal-Mart stock. 
B) You pay $500 to repair the damage done to your car by an uninsured motorist. 
C) You decide to work five more hours per week at your job to pay for the repairs performed on your car. 
D) You purchase a new car at an auction.

Suppose that the consumer price index at year-end 2010 was 180 and by year-end 2011 had risen to 189. What was the inflation rate during 2011?

The GDP deflator is designed to adjust nominal GDP

Which of the following would not be included in GDP?

Figure 9-3 -Accurate measurement of GDP is important to business decision-makers because this information will help them better determine the

An important difference between the GDP deflator and the consumer price index is that

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Table 7-9 -Refer to Table 7-9. During which of the above years was the purchasing power of the president's salary highest?

Table 7-5 -Refer to Table 7-5. National income equals

Which of the following transactions would enter directly into the determination of GDP?

Why is it important to use real rather than nominal GDP figures when making comparisons of output across time periods?

The price of a gallon of gasoline was $2.01 in May 2004 compared to 39 cents in 1973. However, the Consumer Price Index was 44.4 in 1973 compared to 189.1 in May 2004 (1980 -1984 = 100). In terms of the purchasing power of the dollar in 2004, the 1973 price of gasoline was

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

If a used car dealer purchases a used car for $3,000, makes repairs and refurbishes it, then sells it for $8,000, the

The real GDP data could be properly thought of as

Which of the following would not affect this year's GDP?

Which one of the following transactions would be included in GDP?

Which of the following statements about gross domestic product and gross national product is true?

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?

Which of the following events will leave GDP unchanged?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 7: Taking the Nations Economic Pulse

Suppose that the consumer price index at year-end 2010 was 180 and by year-end 2011 had risen to 189. What was the inflation rate during 2011?

The GDP deflator is designed to adjust nominal GDP

Which of the following would not be included in GDP?

Figure 9-3 -Accurate measurement of GDP is important to business decision-makers because this information will help them better determine the

An important difference between the GDP deflator and the consumer price index is that

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Table 7-9 -Refer to Table 7-9. During which of the above years was the purchasing power of the president's salary highest?

Table 7-5 -Refer to Table 7-5. National income equals

Which of the following transactions would enter directly into the determination of GDP?

Why is it important to use real rather than nominal GDP figures when making comparisons of output across time periods?

The price of a gallon of gasoline was $2.01 in May 2004 compared to 39 cents in 1973. However, the Consumer Price Index was 44.4 in 1973 compared to 189.1 in May 2004 (1980 -1984 = 100). In terms of the purchasing power of the dollar in 2004, the 1973 price of gasoline was

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

If a used car dealer purchases a used car for $3,000, makes repairs and refurbishes it, then sells it for $8,000, the

The real GDP data could be properly thought of as

Which of the following would not affect this year's GDP?

Which one of the following transactions would be included in GDP?

Which of the following statements about gross domestic product and gross national product is true?

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?

Which of the following events will leave GDP unchanged?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters