Question 1

Which of the following transactions would increase GDP?

Accepted Answer

A) a new tricycle purchased at a department store sale by the parents of a three-year-old child 
B) the retirement check your uncle received for spending 25 years in the Marine Corps 
C) the five shares of Microsoft stock your grandparents gave you for making an A in economics 
D) the $200 you lost when your wallet was stolen 
A) a new tricycle purchased at a department store sale by the parents of a three-year-old child 
B) the retirement check your uncle received for spending 25 years in the Marine Corps 
C) the five shares of Microsoft stock your grandparents gave you for making an A in economics 
D) the $200 you lost when your wallet was stolen

Question 2

Suppose a country had net exports of $7.5 billion and sold $44.6 billion of goods and services abroad. This country had

Accepted Answer

A) $44.6 billion of imports and $52.1 billion of exports. 
B) $52.1 billion of exports and $44.6 billion of imports. 
C) $44.6 billion of imports and $37.1 billion of exports. 
D) $44.6 billion of exports and $37.1 billion of imports. 
A) $44.6 billion of imports and $52.1 billion of exports. 
B) $52.1 billion of exports and $44.6 billion of imports. 
C) $44.6 billion of imports and $37.1 billion of exports. 
D) $44.6 billion of exports and $37.1 billion of imports.

Question 3

The chained consumer price index

Accepted Answer

A) assumes that households purchase the same bundle of goods and services over a lengthy time period. 
B) adjusts the quantities of the typical bundle purchased each month to reflect the substitution away from goods that have become more expensive. 
C) reflects changes in the prices of all final goods and services produced domestically by the citizens of a nation during a period. 
D) will generally result in a higher measured rate of inflation than the regular consumer price index. 
A) assumes that households purchase the same bundle of goods and services over a lengthy time period. 
B) adjusts the quantities of the typical bundle purchased each month to reflect the substitution away from goods that have become more expensive. 
C) reflects changes in the prices of all final goods and services produced domestically by the citizens of a nation during a period. 
D) will generally result in a higher measured rate of inflation than the regular consumer price index.

Question 4

Which of the following would be most appropriate for the measurement of differences in the average standard of living of people at different points in time?

Accepted Answer

A) nominal GDP 
B) real GDP 
C) nominal GDP per capita 
D) real GDP per capita 
A) nominal GDP 
B) real GDP 
C) nominal GDP per capita 
D) real GDP per capita

Question 5

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

Accepted Answer

A) GDP increases by $1.50. 
B) GDP increases by $3.50. 
C) GDP increases by $6.00. 
D) GDP increases by $7.50. 
A) GDP increases by $1.50. 
B) GDP increases by $3.50. 
C) GDP increases by $6.00. 
D) GDP increases by $7.50.

Question 6

Given the following figures, by approximately what percentage did Aiden's real income increase between 2004 and 2005? Aiden's 2004 money income = $50,000
Aiden's 2005 money income = $55,000
2004 CPI = 120.0
2005 CPI = 128.0

Accepted Answer

A) zero 
B) 3.1 percent 
C) 6.7 percent 
D) 10 percent 
A) zero 
B) 3.1 percent 
C) 6.7 percent 
D) 10 percent

Question 7

Which of the following events will increase GDP?

Accepted Answer

A) losing $500 playing blackjack in your dorm 
B) selling an antique writing desk for $500 cash 
C) a burglar stealing your CD player 
D) the police department hiring an extra detective to track down the burglar who stole your CD player 
A) losing $500 playing blackjack in your dorm 
B) selling an antique writing desk for $500 cash 
C) a burglar stealing your CD player 
D) the police department hiring an extra detective to track down the burglar who stole your CD player

Question 8

Explain the two approaches to calculating GDP.

Accepted Answer

One approach involves adding up the expe

Question 9

Economists generally use gross domestic product to measure a nation's total output because it

Accepted Answer

A) equals the sales value of all transactions conducted during a period and, thus, can be easily calculated. 
B) is the best available measure of the market value of all final goods and services produced during a period. 
C) is unaffected by changes in the prices of products over time. 
D) is a reliable indicator of the social progress of a nation over time. 
A) equals the sales value of all transactions conducted during a period and, thus, can be easily calculated. 
B) is the best available measure of the market value of all final goods and services produced during a period. 
C) is unaffected by changes in the prices of products over time. 
D) is a reliable indicator of the social progress of a nation over time.

Question 10

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Accepted Answer

A) producers are likely to change the number of goods they sell from year to year. 
B) producers will generally reduce the quality of goods as prices increase over time. 
C) consumers will tend to substitute away from goods that become more expensive. 
D) consumers will usually reduce their consumption of goods when they become relatively cheaper. 
A) producers are likely to change the number of goods they sell from year to year. 
B) producers will generally reduce the quality of goods as prices increase over time. 
C) consumers will tend to substitute away from goods that become more expensive. 
D) consumers will usually reduce their consumption of goods when they become relatively cheaper.

Question 11

Gross domestic product is a measure of both

Accepted Answer

A) the market value of a nation's capital assets (physical capital) and the costs that were incurred producing those assets. 
B) the expenditures on and sales revenues derived from all goods and services exchanged during a period. 
C) the market value of the output produced during a period and the cost of producing that output. 
D) the asset holdings of people and the happiness that they derived from the ownership of those assets. 
A) the market value of a nation's capital assets (physical capital) and the costs that were incurred producing those assets. 
B) the expenditures on and sales revenues derived from all goods and services exchanged during a period. 
C) the market value of the output produced during a period and the cost of producing that output. 
D) the asset holdings of people and the happiness that they derived from the ownership of those assets.

Question 12

Double counting in the resource cost-income approach to GDP refers to

Accepted Answer

A) corporate income being taxed twice 
B) the amount of income taxes paid to states that is taxable by the federal government 
C) calculating GDP twice using the income and expenditures methods 
D) adding the value of exports to GDP and subtracting the value of imports 
E) counting the total value of a final output in addition to the value of the inputs used to make it 
A) corporate income being taxed twice 
B) the amount of income taxes paid to states that is taxable by the federal government 
C) calculating GDP twice using the income and expenditures methods 
D) adding the value of exports to GDP and subtracting the value of imports 
E) counting the total value of a final output in addition to the value of the inputs used to make it

Question 13

As per capita GDP has risen in the United States and other countries,

Accepted Answer

A) life expectancy and leisure time have also risen and infant mortality and illiteracy have gone down.. 
B) life expectancy has risen but leisure time has gone down, while infant mortality and illiteracy have remained the same. 
C) various quality of life variables have been unaffected. 
D) most quality of life variables such as life expectancy and expenditures on leisure time activities have fallen. 
A) life expectancy and leisure time have also risen and infant mortality and illiteracy have gone down.. 
B) life expectancy has risen but leisure time has gone down, while infant mortality and illiteracy have remained the same. 
C) various quality of life variables have been unaffected. 
D) most quality of life variables such as life expectancy and expenditures on leisure time activities have fallen.

Question 14

What does gross private domestic investment include?

Accepted Answer

A) Business purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B) Business purchases of capital goods, all new construction, and inventory investment. 
C) Business purchases of capital goods, all new commercial construction, and inventory investment. 
D) Business purchases of capital goods, all new residential construction, and inventory investment. 
E) Business purchases of all types of durable goods, all new construction, and inventory investment. 
A) Business purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B) Business purchases of capital goods, all new construction, and inventory investment. 
C) Business purchases of capital goods, all new commercial construction, and inventory investment. 
D) Business purchases of capital goods, all new residential construction, and inventory investment. 
E) Business purchases of all types of durable goods, all new construction, and inventory investment.

Question 15

Your father tells you he earned $3.00 per hour when he was 16 in 1977; you remember making $6.00 per hour when you were 16 in 1999. Given that the CPI was 36.7 in 1977 and 166.1 in 1999, which of the following is the 1999 real equivalent of your father's hourly earnings when he was 16?

Accepted Answer

A) $4.48 
B) $6.78 
C) $13.58 
D) $15.01 
A) $4.48 
B) $6.78 
C) $13.58 
D) $15.01

Question 16

U.S. imports are

Accepted Answer

A) not added to U.S.GDP because they are produced abroad 
B) added to U.S.GDP because they are consumed domestically 
C) added to U.S.GDP because they represent an increase in inventories 
D) added to U.S.GDP as government purchases because the government decides what goods may be imported 
E) not added to U.S.GDP because they are intermediate goods 
A) not added to U.S.GDP because they are produced abroad 
B) added to U.S.GDP because they are consumed domestically 
C) added to U.S.GDP because they represent an increase in inventories 
D) added to U.S.GDP as government purchases because the government decides what goods may be imported 
E) not added to U.S.GDP because they are intermediate goods

Question 17

Suppose the CPI was 104 in 1967, and suppose currently the CPI is 390. According to the CPI, $10 in 1967 purchased the same number of goods and services as

Accepted Answer

A) $28.88 purchases today. 
B) $37.50 purchases today. 
C) $42.64 purchases today. 
D) $104.00 purchases today. 
A) $28.88 purchases today. 
B) $37.50 purchases today. 
C) $42.64 purchases today. 
D) $104.00 purchases today.

Question 18

The annual rate of inflation is

Accepted Answer

A) a change in real income of workers from one year to the next. 
B) the percentage change in the general level of prices from one year to the next. 
C) the increase in the purchasing power of the dollar from one year to the next. 
D) the percentage increase in the total value of the goods and services produced from one year to the next. 
A) a change in real income of workers from one year to the next. 
B) the percentage change in the general level of prices from one year to the next. 
C) the increase in the purchasing power of the dollar from one year to the next. 
D) the percentage increase in the total value of the goods and services produced from one year to the next.

Question 19

The Consumer Price Index compares the

Accepted Answer

A) prices of all goods and services in the economy compared to the prices of those goods and services in a base year. 
B) prices of consumer goods and services that a household purchases to the prices of those goods and services purchased in a base year. 
C) prices of producer goods and services that are made for consumers to the prices of those goods and services in a base year. 
D) prices of goods and services that are purchased by producers to the prices of those goods and services in a base year. 
E) prices of goods and services that are purchased by consumer manufacturers to the prices of those goods and services in a base year. 
A) prices of all goods and services in the economy compared to the prices of those goods and services in a base year. 
B) prices of consumer goods and services that a household purchases to the prices of those goods and services purchased in a base year. 
C) prices of producer goods and services that are made for consumers to the prices of those goods and services in a base year. 
D) prices of goods and services that are purchased by producers to the prices of those goods and services in a base year. 
E) prices of goods and services that are purchased by consumer manufacturers to the prices of those goods and services in a base year.

Question 20

Which of the following correctly states the relationship between GDP and GNP for the U.S.?

Accepted Answer

A) GDP equals GNP minus the net income of foreigners. 
B) GDP equals GNP plus the net income of foreigners. 
C) GDP equals GNP minus indirect business taxes. 
D) GDP equals GNP. 
A) GDP equals GNP minus the net income of foreigners. 
B) GDP equals GNP plus the net income of foreigners. 
C) GDP equals GNP minus indirect business taxes. 
D) GDP equals GNP.

Which of the following transactions would increase GDP?

Suppose a country had net exports of $7.5 billion and sold $44.6 billion of goods and services abroad. This country had

The chained consumer price index

Which of the following would be most appropriate for the measurement of differences in the average standard of living of people at different points in time?

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

Given the following figures, by approximately what percentage did Aiden's real income increase between 2004 and 2005? Aiden's 2004 money income = $50,000 Aiden's 2005 money income = $55,000 2004 CPI = 120.0 2005 CPI = 128.0

Which of the following events will increase GDP?

Explain the two approaches to calculating GDP.

Economists generally use gross domestic product to measure a nation's total output because it

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Gross domestic product is a measure of both

Double counting in the resource cost-income approach to GDP refers to

As per capita GDP has risen in the United States and other countries,

What does gross private domestic investment include?

Your father tells you he earned $3.00 per hour when he was 16 in 1977; you remember making $6.00 per hour when you were 16 in 1999. Given that the CPI was 36.7 in 1977 and 166.1 in 1999, which of the following is the 1999 real equivalent of your father's hourly earnings when he was 16?

U.S. imports are

Suppose the CPI was 104 in 1967, and suppose currently the CPI is 390. According to the CPI, $10 in 1967 purchased the same number of goods and services as

The annual rate of inflation is

The Consumer Price Index compares the

Which of the following correctly states the relationship between GDP and GNP for the U.S.?

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

Which of the following transactions would increase GDP?

Suppose a country had net exports of $7.5 billion and sold $44.6 billion of goods and services abroad. This country had

The chained consumer price index

Which of the following would be most appropriate for the measurement of differences in the average standard of living of people at different points in time?

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

Given the following figures, by approximately what percentage did Aiden's real income increase between 2004 and 2005? Aiden's 2004 money income = $50,000 Aiden's 2005 money income = $55,000 2004 CPI = 120.0 2005 CPI = 128.0

Which of the following events will increase GDP?

Explain the two approaches to calculating GDP.

Economists generally use gross domestic product to measure a nation's total output because it

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Gross domestic product is a measure of both

Double counting in the resource cost-income approach to GDP refers to

As per capita GDP has risen in the United States and other countries,

What does gross private domestic investment include?

Your father tells you he earned $3.00 per hour when he was 16 in 1977; you remember making $6.00 per hour when you were 16 in 1999. Given that the CPI was 36.7 in 1977 and 166.1 in 1999, which of the following is the 1999 real equivalent of your father's hourly earnings when he was 16?

U.S. imports are

Suppose the CPI was 104 in 1967, and suppose currently the CPI is 390. According to the CPI, $10 in 1967 purchased the same number of goods and services as

The annual rate of inflation is

The Consumer Price Index compares the

Which of the following correctly states the relationship between GDP and GNP for the U.S.?

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