Exam 7: Taking the Nations Economic Pulse

Determine whether each of the following transactions will be counted in the 2005 GDP of the United States. If the transaction is counted, identify which expenditure component (personal consumption, gross investment, government consumption and gross investment, or net exports) will be affected. a.Norm, a frequent visitor to a local bar, purchases a Budweiser beer.(Budweiser beer is domestically produced.) b.The owner of the local bar purchases a new domestically made cooler unit in which to store his beer. c.Carla, a U.S.foreign exchange student, works her way through college in Germany as a waitress in a bar. d.On her night off, Carla purchases a Budweiser beer for her friend in the German bar.

U.S. GDP and U.S. GNP are related as follows:

Table 7-3 -Refer to Table 7-3. Gross domestic product equals

Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

Which statement represents most correctly the relationship between nominal GDP and real GDP?

Which of the following best explains why the chained consumer price index generally results in a lower rate of inflation than the regular consumer price index?

Which of the following is true about inflation?

Gross domestic product (measured in real dollars) is an important social tool because it provides

If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is 115, this indicates that the general level of prices

Assume that between 1998 and 2008, nominal GDP increased from $7 trillion to $12 trillion and that the price index rose from 100 to 133.3. Which of the following expresses GDP for 2008 in terms of 1998 prices?

Your father tells you he earned $1.50 per hour when he was 16 in 1969. Given that the CPI was 36.0 in 1969 and 215 in 2008, how much would you have to earn in 2008 in order to have the same real wage as your father in 1969?

Which of the following is the most likely side effect of an increase in the relative size of the underground economy with the passage of time?

One difficulty of computing the value of GDP is that there are no market prices for

If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, the

Table 7-9 -Refer to Table 7-9. The salary of the president of the United States in 2000 was $400,000. In 1940, the president's salary was $75,000. If the Consumer Price Index was 8.1 in 1940 and 100 in 2000, the 1940 presidential salary measured in terms of the purchasing power of the dollar in 2000 would be

Table 7-2 -Refer to Table 7-2. Gross domestic product is equal to

If ten years ago the price of a movie ticket was $5 and the average hourly wage was $10, and today the price of a movie ticket is $8 and the average hourly wage is $20, then

The consumer price index (CPI) is calculated

Indicate whether the following transactions would be included in GDP. If they are included, indicate which component (consumption, investment, government consumption and gross investment, or net exports) of GDP would be affected. a.A Czech student attending school in Florida takes a summer job as a lifeguard. b.A New York company buys welding equipment from a St.Louis firm to help it build jet fighters. c.The IRS purchases a new computer from the GATS computer company (an American-owned business producing and operating in Germany) that will allow it to better detect income tax evasion.

If national income accountants fail to make an adequate adjustment for increases in the quality of goods and services over time,