Question 1

Because of transactions which take place in the underground economy, the

Accepted Answer

A) GDP calculation tends to overstate the actual value of goods sold in the economy. 
B) GDP calculation tends to accurately portray the value of goods sold in the economy. 
C) GDP calculation tends to understate the actual value of goods sold in the economy. 
D) value of the GDP calculation will be equal to the value of the national income calculation. 
E) value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach. 
A) GDP calculation tends to overstate the actual value of goods sold in the economy. 
B) GDP calculation tends to accurately portray the value of goods sold in the economy. 
C) GDP calculation tends to understate the actual value of goods sold in the economy. 
D) value of the GDP calculation will be equal to the value of the national income calculation. 
E) value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.

Question 2

Which of the following events will reduce GDP?

Accepted Answer

A) A hurricane destroys your house. 
B) You lose $500 playing poker. 
C) You pay $500 to repair the damage done to your house by a hurricane. 
D) You work 15 hours less this month so that you can repair the damage done to your home by a hurricane. 
A) A hurricane destroys your house. 
B) You lose $500 playing poker. 
C) You pay $500 to repair the damage done to your house by a hurricane. 
D) You work 15 hours less this month so that you can repair the damage done to your home by a hurricane.

Question 3

Which one of the following would count as investment in the national income accounts?

Accepted Answer

A) purchase of a new airplane by an airline 
B) purchase of a U.S.government bond 
C) purchase of 100 shares of Wal-Mart stock 
D) purchase of an existing house 
A) purchase of a new airplane by an airline 
B) purchase of a U.S.government bond 
C) purchase of 100 shares of Wal-Mart stock 
D) purchase of an existing house

Question 4

Use the table below to choose the correct answer.   Gross domestic product equals

Accepted Answer

A) $550. 
B) $510. 
C) $595. 
D) $610. 
A) $550. 
B) $510. 
C) $595. 
D) $610.

Question 5

Which one of the following events will leave GDP unchanged?

Accepted Answer

A) You pay $500 to repair your car damaged in an accident. 
B) You buy a new domestic car to replace one that was stolen. 
C) You lose $500 playing blackjack with friends. 
D) You work extra hours this month to help make up for the money you lost playing blackjack. 
A) You pay $500 to repair your car damaged in an accident. 
B) You buy a new domestic car to replace one that was stolen. 
C) You lose $500 playing blackjack with friends. 
D) You work extra hours this month to help make up for the money you lost playing blackjack.

Question 6

Per capita GDP is

Accepted Answer

A) real GDP divided by the GDP deflator 
B) a measure of income per person 
C) a measure of resources available to each person 
D) an indicator of the overall production of a government 
A) real GDP divided by the GDP deflator 
B) a measure of income per person 
C) a measure of resources available to each person 
D) an indicator of the overall production of a government

Question 7

If nominal GDP increases by 4 percent, then

Accepted Answer

A) real output has increased by 4 percent 
B) the price level has increased by 4 percent 
C) consumer spending must have increased by 4 percent 
D) it is possible that all of the increase was caused by an increase in the price level 
E) net exports increased by 4 percent 
A) real output has increased by 4 percent 
B) the price level has increased by 4 percent 
C) consumer spending must have increased by 4 percent 
D) it is possible that all of the increase was caused by an increase in the price level 
E) net exports increased by 4 percent

Question 8

Table 7-1
  
-Given the information in Table 7-1, the GDP equals

Accepted Answer

A) $1,140. 
B) $1,330. 
C) $1,650. 
D) $2,670. 
A) $1,140. 
B) $1,330. 
C) $1,650. 
D) $2,670.

Question 9

A real estate salesperson sells a house in 2011 that was built in 1994. How does this transaction get counted in the GDP statistics?

Accepted Answer

A) The price of the house and the real estate salesperson's commission are both included in 2011's GDP. 
B) Neither the price of the house or the commission is included in 2011's GDP. 
C) The real estate salesperson's commission but not the price of the house is included in 2011's GDP. 
D) The price of the house would be included in both 1994's GDP and the GDP for 2011. 
A) The price of the house and the real estate salesperson's commission are both included in 2011's GDP. 
B) Neither the price of the house or the commission is included in 2011's GDP. 
C) The real estate salesperson's commission but not the price of the house is included in 2011's GDP. 
D) The price of the house would be included in both 1994's GDP and the GDP for 2011.

Question 10

When economists speak of changes in GDP measured in constant dollars, they mean that

Accepted Answer

A) money GDP is constant. 
B) the price level is constant. 
C) a price index has been used to adjust money GDP for the effects of inflation. 
D) the growth rate of money GDP has been adjusted for changes in population. 
A) money GDP is constant. 
B) the price level is constant. 
C) a price index has been used to adjust money GDP for the effects of inflation. 
D) the growth rate of money GDP has been adjusted for changes in population.

Question 11

Your brother graduated from college 10 years ago and started to work at a salary of $20,000. You expect to graduate this year and start to work for $35,000. If the consumer price index was 80 ten years ago and is 120 this year, who will have received the higher real starting salary?

Accepted Answer

A) You will have. 
B) Your brother did. 
C) You and your brother both will have started at the same real salary level. 
D) Not enough information is supplied to answer the question. 
A) You will have. 
B) Your brother did. 
C) You and your brother both will have started at the same real salary level. 
D) Not enough information is supplied to answer the question.

Question 12

GDP is not a perfect measure of welfare because it

Accepted Answer

A) treats a dollar spent on candy bars the same as a dollar spent on education 
B) treats a dollar spent on exports the same as a dollar spent on imports 
C) double counts the value of leisure time 
D) double counts depreciation 
E) counts illegal activities in the underground economy 
A) treats a dollar spent on candy bars the same as a dollar spent on education 
B) treats a dollar spent on exports the same as a dollar spent on imports 
C) double counts the value of leisure time 
D) double counts depreciation 
E) counts illegal activities in the underground economy

Question 13

The typical bundle of goods and services on which the GDP deflator is based

Accepted Answer

A) is narrower than the one used to calculate the CPI. 
B) is updated once every decade. 
C) is the same as the one used to calculate the CPI. 
D) is updated every year. 
A) is narrower than the one used to calculate the CPI. 
B) is updated once every decade. 
C) is the same as the one used to calculate the CPI. 
D) is updated every year.

Question 14

Gross domestic product during a period is measured by adding

Accepted Answer

A) incomes received by households minus the sale of factor services supplied domestically. 
B) factor payments made by domestic firms minus retained earnings and indirect business taxes. 
C) expenditures on new final goods and services produced domestically. 
D) the market value of all goods and services produced domestically and then subtracting net exports from that figure. 
A) incomes received by households minus the sale of factor services supplied domestically. 
B) factor payments made by domestic firms minus retained earnings and indirect business taxes. 
C) expenditures on new final goods and services produced domestically. 
D) the market value of all goods and services produced domestically and then subtracting net exports from that figure.

Question 15

Crime currently affects the measurement of GDP such that

Accepted Answer

A) expenditures on police protection and detention centers contribute to GDP. 
B) the loss to victims due to crime is subtracted from GDP. 
C) crime is completely ignored because it does not express the economic well-being indicated by GDP. 
D) expenditures on police protection and detention centers are subtracted from GDP. 
A) expenditures on police protection and detention centers contribute to GDP. 
B) the loss to victims due to crime is subtracted from GDP. 
C) crime is completely ignored because it does not express the economic well-being indicated by GDP. 
D) expenditures on police protection and detention centers are subtracted from GDP.

Question 16

If the GDP deflator in 2009 was 120 compared to a value of 100 during the 2004 base year, this would indicate that

Accepted Answer

A) the inflation rate during 2009 was 20 percent. 
B) the general level of prices during 2009 was 20 percent higher than during 2004. 
C) the inflation rate during 2009 was 120 percent. 
D) real GDP was 20 percent higher in 2009 than 2004. 
A) the inflation rate during 2009 was 20 percent. 
B) the general level of prices during 2009 was 20 percent higher than during 2004. 
C) the inflation rate during 2009 was 120 percent. 
D) real GDP was 20 percent higher in 2009 than 2004.

Question 17

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Accepted Answer

A) Your real wage fell. 
B) Your nominal wage fell. 
C) Both your nominal and real wages decreased. 
D) Although your nominal wage fell, your real wage increased. 
E) Both your nominal and real wages increased. 
A) Your real wage fell. 
B) Your nominal wage fell. 
C) Both your nominal and real wages decreased. 
D) Although your nominal wage fell, your real wage increased. 
E) Both your nominal and real wages increased.

Question 18

Which of the following transactions would be included in this year's GDP for the United States?

Accepted Answer

A) You buy a rug imported from Mexico. 
B) You buy stock in an American textile company. 
C) You purchase a table over the Internet from a North Carolina furniture manufacturer. 
D) You purchase a table over the Internet from a Mexican manufacturer. 
A) You buy a rug imported from Mexico. 
B) You buy stock in an American textile company. 
C) You purchase a table over the Internet from a North Carolina furniture manufacturer. 
D) You purchase a table over the Internet from a Mexican manufacturer.

Question 19

A firm purchases $600,000 worth of raw materials and pays wages and salaries of $100,000 and dividends of $200,000. If the firm sells its output for $1 million, the firm's value added to GDP is

Accepted Answer

A) $300,000. 
B) $400,000. 
C) $900,000. 
D) $1,000,000. 
A) $300,000. 
B) $400,000. 
C) $900,000. 
D) $1,000,000.

Question 20

Use of real GDP to measure changes in national output from one period to another can be misleading if

Accepted Answer

A) the price level is different for the two periods. 
B) the share of production carried out in the nonmarket sector is different for the two periods. 
C) the bundle of goods produced during the periods is quite similar. 
D) the size of the export-import sector differs for the two periods. 
A) the price level is different for the two periods. 
B) the share of production carried out in the nonmarket sector is different for the two periods. 
C) the bundle of goods produced during the periods is quite similar. 
D) the size of the export-import sector differs for the two periods.

Because of transactions which take place in the underground economy, the

Which of the following events will reduce GDP?

Which one of the following would count as investment in the national income accounts?

Use the table below to choose the correct answer. Gross domestic product equals

Which one of the following events will leave GDP unchanged?

Per capita GDP is

If nominal GDP increases by 4 percent, then

Table 7-1 -Given the information in Table 7-1, the GDP equals

A real estate salesperson sells a house in 2011 that was built in 1994. How does this transaction get counted in the GDP statistics?

When economists speak of changes in GDP measured in constant dollars, they mean that

Your brother graduated from college 10 years ago and started to work at a salary of $20,000. You expect to graduate this year and start to work for $35,000. If the consumer price index was 80 ten years ago and is 120 this year, who will have received the higher real starting salary?

GDP is not a perfect measure of welfare because it

The typical bundle of goods and services on which the GDP deflator is based

Gross domestic product during a period is measured by adding

Crime currently affects the measurement of GDP such that

If the GDP deflator in 2009 was 120 compared to a value of 100 during the 2004 base year, this would indicate that

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Which of the following transactions would be included in this year's GDP for the United States?

A firm purchases $600,000 worth of raw materials and pays wages and salaries of $100,000 and dividends of $200,000. If the firm sells its output for $1 million, the firm's value added to GDP is

Use of real GDP to measure changes in national output from one period to another can be misleading if

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

Because of transactions which take place in the underground economy, the

Which of the following events will reduce GDP?

Which one of the following would count as investment in the national income accounts?

Use the table below to choose the correct answer. Gross domestic product equals

Which one of the following events will leave GDP unchanged?

Per capita GDP is

If nominal GDP increases by 4 percent, then

Table 7-1 -Given the information in Table 7-1, the GDP equals

A real estate salesperson sells a house in 2011 that was built in 1994. How does this transaction get counted in the GDP statistics?

When economists speak of changes in GDP measured in constant dollars, they mean that

Your brother graduated from college 10 years ago and started to work at a salary of $20,000. You expect to graduate this year and start to work for $35,000. If the consumer price index was 80 ten years ago and is 120 this year, who will have received the higher real starting salary?

GDP is not a perfect measure of welfare because it

The typical bundle of goods and services on which the GDP deflator is based

Gross domestic product during a period is measured by adding

Crime currently affects the measurement of GDP such that

If the GDP deflator in 2009 was 120 compared to a value of 100 during the 2004 base year, this would indicate that

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Which of the following transactions would be included in this year's GDP for the United States?

A firm purchases $600,000 worth of raw materials and pays wages and salaries of $100,000 and dividends of $200,000. If the firm sells its output for $1 million, the firm's value added to GDP is

Use of real GDP to measure changes in national output from one period to another can be misleading if

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