Question 1

New residential housing is counted in GDP as

Accepted Answer

A) a durable consumption good. 
B) a household durable good. 
C) an investment good. 
D) an inventory expansion. 
E) a long-term durable good. 
A) a durable consumption good. 
B) a household durable good. 
C) an investment good. 
D) an inventory expansion. 
E) a long-term durable good.

Question 2

The change in nominal GDP will always exceed the change in real GDP when nominal GDP is

Accepted Answer

A) increasing and prices are unchanged. 
B) increasing and prices are decreasing. 
C) decreasing and prices are decreasing. 
D) increasing and prices are increasing. 
A) increasing and prices are unchanged. 
B) increasing and prices are decreasing. 
C) decreasing and prices are decreasing. 
D) increasing and prices are increasing.

Question 3

Double counting in the resource cost-income approach to GDP statistics is avoided by

Accepted Answer

A) correct accounting of the values of exports and imports 
B) choosing only one method to calculate GDP--either the income or the expenditures method 
C) counting only the value added at each stage of a good's production process 
D) counting the value of final and intermediate goods and services 
E) subtracting the total value of intermediate goods and services from the total value of final goods and services 
A) correct accounting of the values of exports and imports 
B) choosing only one method to calculate GDP--either the income or the expenditures method 
C) counting only the value added at each stage of a good's production process 
D) counting the value of final and intermediate goods and services 
E) subtracting the total value of intermediate goods and services from the total value of final goods and services

Question 4

If a country has attracted a relatively large number of foreign workers and a large amount of foreign investment,

Accepted Answer

A) national income will generally exceed gross national product. 
B) gross national product will generally exceed gross domestic product. 
C) net domestic product will generally exceed gross domestic product. 
D) gross domestic product will generally exceed gross national product. 
A) national income will generally exceed gross national product. 
B) gross national product will generally exceed gross domestic product. 
C) net domestic product will generally exceed gross domestic product. 
D) gross domestic product will generally exceed gross national product.

Question 5

Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is

Accepted Answer

A) currently $130. 
B) 130 percent more in Year X than in the base year. 
C) 130 percent more in the base year than in Year X. 
D) priced at 30 percent more in Year X than in the base year. 
A) currently $130. 
B) 130 percent more in Year X than in the base year. 
C) 130 percent more in the base year than in Year X. 
D) priced at 30 percent more in Year X than in the base year.

Question 6

Over time, GDP may increase as the result of either (i) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

Accepted Answer

A) (i) will generally increase living standards, but (ii) will not. 
B) (ii) will generally increase living standards, but (i) will not. 
C) Both (i) and (ii) will generally increase living standards. 
D) Neither (i) nor (ii) will generally increase living standards. 
A) (i) will generally increase living standards, but (ii) will not. 
B) (ii) will generally increase living standards, but (i) will not. 
C) Both (i) and (ii) will generally increase living standards. 
D) Neither (i) nor (ii) will generally increase living standards.

Question 7

Discuss the problems with GDP as a measure of a country's current production and income.

Accepted Answer

First, GDP does not count nonmarket prod

Question 8

Because GDP does not fully account for improvements in the quality of goods, the GDP calculation

Accepted Answer

A) tends to overstate the true value of output in the United States. 
B) tends to understate the true value of output in the United States. 
C) provides an accurate value of output in the United States. 
D) measures the value correctly because price changes always capture the value of quality changes. 
A) tends to overstate the true value of output in the United States. 
B) tends to understate the true value of output in the United States. 
C) provides an accurate value of output in the United States. 
D) measures the value correctly because price changes always capture the value of quality changes.

Question 9

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

Accepted Answer

A) necessarily raises GDP. 
B) necessarily decreases GDP. 
C) doesn't change GDP because gambling is never included in GDP. 
D) doesn't change GDP because in either case his income is included. 
A) necessarily raises GDP. 
B) necessarily decreases GDP. 
C) doesn't change GDP because gambling is never included in GDP. 
D) doesn't change GDP because in either case his income is included.

Question 10

Assume that between 1999 and 2009 nominal GDP increased from $7 trillion to $12 trillion and that the GDP deflator rose from 100 to 150. Which of the following expresses GDP for 2009 in terms of 1999 prices?

Accepted Answer

A) $7.5 trillion 
B) $8.0 trillion 
C) $9.0 trillion 
D) $18.0 trillion 
A) $7.5 trillion 
B) $8.0 trillion 
C) $9.0 trillion 
D) $18.0 trillion

Question 11

Answer the following questions:
a.What does GDP measure, and why is it a useful tool for economists, business decision makers, and government policy makers?
b.Explain at least two important things GDP does not measure.

Accepted Answer

a.
GDP measures the productive output of

Question 12

Answer the following questions:
a.In 2004, four major hurricanes hit Florida.Explain how this destruction of property, and the rebuilding that went on afterward, affected GDP.
b.Explain how GDP has trouble accounting for other parts of the economy as well.

Accepted Answer

a.
The goods that are destroyed are not

Question 13

A business produced $10 million of goods in 2010 but sold only $9 million. Is the $1 million increase in inventory counted as part of the 2010 gross domestic product?

Accepted Answer

A) No, because inventories are intermediate goods. 
B) No, because if these inventories were sold in 2011, they would be counted twice. 
C) Yes, because these inventories are part of the output of the economy in 2010. 
D) Yes, but they will be added to the 2010 GDP only if they are sold in 2011. 
A) No, because inventories are intermediate goods. 
B) No, because if these inventories were sold in 2011, they would be counted twice. 
C) Yes, because these inventories are part of the output of the economy in 2010. 
D) Yes, but they will be added to the 2010 GDP only if they are sold in 2011.

Question 14

In computing GDP, market prices are used to value final goods and services because

Accepted Answer

A) market prices reflect the values of goods and services to the buyer. 
B) market prices do not change much over time, so it is easy to make comparisons between years. 
C) if market prices are out of line with how people value goods, the government sets price ceilings and price floors. 
D) None of the above is correct; market prices are not used in computing GDP. 
A) market prices reflect the values of goods and services to the buyer. 
B) market prices do not change much over time, so it is easy to make comparisons between years. 
C) if market prices are out of line with how people value goods, the government sets price ceilings and price floors. 
D) None of the above is correct; market prices are not used in computing GDP.

Question 15

What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?

Accepted Answer

Real GDP is nominal GDP adjusted for the

Question 16

Government purchases include spending on goods and services by

Accepted Answer

A) the federal government only. 
B) state and federal governments only. 
C) local, state and federal governments. 
D) local, state and federal governments, as well household spending by employees of those governments. 
A) the federal government only. 
B) state and federal governments only. 
C) local, state and federal governments. 
D) local, state and federal governments, as well household spending by employees of those governments.

Question 17

An automobile manufacturing plant opens in Alabama, and its owner, all of the workers, and all raw materials are from Japan. How would the purchase of an automobile from this plant change U.S. GDP and GNP?

Accepted Answer

A) It would increase GNP and GDP. 
B) It would increase GNP and leave GDP unchanged. 
C) It would increase GDP and leave GNP unchanged. 
D) It would leave both GDP and GNP unchanged. 
A) It would increase GNP and GDP. 
B) It would increase GNP and leave GDP unchanged. 
C) It would increase GDP and leave GNP unchanged. 
D) It would leave both GDP and GNP unchanged.

Question 18

A business spends $10 million on new capital equipment, and during the same year, $7 million of its existing capital wears out. Which of the following is correct?

Accepted Answer

A) The firm's gross investment is $7 million, and its net investment is $10 million. 
B) The firm's gross investment is $3 million, and its net investment is $7 million. 
C) The firm's gross investment is $7 million, and its net investment is $3 million. 
D) The firm's gross investment is $10 million, and its net investment is $3 million. 
A) The firm's gross investment is $7 million, and its net investment is $10 million. 
B) The firm's gross investment is $3 million, and its net investment is $7 million. 
C) The firm's gross investment is $7 million, and its net investment is $3 million. 
D) The firm's gross investment is $10 million, and its net investment is $3 million.

Question 19

A professor of economics gets a $100 a month raise. She figures that even with her new monthly salary she will be unable to buy as many goods and services as she could 12 months ago.

Accepted Answer

A) Her real and nominal salary have risen. 
B) Her real and nominal salary have fallen. 
C) Her real salary has risen and her nominal salary has fallen. 
D) Her real salary has fallen and her nominal salary has risen. 
A) Her real and nominal salary have risen. 
B) Her real and nominal salary have fallen. 
C) Her real salary has risen and her nominal salary has fallen. 
D) Her real salary has fallen and her nominal salary has risen.

Question 20

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

Accepted Answer

A) The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B) The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C) The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D) The 2006 sale affected neither 2005 GDP nor 2006 GDP. 
A) The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B) The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C) The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D) The 2006 sale affected neither 2005 GDP nor 2006 GDP.

New residential housing is counted in GDP as

The change in nominal GDP will always exceed the change in real GDP when nominal GDP is

Double counting in the resource cost-income approach to GDP statistics is avoided by

If a country has attracted a relatively large number of foreign workers and a large amount of foreign investment,

Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is

Over time, GDP may increase as the result of either (i) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

Discuss the problems with GDP as a measure of a country's current production and income.

Because GDP does not fully account for improvements in the quality of goods, the GDP calculation

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

Assume that between 1999 and 2009 nominal GDP increased from $7 trillion to $12 trillion and that the GDP deflator rose from 100 to 150. Which of the following expresses GDP for 2009 in terms of 1999 prices?

Answer the following questions: a.What does GDP measure, and why is it a useful tool for economists, business decision makers, and government policy makers? b.Explain at least two important things GDP does not measure.

Answer the following questions: a.In 2004, four major hurricanes hit Florida.Explain how this destruction of property, and the rebuilding that went on afterward, affected GDP. b.Explain how GDP has trouble accounting for other parts of the economy as well.

A business produced $10 million of goods in 2010 but sold only $9 million. Is the $1 million increase in inventory counted as part of the 2010 gross domestic product?

In computing GDP, market prices are used to value final goods and services because

What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?

Government purchases include spending on goods and services by

An automobile manufacturing plant opens in Alabama, and its owner, all of the workers, and all raw materials are from Japan. How would the purchase of an automobile from this plant change U.S. GDP and GNP?

A business spends $10 million on new capital equipment, and during the same year, $7 million of its existing capital wears out. Which of the following is correct?

A professor of economics gets a $100 a month raise. She figures that even with her new monthly salary she will be unable to buy as many goods and services as she could 12 months ago.

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

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

New residential housing is counted in GDP as

The change in nominal GDP will always exceed the change in real GDP when nominal GDP is

Double counting in the resource cost-income approach to GDP statistics is avoided by

If a country has attracted a relatively large number of foreign workers and a large amount of foreign investment,

Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is

Over time, GDP may increase as the result of either (i) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

Discuss the problems with GDP as a measure of a country's current production and income.

Because GDP does not fully account for improvements in the quality of goods, the GDP calculation

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

Assume that between 1999 and 2009 nominal GDP increased from $7 trillion to $12 trillion and that the GDP deflator rose from 100 to 150. Which of the following expresses GDP for 2009 in terms of 1999 prices?

Answer the following questions: a.What does GDP measure, and why is it a useful tool for economists, business decision makers, and government policy makers? b.Explain at least two important things GDP does not measure.

Answer the following questions: a.In 2004, four major hurricanes hit Florida.Explain how this destruction of property, and the rebuilding that went on afterward, affected GDP. b.Explain how GDP has trouble accounting for other parts of the economy as well.

A business produced $10 million of goods in 2010 but sold only $9 million. Is the $1 million increase in inventory counted as part of the 2010 gross domestic product?

In computing GDP, market prices are used to value final goods and services because

What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?

Government purchases include spending on goods and services by

An automobile manufacturing plant opens in Alabama, and its owner, all of the workers, and all raw materials are from Japan. How would the purchase of an automobile from this plant change U.S. GDP and GNP?

A business spends $10 million on new capital equipment, and during the same year, $7 million of its existing capital wears out. Which of the following is correct?

A professor of economics gets a $100 a month raise. She figures that even with her new monthly salary she will be unable to buy as many goods and services as she could 12 months ago.

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

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