Question 1

Which of the following about inventory changes and GDP is true?

Accepted Answer

A)  Inventory investment adds to GDP because it represents goods produced during the current period. 
B)  Inventory investment is subtracted from GDP because the goods were not sold during the period. 
C)  Inventory investment does not affect GDP because the goods were not sold during the period. 
D)  Inventory investment does not affect GDP because it does not represent goods produced during the period. 
A)  Inventory investment adds to GDP because it represents goods produced during the current period. 
B)  Inventory investment is subtracted from GDP because the goods were not sold during the period. 
C)  Inventory investment does not affect GDP because the goods were not sold during the period. 
D)  Inventory investment does not affect GDP because it does not represent goods produced during the period.

Question 2

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 3

In contrast with nominal GDP, real GDP refers to nominal GDP

Accepted Answer

A)  minus exports. 
B)  minus personal income taxes. 
C)  corrected for price changes. 
D)  corrected for depreciation. 
A)  minus exports. 
B)  minus personal income taxes. 
C)  corrected for price changes. 
D)  corrected for depreciation.

Question 4

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 5

Your grandfather tells you that he earned $.50 per hour at his job when he was a boy in 1929.
a.Given that the CPI was 17.1 in 1929 and 184.0 in 2003, how much would you have to make in 2003 to have the same real hourly wage?
b.You made $5.50 an hour working during 2003. Were you better off than your grandfather in terms of purchasing power? Explain.
c.Your grandfather also tells you that a soda cost $.05 in 1929, and you know a soda cost $.55 in 2003. You decide to use the price of a soda as the price index. How much would the 2003 "soda equivalent" of $.50 per hour in 1929 be?

Accepted Answer

a.$5.38
b.Yes, $5.50 had more

Question 6

Real GDP per person

Accepted Answer

A)  minus real GDP per person from the previous period equals the growth rate of real GDP per person. 
B)  provides more meaningful comparisons across time and countries than real GDP. 
C)  provides a less useful measure of the standard of living than nominal GDP per person. 
D)  All of the above are correct. 
A)  minus real GDP per person from the previous period equals the growth rate of real GDP per person. 
B)  provides more meaningful comparisons across time and countries than real GDP. 
C)  provides a less useful measure of the standard of living than nominal GDP per person. 
D)  All of the above are correct.

Question 7

National income is

Accepted Answer

A)  personal income of individuals minus the taxes they pay. 
B)  gross national product minus depreciation. 
C)  employee compensation, self-employment income, interest, rents, plus corporate profits. 
D)  consumption, investment, government expenditures, and net exports. 
A)  personal income of individuals minus the taxes they pay. 
B)  gross national product minus depreciation. 
C)  employee compensation, self-employment income, interest, rents, plus corporate profits. 
D)  consumption, investment, government expenditures, and net exports.

Question 8

If the GDP deflator in 2011 was 130 compared to a value of 100 during the 2005 base year, this would indicate that

Accepted Answer

A)  the inflation rate during 2011 was 30 percent. 
B)  the general level of prices during 2011 was 30 percent higher than during 2005. 
C)  the inflation rate during 2011 was 130 percent. 
D)  nominal GDP grew by 30 percent during 2011. 
E)  real GDP was 30 percent higher in 2011 than 2005. 
A)  the inflation rate during 2011 was 30 percent. 
B)  the general level of prices during 2011 was 30 percent higher than during 2005. 
C)  the inflation rate during 2011 was 130 percent. 
D)  nominal GDP grew by 30 percent during 2011. 
E)  real GDP was 30 percent higher in 2011 than 2005.

Question 9

Automobiles are now safer and get better gasoline mileage.  If there is an increase in the price of automobiles, which of the following is true?

Accepted Answer

A)  All of the price increase reflects the improvement in the quality of the product rather than inflation. 
B)  A portion of the price increase reflects the improvement in the quality of the product rather than inflation. 
C)  All of the price increase reflects inflation rather than the improvement in the quality of the product. 
D)  There will be no effect on inflation. 
A)  All of the price increase reflects the improvement in the quality of the product rather than inflation. 
B)  A portion of the price increase reflects the improvement in the quality of the product rather than inflation. 
C)  All of the price increase reflects inflation rather than the improvement in the quality of the product. 
D)  There will be no effect on inflation.

Question 10

In an economy with persistent inflation,

Accepted Answer

A)  real GDP will grow faster than nominal GDP. 
B)  nominal GDP will grow faster than real GDP. 
C)  nominal and real GDP will grow at the same rate. 
D)  nominal and real GDP will both fall. 
A)  real GDP will grow faster than nominal GDP. 
B)  nominal GDP will grow faster than real GDP. 
C)  nominal and real GDP will grow at the same rate. 
D)  nominal and real GDP will both fall.

Question 11

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 12

If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of aerobics class has risen from $20 to $30, then

Accepted Answer

A)  pizzas have become relatively more expensive. 
B)  aerobics classes have become relatively more expensive. 
C)  the relative prices of pizzas and aerobics classes have remained constant. 
D)  workers' real income must have decreased. 
A)  pizzas have become relatively more expensive. 
B)  aerobics classes have become relatively more expensive. 
C)  the relative prices of pizzas and aerobics classes have remained constant. 
D)  workers' real income must have decreased.

Question 13

If you wanted to measure whether the output of an economy was increasing or decreasing across time periods, you would use the real GDP data rather than the nominal GDP data because

Accepted Answer

A)  exports are excluded from real GDP but not nominal. 
B)  real GDP incorporates the impact of federal budget deficits and surpluses; nominal GDP does not. 
C)  real GDP reflects the impact of transfer payments on the economy, but nominal GDP does not. 
D)  real GDP adjusts for changes in the general level of prices, but nominal GDP does not. 
A)  exports are excluded from real GDP but not nominal. 
B)  real GDP incorporates the impact of federal budget deficits and surpluses; nominal GDP does not. 
C)  real GDP reflects the impact of transfer payments on the economy, but nominal GDP does not. 
D)  real GDP adjusts for changes in the general level of prices, but nominal GDP does not.

Question 14

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 15

The reporter on one broadcast network says 2011 GDP increased to an all-time high. Commenting on the same figure, a second reporter says GDP in 2011 was less than in 2010. Which of the following explanations is consistent with the statements of both reporters?

Accepted Answer

A)  The first reporter was referring to real GDP, and the second was referring to nominal GDP. 
B)  The first reporter was referring to nominal GDP, and the second was referring to real GDP. 
C)  The first reporter was referring to GDP as measured by the expenditure approach, and the second was referring to GDP as measured by the income cost approach. 
D)  The first reporter was referring to GDP as measured by the income cost approach, and the second was referring to GDP as measured by the expenditure approach. 
A)  The first reporter was referring to real GDP, and the second was referring to nominal GDP. 
B)  The first reporter was referring to nominal GDP, and the second was referring to real GDP. 
C)  The first reporter was referring to GDP as measured by the expenditure approach, and the second was referring to GDP as measured by the income cost approach. 
D)  The first reporter was referring to GDP as measured by the income cost approach, and the second was referring to GDP as measured by the expenditure approach.

Question 16

When the consumer price index rises, the typical family

Accepted Answer

A)  has to spend more dollars to maintain the same standard of living. 
B)  can spend fewer dollars to maintain the same standard of living. 
C)  finds that its standard of living is not affected. 
D)  can offset the effects of rising prices by saving more. 
A)  has to spend more dollars to maintain the same standard of living. 
B)  can spend fewer dollars to maintain the same standard of living. 
C)  finds that its standard of living is not affected. 
D)  can offset the effects of rising prices by saving more.

Question 17

The price of dishwashers increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

Accepted Answer

A)  more than 1 percent. 
B)  less than 1 percent. 
C)  1 percent. 
D)  None of the above is correct; this particular price increase will not affect the GDP deflator. 
A)  more than 1 percent. 
B)  less than 1 percent. 
C)  1 percent. 
D)  None of the above is correct; this particular price increase will not affect the GDP deflator.

Question 18

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 19

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 20

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

Accepted Answer

A)  GNP = GDP − Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad. 
B)  GNP = GDP + Income earned by foreigners in the U.S. − Income earned by U.S. citizens abroad. 
C)  GNP = GDP + Value of exported goods − Value of imported goods. 
D)  GNP = GDP − Value of exported goods + Value of imported goods. 
A)  GNP = GDP − Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad. 
B)  GNP = GDP + Income earned by foreigners in the U.S. − Income earned by U.S. citizens abroad. 
C)  GNP = GDP + Value of exported goods − Value of imported goods. 
D)  GNP = GDP − Value of exported goods + Value of imported goods.

Which of the following about inventory changes and GDP is true?

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

In contrast with nominal GDP, real GDP refers to nominal GDP

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

Real GDP per person

National income is

If the GDP deflator in 2011 was 130 compared to a value of 100 during the 2005 base year, this would indicate that

Automobiles are now safer and get better gasoline mileage. If there is an increase in the price of automobiles, which of the following is true?

In an economy with persistent inflation,

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

If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of aerobics class has risen from $20 to $30, then

If you wanted to measure whether the output of an economy was increasing or decreasing across time periods, you would use the real GDP data rather than the nominal GDP data because

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

The reporter on one broadcast network says 2011 GDP increased to an all-time high. Commenting on the same figure, a second reporter says GDP in 2011 was less than in 2010. Which of the following explanations is consistent with the statements of both reporters?

When the consumer price index rises, the typical family

The price of dishwashers increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

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.

Crime currently affects the measurement of GDP such that

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

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

Special Topics

Filters

Exam 7: Taking the Nations Economic Pulse

Which of the following about inventory changes and GDP is true?

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

In contrast with nominal GDP, real GDP refers to nominal GDP

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

Real GDP per person

National income is

If the GDP deflator in 2011 was 130 compared to a value of 100 during the 2005 base year, this would indicate that

Automobiles are now safer and get better gasoline mileage. If there is an increase in the price of automobiles, which of the following is true?

In an economy with persistent inflation,

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

If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of aerobics class has risen from $20 to $30, then

If you wanted to measure whether the output of an economy was increasing or decreasing across time periods, you would use the real GDP data rather than the nominal GDP data because

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

The reporter on one broadcast network says 2011 GDP increased to an all-time high. Commenting on the same figure, a second reporter says GDP in 2011 was less than in 2010. Which of the following explanations is consistent with the statements of both reporters?

When the consumer price index rises, the typical family

The price of dishwashers increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

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.

Crime currently affects the measurement of GDP such that

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

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

Special Topics

Filters