Question 1

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 2

Which of the following transactions would enter directly into the determination of GDP?

Accepted Answer

A)  a bicycle you purchased at a garage sale 
B)  the retirement check your uncle received for spending 25 years in the Marine Corps 
C)  the DVD player you purchased from Best Buy 
D)  the five shares of Microsoft stock your grandparents gave you for making an A in economics 
A)  a bicycle you purchased at a garage sale 
B)  the retirement check your uncle received for spending 25 years in the Marine Corps 
C)  the DVD player you purchased from Best Buy 
D)  the five shares of Microsoft stock your grandparents gave you for making an A in economics

Question 3

If the cost-of-living indices were 100 in Chicago, 150 in Boston, and 190 in New York City, which of the following annual pay rates for jobs would provide you with the most purchasing power over goods and services?

Accepted Answer

A)  A $75,000 job in Boston. 
B)  A $100,000 job in New York City. 
C)  A $50,000 job in Chicago. 
D)  A $90,000 job in New York City. 
A)  A $75,000 job in Boston. 
B)  A $100,000 job in New York City. 
C)  A $50,000 job in Chicago. 
D)  A $90,000 job in New York City.

Question 4

Which of the following would be included in this year's GDP?

Accepted Answer

A)  the value of a used car, at its sale price 
B)  the value of a new domestic automobile, at its sale price 
C)  a sale of Microsoft stock from one individual to another 
D)  the face value of a life insurance policy paid to a woman at the death of her husband 
A)  the value of a used car, at its sale price 
B)  the value of a new domestic automobile, at its sale price 
C)  a sale of Microsoft stock from one individual to another 
D)  the face value of a life insurance policy paid to a woman at the death of her husband

Question 5

Use the table below to answer the following question(s).   Refer to Table 7-5. National income equals

Accepted Answer

A)  $1,380. 
B)  $1,530. 
C)  $1,860. 
D)  $4,170. 
A)  $1,380. 
B)  $1,530. 
C)  $1,860. 
D)  $4,170.

Question 6

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 7

The GDP deflator is designed to adjust nominal GDP for changes in

Accepted Answer

A)  the level of transfer payments. 
B)  the quality of goods over time. 
C)  the costs of economic bads such as pollution and crime. 
D)  the general level of prices over time. 
A)  the level of transfer payments. 
B)  the quality of goods over time. 
C)  the costs of economic bads such as pollution and crime. 
D)  the general level of prices over time.

Question 8

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

Accepted Answer

A)  U.S. investment and GDP increase, but German GDP is unaffected. 
B)  U.S. investment and German GDP increase, but U.S. GDP is unaffected. 
C)  U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods. 
D)  U.S. investment, U.S. GDP, and German GDP all increase. 
A)  U.S. investment and GDP increase, but German GDP is unaffected. 
B)  U.S. investment and German GDP increase, but U.S. GDP is unaffected. 
C)  U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods. 
D)  U.S. investment, U.S. GDP, and German GDP all increase.

Question 9

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

Accepted Answer

A)  The total value of GDP must have increased 11 percent during the year. 
B)  The general level of prices as measured by the GDP deflator decreased by approximately 3 percent during the year. 
C)  The general level of prices as measured by the GDP deflator increased by approximately 3 percent during the year. 
D)  Imports must have been about 3 percent larger than exports during the year. 
A)  The total value of GDP must have increased 11 percent during the year. 
B)  The general level of prices as measured by the GDP deflator decreased by approximately 3 percent during the year. 
C)  The general level of prices as measured by the GDP deflator increased by approximately 3 percent during the year. 
D)  Imports must have been about 3 percent larger than exports during the year.

Question 10

Use the table below to answer the following question(s). Table 7-5
  Refer to Table 7-5. Gross domestic product equals

Accepted Answer

A)  $1,860. 
B)  $1,380. 
C)  $1,910. 
D)  $4,170. 
A)  $1,860. 
B)  $1,380. 
C)  $1,910. 
D)  $4,170.

Question 11

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

Accepted Answer

A)  real GDP will overstate the growth rate of real output. 
B)  the GDP deflator will underestimate inflation. 
C)  the GDP deflator will overestimate inflation. 
D)  real GDP will overstate the growth of real output, and the GDP deflator will understate inflation. 
A)  real GDP will overstate the growth rate of real output. 
B)  the GDP deflator will underestimate inflation. 
C)  the GDP deflator will overestimate inflation. 
D)  real GDP will overstate the growth of real output, and the GDP deflator will understate inflation.

Question 12

Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6 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 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 nominal and real wages increased.

Question 13

Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was

Accepted Answer

A)  zero; prices were stable. 
B)  3.8 percent. 
C)  6 percent. 
D)  66 percent. 
A)  zero; prices were stable. 
B)  3.8 percent. 
C)  6 percent. 
D)  66 percent.

Question 14

If nominal or money GDP increases 6 percent in 2011 (compared to 2010), and real GDP increases 4 percent over the same period, which of the following must be true?

Accepted Answer

A)  Exports exceeded imports. 
B)  The general price level as measured by the GDP deflator fell during 2011. 
C)  The economy entered a recession in 2011. 
D)  Inflation during 2011 was 2 percent. 
A)  Exports exceeded imports. 
B)  The general price level as measured by the GDP deflator fell during 2011. 
C)  The economy entered a recession in 2011. 
D)  Inflation during 2011 was 2 percent.

Question 15

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?

Accepted Answer

A)  The growth rate of real GDP will tend to understate the growth rate of total output. 
B)  The growth rate of real GDP will tend to overstate the growth rate of total output. 
C)  The GDP deflator will tend to overstate any increase in inflation. 
D)  The GDP deflator will tend to understate any increase in inflation. 
A)  The growth rate of real GDP will tend to understate the growth rate of total output. 
B)  The growth rate of real GDP will tend to overstate the growth rate of total output. 
C)  The GDP deflator will tend to overstate any increase in inflation. 
D)  The GDP deflator will tend to understate any increase in inflation.

Question 16

Which one of the following events will reduce GDP?

Accepted Answer

A)  Mrs. Lee hires a housekeeper. 
B)  You buy the ingredients to bake a loaf of bread, but you burn the bread and throw it away. 
C)  You decide to work five more hours per week at your bookkeeper job, even though you need more time to study. 
D)  An automobile manufacturer lays off 200 workers as the result of a fire in the paint shop. 
A)  Mrs. Lee hires a housekeeper. 
B)  You buy the ingredients to bake a loaf of bread, but you burn the bread and throw it away. 
C)  You decide to work five more hours per week at your bookkeeper job, even though you need more time to study. 
D)  An automobile manufacturer lays off 200 workers as the result of a fire in the paint shop.

Question 17

Explain the two approaches to calculating GDP.

Accepted Answer

One approach involves adding up the expe

Question 18

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?

Accepted Answer

A)  $7.5 trillion 
B)  $9.0 trillion 
C)  $9.5 trillion 
D)  $16.0 trillion 
A)  $7.5 trillion 
B)  $9.0 trillion 
C)  $9.5 trillion 
D)  $16.0 trillion

Question 19

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?

Accepted Answer

A)  The chained index is based on a comprehensive bundle of goods and services, while the regular CPI considers only changes in the prices of food and energy. 
B)  The chained index makes allowance each month for shifts away from goods that have become relatively more expensive; the regular CPI does not adjust for this factor. 
C)  The chained consumer price index considers the impact of both rising and falling prices, whereas the regular consumer price index considers only the impact of goods and services with rising prices during the period. 
D)  The chained consumer price index considers only the prices of goods and services purchased by households, whereas the regular CPI also includes the price changes of investment assets such as stocks and real estate. 
A)  The chained index is based on a comprehensive bundle of goods and services, while the regular CPI considers only changes in the prices of food and energy. 
B)  The chained index makes allowance each month for shifts away from goods that have become relatively more expensive; the regular CPI does not adjust for this factor. 
C)  The chained consumer price index considers the impact of both rising and falling prices, whereas the regular consumer price index considers only the impact of goods and services with rising prices during the period. 
D)  The chained consumer price index considers only the prices of goods and services purchased by households, whereas the regular CPI also includes the price changes of investment assets such as stocks and real estate.

Question 20

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of about

Accepted Answer

A)  $536,000. 
B)  $828,000. 
C)  $1,131,000. 
D)  $1,216,000. 
A)  $536,000. 
B)  $828,000. 
C)  $1,131,000. 
D)  $1,216,000.

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?

Which of the following transactions would enter directly into the determination of GDP?

If the cost-of-living indices were 100 in Chicago, 150 in Boston, and 190 in New York City, which of the following annual pay rates for jobs would provide you with the most purchasing power over goods and services?

Which of the following would be included in this year's GDP?

Use the table below to answer the following question(s). Refer to Table 7-5. National income equals

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

The GDP deflator is designed to adjust nominal GDP for changes in

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

Use the table below to answer the following question(s). Table 7-5 Refer to Table 7-5. Gross domestic product equals

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

Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6 percent. Which of the following is true?

Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was

If nominal or money GDP increases 6 percent in 2011 (compared to 2010), and real GDP increases 4 percent over the same period, which of the following must be true?

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?

Which one of the following events will reduce GDP?

Explain the two approaches to calculating GDP.

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?

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?

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of about

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

Which of the following transactions would enter directly into the determination of GDP?

If the cost-of-living indices were 100 in Chicago, 150 in Boston, and 190 in New York City, which of the following annual pay rates for jobs would provide you with the most purchasing power over goods and services?

Which of the following would be included in this year's GDP?

Use the table below to answer the following question(s). Refer to Table 7-5. National income equals

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

The GDP deflator is designed to adjust nominal GDP for changes in

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

Use the table below to answer the following question(s). Table 7-5 Refer to Table 7-5. Gross domestic product equals

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

Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6 percent. Which of the following is true?

Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was

If nominal or money GDP increases 6 percent in 2011 (compared to 2010), and real GDP increases 4 percent over the same period, which of the following must be true?

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?

Which one of the following events will reduce GDP?

Explain the two approaches to calculating GDP.

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?

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?

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of about

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