Question 1

If a local shop buys a used motorcycle for $1,000, makes repairs and refurbishes it, then resells it for $2,500, the

Accepted Answer

A)  shop contributes value added equal to $1,500, but nothing is added to GDP. 
B)  shop contributes value added equal to $1,500, and consequently $1,500 is added to GDP. 
C)  shop contributes nothing to production because only existing goods are involved. 
D)  shop contributes value added equal to $2,500, but only $1,500 is added to GDP. 
A)  shop contributes value added equal to $1,500, but nothing is added to GDP. 
B)  shop contributes value added equal to $1,500, and consequently $1,500 is added to GDP. 
C)  shop contributes nothing to production because only existing goods are involved. 
D)  shop contributes value added equal to $2,500, but only $1,500 is added to GDP.

Question 2

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because

Accepted Answer

A)  the GDP deflator is calculated for a narrow market basket of goods, approximating those items included in our measure of consumption expenditures. 
B)  the GDP deflator calculates changes in the prices of items that more closely approximate those included in GDP. 
C)  the GDP deflator is always less than the consumer price index, and therefore, it is a more stable index. 
D)  the GDP deflator is the sum of the consumer price index and the wholesale price index. 
A)  the GDP deflator is calculated for a narrow market basket of goods, approximating those items included in our measure of consumption expenditures. 
B)  the GDP deflator calculates changes in the prices of items that more closely approximate those included in GDP. 
C)  the GDP deflator is always less than the consumer price index, and therefore, it is a more stable index. 
D)  the GDP deflator is the sum of the consumer price index and the wholesale price index.

Question 3

The consumer price index (CPI) is designed to measure

Accepted Answer

A)  the impact of price changes on the value of real GDP. 
B)  the nominal value of consumer spending on food, clothing, and energy. 
C)  the total spending of households as a percentage of GDP. 
D)  the impact of price changes on the cost of the typical bundle of goods purchased by households. 
A)  the impact of price changes on the value of real GDP. 
B)  the nominal value of consumer spending on food, clothing, and energy. 
C)  the total spending of households as a percentage of GDP. 
D)  the impact of price changes on the cost of the typical bundle of goods purchased by households.

Question 4

Gross domestic product is equal to the market value of all goods and services

Accepted Answer

A)  exchanged during a period. 
B)  produced domestically during a period. 
C)  produced by the citizens of a nation during a period. 
D)  produced domestically during a period minus the depreciation of productive assets. 
A)  exchanged during a period. 
B)  produced domestically during a period. 
C)  produced by the citizens of a nation during a period. 
D)  produced domestically during a period minus the depreciation of productive assets.

Question 5

Which of the following would contribute to GDP?

Accepted Answer

A)  An American company buys stock in another American company. 
B)  An American company produces goods in Canada. 
C)  A Canadian company buys stock in an American company. 
D)  A Canadian company produces goods in the United States. 
A)  An American company buys stock in another American company. 
B)  An American company produces goods in Canada. 
C)  A Canadian company buys stock in an American company. 
D)  A Canadian company produces goods in the United States.

Question 6

In recent years, people have benefited from greater amounts of leisure time. This trend

Accepted Answer

A)  has caused GDP to rise. 
B)  has caused GDP to fall. 
C)  made GDP fluctuate randomly 
D)  is not accounted for in GDP. 
A)  has caused GDP to rise. 
B)  has caused GDP to fall. 
C)  made GDP fluctuate randomly 
D)  is not accounted for in GDP.

Question 7

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 8

The primary value of data for real GDP lies in its ability to

Accepted Answer

A)  reflect the welfare of a society relative to a previous period. 
B)  compare a nation's productivity during two periods widely separated in time. 
C)  indicate short-term changes in the output rate of a nation. 
D)  indicate how hard the people of a nation are working. 
A)  reflect the welfare of a society relative to a previous period. 
B)  compare a nation's productivity during two periods widely separated in time. 
C)  indicate short-term changes in the output rate of a nation. 
D)  indicate how hard the people of a nation are working.

Question 9

Which of the following does not contribute to GDP?

Accepted Answer

A)  You lose $50 playing cards with friends. 
B)  You pay a doctor $200 to treat an arm that you broke in an accident. 
C)  You pay $300 for this month's rent on your apartment. 
D)  Your economics textbook is revised, and you buy the new edition. 
A)  You lose $50 playing cards with friends. 
B)  You pay a doctor $200 to treat an arm that you broke in an accident. 
C)  You pay $300 for this month's rent on your apartment. 
D)  Your economics textbook is revised, and you buy the new edition.

Question 10

Use the table below to choose the correct answer. Table 7-7
  Refer to Table 7-7. Gross domestic product equals

Accepted Answer

A)  $3,700. 
B)  $3,900. 
C)  $4,080. 
D)  $4,480. 
A)  $3,700. 
B)  $3,900. 
C)  $4,080. 
D)  $4,480.

Question 11

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 12

An important difference between the GDP deflator and the consumer price index is that

Accepted Answer

A)  the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
B)  the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers. 
C)  the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers. 
D)  the GDP deflator reflects the prices of all goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of final goods and services bought by consumers. 
A)  the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. 
B)  the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers. 
C)  the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers. 
D)  the GDP deflator reflects the prices of all goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of final goods and services bought by consumers.

Question 13

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated. This is because the unreported income

Accepted Answer

A)  involves the introduction of new goods. 
B)  is part of the underground economy. 
C)  is an example of nonmarket production. 
D)  represents an increase in leisure time. 
A)  involves the introduction of new goods. 
B)  is part of the underground economy. 
C)  is an example of nonmarket production. 
D)  represents an increase in leisure time.

Question 14

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

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 15

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

Accepted Answer

A)  $20.00 purchased in 1955. 
B)  $33.33 purchased in 1955. 
C)  $47.50 purchased in 1955. 
D)  None of the above is correct. 
A)  $20.00 purchased in 1955. 
B)  $33.33 purchased in 1955. 
C)  $47.50 purchased in 1955. 
D)  None of the above is correct.

Question 16

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  GDP excludes changes in inventories. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP excludes nonmarket transactions. 
D)  GDP excludes business investment spending. 
A)  GDP excludes changes in inventories. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP excludes nonmarket transactions. 
D)  GDP excludes business investment spending.

Question 17

Technological changes that reduce transaction costs and expand the availability of low-cost access to information

Accepted Answer

A)  increase GDP, but they generally fail to improve the welfare of people. 
B)  improve the well-being of people, but they often exert only a small impact on GDP, and sometimes they actually lead to a GDP reduction. 
C)  increase the consumer price index, but not the GDP deflator. 
D)  increase the GDP deflator, but not the consumer price index. 
A)  increase GDP, but they generally fail to improve the welfare of people. 
B)  improve the well-being of people, but they often exert only a small impact on GDP, and sometimes they actually lead to a GDP reduction. 
C)  increase the consumer price index, but not the GDP deflator. 
D)  increase the GDP deflator, but not the consumer price index.

Question 18

What is meant by a final good or service as opposed to an intermediate good or service? Why are only final goods and services included in the calculation of GDP?

Accepted Answer

A final good is a good purchased by its

Question 19

Which of the following is true about inflation?

Accepted Answer

A)  It reduces the cost-of-living of the typical worker. 
B)  It is measured by changes in the cost of a typical market basket of goods between time periods. 
C)  It causes the purchasing power of a dollar to rise. 
D)  It has no effect on real resources. 
A)  It reduces the cost-of-living of the typical worker. 
B)  It is measured by changes in the cost of a typical market basket of goods between time periods. 
C)  It causes the purchasing power of a dollar to rise. 
D)  It has no effect on real resources.

Question 20

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because the GDP deflator is

Accepted Answer

A)  calculated for a more general market basket of goods than the consumer price index. 
B)  always less than the consumer price index and, thus, is a more stable index. 
C)  the sum of the consumer price index and the wholesale price index. 
D)  the only price index adjusted annually for changes in the quality of products. 
A)  calculated for a more general market basket of goods than the consumer price index. 
B)  always less than the consumer price index and, thus, is a more stable index. 
C)  the sum of the consumer price index and the wholesale price index. 
D)  the only price index adjusted annually for changes in the quality of products.

If a local shop buys a used motorcycle for $1,000, makes repairs and refurbishes it, then resells it for $2,500, the

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because

The consumer price index (CPI) is designed to measure

Gross domestic product is equal to the market value of all goods and services

Which of the following would contribute to GDP?

In recent years, people have benefited from greater amounts of leisure time. This trend

Per capita GDP is

The primary value of data for real GDP lies in its ability to

Which of the following does not contribute to GDP?

Use the table below to choose the correct answer. Table 7-7 Refer to Table 7-7. Gross domestic product equals

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?

An important difference between the GDP deflator and the consumer price index is that

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated. This is because the unreported income

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

Which of the following is a shortcoming of GDP?

Technological changes that reduce transaction costs and expand the availability of low-cost access to information

What is meant by a final good or service as opposed to an intermediate good or service? Why are only final goods and services included in the calculation of GDP?

Which of the following is true about inflation?

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because the GDP deflator is

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

If a local shop buys a used motorcycle for $1,000, makes repairs and refurbishes it, then resells it for $2,500, the

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because

The consumer price index (CPI) is designed to measure

Gross domestic product is equal to the market value of all goods and services

Which of the following would contribute to GDP?

In recent years, people have benefited from greater amounts of leisure time. This trend

Per capita GDP is

The primary value of data for real GDP lies in its ability to

Which of the following does not contribute to GDP?

Use the table below to choose the correct answer. Table 7-7 Refer to Table 7-7. Gross domestic product equals

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?

An important difference between the GDP deflator and the consumer price index is that

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated. This is because the unreported income

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

Which of the following is a shortcoming of GDP?

Technological changes that reduce transaction costs and expand the availability of low-cost access to information

What is meant by a final good or service as opposed to an intermediate good or service? Why are only final goods and services included in the calculation of GDP?

Which of the following is true about inflation?

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because the GDP deflator is

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