Question 1

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. D

Question 2

The nominal salary paid to the president of the United States and the Consumer Price Index (CPI)are given for various years below.
Table 7-9
  
-Refer to Table 7-9.The salary of the president of the United States in 2000 was $400,000.In 1940,the president's salary was $75,000.If the Consumer Price Index was 8.1 in 1940 and 100 in 2000,the 1940 presidential salary measured in terms of the purchasing power of the dollar in 2000 would be

Accepted Answer

A) less than $75,000. 
B) less than $400,000. 
C) approximately $668,850. 
D) approximately $750,000. 
E) approximately $926,000. 
A) less than $75,000. 
B) less than $400,000. 
C) approximately $668,850. 
D) approximately $750,000. 
E) approximately $926,000. E

Question 3

Your father tells you he earned $1.50 per hour when he was 16 in 1969;you remember making $6.00 per hour when you were 16 in 2003.Given that the CPI was 36.7 in 1969 and 184.0 in 2003,which of the following is the 2003 real equivalent of your father's hourly earnings when he was 16?

Accepted Answer

A) $2.76. 
B) $5.01. 
C) $6.23. 
D) $7.52. 
A) $2.76. 
B) $5.01. 
C) $6.23. 
D) $7.52. D

Question 4

A wealthy stamp collector recently sold a rare stamp for $80,000 that he purchased two years earlier for only $10,000.What impact will this transaction have on GDP?

Accepted Answer

A) GDP increases by $80,000. 
B) GDP increases by $70,000. 
C) GDP declines by $70,000. 
D) There is no change in GDP. 
A) GDP increases by $80,000. 
B) GDP increases by $70,000. 
C) GDP declines by $70,000. 
D) There is no change in GDP.

Question 5

If U.S.net exports are negative,

Accepted Answer

A) U.S.consumers are spending less on foreign goods than foreign consumers are spending on U.S.goods 
B) U.S.consumers are spending more on foreign goods than foreign consumers are spending on U.S.goods 
C) the government must promote imports to balance international trade 
D) U.S.consumers are spending more on foreign goods than they are spending on U.S.goods 
E) U.S.disposable income is low 
A) U.S.consumers are spending less on foreign goods than foreign consumers are spending on U.S.goods 
B) U.S.consumers are spending more on foreign goods than foreign consumers are spending on U.S.goods 
C) the government must promote imports to balance international trade 
D) U.S.consumers are spending more on foreign goods than they are spending on U.S.goods 
E) U.S.disposable income is low

Question 6

Suppose a country had net exports of $8.3 billion and sold $52.4 billion of goods and services abroad.This country had

Accepted Answer

A) $60.7 billion of imports and $52.4 billion of imports. 
B) $60.7 billion of exports and $52.4 of imports. 
C) $52.4 billion of imports and $44.1 billion of exports. 
D) $52.4 billion of exports and $44.1 billion of imports. 
A) $60.7 billion of imports and $52.4 billion of imports. 
B) $60.7 billion of exports and $52.4 of imports. 
C) $52.4 billion of imports and $44.1 billion of exports. 
D) $52.4 billion of exports and $44.1 billion of imports.

Question 7

You buy 50 shares of stock in a telecommunications company for $20 a share and pay $100 commission.How much will this transaction add to GDP?

Accepted Answer

A) zero 
B) $100 
C) $1,000 
D) $1,100 
A) zero 
B) $100 
C) $1,000 
D) $1,100

Question 8

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 9

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 10

If Honda (a Japan-based firm)produces a car in Ohio and exports it to Japan,in which country's GDP will the car be counted?

Accepted Answer

A) Japan's,because Honda is a Japanese company 
B) Japan's because that is where the car is purchased 
C) The GDP of the United States because that is where it was built 
D) Both Japan and the United States 
A) Japan's,because Honda is a Japanese company 
B) Japan's because that is where the car is purchased 
C) The GDP of the United States because that is where it was built 
D) Both Japan and the United States

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

Which of the following will increase this year's GDP?

Accepted Answer

A) the sale of a used economics textbook to the college bookstore 
B) family lawn services provided by a 16-year-old son or daughter 
C) $60,000 of income earned by an American college professor teaching in England 
D) a $100 sales commission to a broker for a purchase of 100 shares of stock 
E) $10 billion of damage caused by a hurricane that hit the coast of Florida 
A) the sale of a used economics textbook to the college bookstore 
B) family lawn services provided by a 16-year-old son or daughter 
C) $60,000 of income earned by an American college professor teaching in England 
D) a $100 sales commission to a broker for a purchase of 100 shares of stock 
E) $10 billion of damage caused by a hurricane that hit the coast of Florida

Question 13

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.

Question 14

You buy 100 shares of IBM stock at $100 per share and pay $150 commission.How much will this transaction add to GDP?

Accepted Answer

A) zero 
B) $150 
C) $10,000 
D) $10,150 
A) zero 
B) $150 
C) $10,000 
D) $10,150

Question 15

One of the widely-acknowledged problems with the consumer price index (CPI)as a measure of the cost of living is that the CPI

Accepted Answer

A) fails to account for consumer spending on housing. 
B) accounts only for consumer spending on food,clothing,and energy. 
C) fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D) fails to account for the introduction of new goods. 
A) fails to account for consumer spending on housing. 
B) accounts only for consumer spending on food,clothing,and energy. 
C) fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D) fails to account for the introduction of new goods.

Question 16

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 17

If the safety of the work environment has improved over time,

Accepted Answer

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

Question 18

Which of the following statements about gross domestic product and gross national product is true?

Accepted Answer

A) Gross domestic product includes income payments to foreigners for their work domestically;gross national product does not. 
B) Gross domestic product includes the income earned abroad by domestic citizens;gross national product does not. 
C) Gross domestic product includes exports;gross national product does not. 
D) GDP and GNP are equal. 
A) Gross domestic product includes income payments to foreigners for their work domestically;gross national product does not. 
B) Gross domestic product includes the income earned abroad by domestic citizens;gross national product does not. 
C) Gross domestic product includes exports;gross national product does not. 
D) GDP and GNP are equal.

Question 19

If on-the-job working conditions have improved over time,

Accepted Answer

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

Question 20

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.

Exam 7: Ataking the Nations Economic Pulse

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

Your father tells you he earned $1.50 per hour when he was 16 in 1969;you remember making $6.00 per hour when you were 16 in 2003.Given that the CPI was 36.7 in 1969 and 184.0 in 2003,which of the following is the 2003 real equivalent of your father's hourly earnings when he was 16?

A wealthy stamp collector recently sold a rare stamp for $80,000 that he purchased two years earlier for only $10,000.What impact will this transaction have on GDP?

If U.S.net exports are negative,

Suppose a country had net exports of $8.3 billion and sold $52.4 billion of goods and services abroad.This country had

You buy 50 shares of stock in a telecommunications company for $20 a share and pay $100 commission.How much will this transaction add to GDP?

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?

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

If Honda (a Japan-based firm)produces a car in Ohio and exports it to Japan,in which country's GDP will the car be counted?

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.

Which of the following will increase this year's GDP?

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

You buy 100 shares of IBM stock at $100 per share and pay $150 commission.How much will this transaction add to GDP?

One of the widely-acknowledged problems with the consumer price index (CPI)as a measure of the cost of living is that the CPI

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

If the safety of the work environment has improved over time,

Which of the following statements about gross domestic product and gross national product is true?

If on-the-job working conditions have improved over time,

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

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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