Question 1

The GDP of a country can be derived by summing

Accepted Answer

A) the expenditures on final user goods and services produced domestically during the year. 
B) the payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes. 
C) the market value of all goods and services produced domestically during the period and then subtracting net exports from that figure. 
D) the income payments to the resource suppliers and net exports. 
A) the expenditures on final user goods and services produced domestically during the year. 
B) the payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes. 
C) the market value of all goods and services produced domestically during the period and then subtracting net exports from that figure. 
D) the income payments to the resource suppliers and net exports.

Question 2

When economists speak of changes in GDP measured in constant dollars,they mean that

Accepted Answer

A) money GDP is constant. 
B) the price level is constant. 
C) a price index has been used to adjust money GDP for the effects of inflation. 
D) the growth rate of money GDP has been adjusted for changes in population. 
A) money GDP is constant. 
B) the price level is constant. 
C) a price index has been used to adjust money GDP for the effects of inflation. 
D) the growth rate of money GDP has been adjusted for changes in population.

Question 3

If the base year for the GDP deflator is 1996,the value of the GDP deflator for 1996

Accepted Answer

A) is 10. 
B) is 100. 
C) is 150. 
D) cannot be determined from the data given. 
A) is 10. 
B) is 100. 
C) is 150. 
D) cannot be determined from the data given.

Question 4

Suppose the CPI was 104 in 1967,and suppose currently the CPI is 390.According to the CPI,$10 in 1967 purchased the same number of goods and services as

Accepted Answer

A) $28.88 purchases today. 
B) $37.50 purchases today. 
C) $42.64 purchases today. 
D) $104.00 purchases today. 
A) $28.88 purchases today. 
B) $37.50 purchases today. 
C) $42.64 purchases today. 
D) $104.00 purchases today.

Question 5

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

Accepted Answer

A) Jennifer buys a rug imported from Mexico. 
B) Melissa buys stock in an American textile company. 
C) Jennifer purchases a table over the Internet from a North Carolina furniture manufacturer. 
D) Melissa purchases a table over the Internet from a Mexican manufacturer. 
A) Jennifer buys a rug imported from Mexico. 
B) Melissa buys stock in an American textile company. 
C) Jennifer purchases a table over the Internet from a North Carolina furniture manufacturer. 
D) Melissa purchases a table over the Internet from a Mexican manufacturer.

Question 6

Suppose we shopped for a basket of goods in Year 1 and it cost $350.Suppose the same basket of goods costs $385 in Year 2.If the CPI in Year 1 is 100,the CPI in Year 2 will be

Accepted Answer

A) 35. 
B) 90. 
C) 100. 
D) 110. 
E) 135. 
A) 35. 
B) 90. 
C) 100. 
D) 110. 
E) 135.

Question 7

Suppose that Mike earned $15,000 in 2008 and $15,600 in 2009.If the consumer price index was 100 in 2008 and 103 in 2009,by approximately what percent did Mike's real salary increase?

Accepted Answer

A) 1 percent 
B) 3 percent 
C) 4 percent 
D) 5 percent 
A) 1 percent 
B) 3 percent 
C) 4 percent 
D) 5 percent

Question 8

Which of the following is not a problem or shortcoming of GDP?

Accepted Answer

A) Goods produced in one period that are sold in the following period fail to get counted in any period. 
B) It tends to understate the growth of economic welfare because it does not fully and accurately account for improvements in the quality of products. 
C) GDP is not an accurate measure of welfare because it makes no adjustment for harmful side effects (such as pollution)or destructive acts of nature. 
D) GDP understates output because it fails to include nonmarket production such as that which takes place in the household or in illegal markets. 
A) Goods produced in one period that are sold in the following period fail to get counted in any period. 
B) It tends to understate the growth of economic welfare because it does not fully and accurately account for improvements in the quality of products. 
C) GDP is not an accurate measure of welfare because it makes no adjustment for harmful side effects (such as pollution)or destructive acts of nature. 
D) GDP understates output because it fails to include nonmarket production such as that which takes place in the household or in illegal markets.

Question 9

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008.What was the country's inflation rate during 2008?

Accepted Answer

A) 5 percent 
B) 8 percent 
C) 60 percent 
D) 68 percent 
A) 5 percent 
B) 8 percent 
C) 60 percent 
D) 68 percent

Question 10

Which one of the following transactions would be included in GDP?

Accepted Answer

A) Ms.Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B) Mr.Doe donates $500 to his town's junior college scholarship fund. 
C) Ms.Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D) Ms.Smith pays $5,000 to purchase 100 shares of Microsoft stock. 
A) Ms.Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B) Mr.Doe donates $500 to his town's junior college scholarship fund. 
C) Ms.Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D) Ms.Smith pays $5,000 to purchase 100 shares of Microsoft stock.

Question 11

Which of the following is included as government consumption and gross investment in the national income accounts?

Accepted Answer

A) tanks bought for use by the U.S.army 
B) interest on public debt 
C) unemployment insurance payments 
D) social security benefit payments 
A) tanks bought for use by the U.S.army 
B) interest on public debt 
C) unemployment insurance payments 
D) social security benefit payments

Question 12

Which of the following transactions would be included in U.S.GDP but not in GNP?

Accepted Answer

A) An American tourist spends money in Mexico City. 
B) The U.S.government hires an American economist to evaluate United States/Mexico trade policy. 
C) A car is produced in Detroit and exported to Mexico. 
D) A salary is paid to a Canadian engineer employed in the California computer industry. 
A) An American tourist spends money in Mexico City. 
B) The U.S.government hires an American economist to evaluate United States/Mexico trade policy. 
C) A car is produced in Detroit and exported to Mexico. 
D) A salary is paid to a Canadian engineer employed in the California computer industry.

Question 13

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 14

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Accepted Answer

A) 10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3. 
B) 10 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3. 
C) 11.1 percent inflation between years 1 and 2,and 5 percent inflation between years 2 and 3. 
D) 11.1 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3. 
A) 10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3. 
B) 10 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3. 
C) 11.1 percent inflation between years 1 and 2,and 5 percent inflation between years 2 and 3. 
D) 11.1 percent inflation between years 1 and 2,and 5 percent deflation between years 2 and 3.

Question 15

Your brother graduated from college 10 years ago and started to work at a salary of $20,000.You expect to graduate this year and start to work for $35,000.If the consumer price index was 80 ten years ago and is 120 this year,who will have received the higher real starting salary?

Accepted Answer

A) You will have. 
B) Your brother did. 
C) You and your brother both will have started at the same real salary level. 
D) Not enough information is supplied to answer the question. 
A) You will have. 
B) Your brother did. 
C) You and your brother both will have started at the same real salary level. 
D) Not enough information is supplied to answer the question.

Question 16

Which of the following transactions would be counted toward this year's GDP?

Accepted Answer

A) General Motors purchases 10,000,000 tires from Firestone. 
B) A 300-year-old painting is sold for $12 million. 
C) A street gang earns $2 million from selling illegal drugs. 
D) Your real estate agent earns $5,000 commission when you sell your 100-year-old house for $100,000. 
A) General Motors purchases 10,000,000 tires from Firestone. 
B) A 300-year-old painting is sold for $12 million. 
C) A street gang earns $2 million from selling illegal drugs. 
D) Your real estate agent earns $5,000 commission when you sell your 100-year-old house for $100,000.

Question 17

Your father tells you he earned $3.00 per hour when he was 16 in 1977;you remember making $6.00 per hour when you were 16 in 1999.Given that the CPI was 36.7 in 1969 and 166.1 in 2007,which of the following is the 2007 real equivalent of your father's hourly earnings when he was 16?

Accepted Answer

A) $4.48 
B) $6.78 
C) $13.58 
D) $15.01 
A) $4.48 
B) $6.78 
C) $13.58 
D) $15.01

Question 18

Economists generally use GDP to measure a nation's total output because it is

Accepted Answer

A) equal to the sales value of all transactions conducted during a period and thus can be easily calculated. 
B) the best available measure of the true costs of producing consumer goods. 
C) unaffected by changes in the prices of products over time. 
D) a relatively reliable measure of the value of all final product goods and services produced during a specific time period. 
A) equal to the sales value of all transactions conducted during a period and thus can be easily calculated. 
B) the best available measure of the true costs of producing consumer goods. 
C) unaffected by changes in the prices of products over time. 
D) a relatively reliable measure of the value of all final product goods and services produced during a specific time period.

Question 19

Generally,the greater the amount of productive activities generated by the household sector,

Accepted Answer

A) the more likely it is that the current GDP will be overstated. 
B) the more likely it is that the current GDP will be understated. 
C) the more accurately GDP will measure current productive activity. 
D) the greater the GDP deflator. 
A) the more likely it is that the current GDP will be overstated. 
B) the more likely it is that the current GDP will be understated. 
C) the more accurately GDP will measure current productive activity. 
D) the greater the GDP deflator.

Question 20

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Accepted Answer

A) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage also increased. 
B) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage decreased. 
C) your real wage increase.If your real wage rose by a greater percentage than the price level,then your nominal wage also increased. 
D) your real wage decrease.If your real wage rose by a greater percentage than the price level,then your nominal wage decreased. 
A) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage also increased. 
B) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage decreased. 
C) your real wage increase.If your real wage rose by a greater percentage than the price level,then your nominal wage also increased. 
D) your real wage decrease.If your real wage rose by a greater percentage than the price level,then your nominal wage decreased.

Exam 7: Ataking the Nations Economic Pulse

The GDP of a country can be derived by summing

When economists speak of changes in GDP measured in constant dollars,they mean that

If the base year for the GDP deflator is 1996,the value of the GDP deflator for 1996

Suppose the CPI was 104 in 1967,and suppose currently the CPI is 390.According to the CPI,$10 in 1967 purchased the same number of goods and services as

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

Suppose we shopped for a basket of goods in Year 1 and it cost $350.Suppose the same basket of goods costs $385 in Year 2.If the CPI in Year 1 is 100,the CPI in Year 2 will be

Suppose that Mike earned $15,000 in 2008 and $15,600 in 2009.If the consumer price index was 100 in 2008 and 103 in 2009,by approximately what percent did Mike's real salary increase?

Which of the following is not a problem or shortcoming of GDP?

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008.What was the country's inflation rate during 2008?

Which one of the following transactions would be included in GDP?

Which of the following is included as government consumption and gross investment in the national income accounts?

Which of the following transactions would be included in U.S.GDP but not in GNP?

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?

If the price index was 90 in year 1,100 in year 2,and 95 in year 3,then the economy experienced

Your brother graduated from college 10 years ago and started to work at a salary of $20,000.You expect to graduate this year and start to work for $35,000.If the consumer price index was 80 ten years ago and is 120 this year,who will have received the higher real starting salary?

Which of the following transactions would be counted toward this year's GDP?

Your father tells you he earned $3.00 per hour when he was 16 in 1977;you remember making $6.00 per hour when you were 16 in 1999.Given that the CPI was 36.7 in 1969 and 166.1 in 2007,which of the following is the 2007 real equivalent of your father's hourly earnings when he was 16?

Economists generally use GDP to measure a nation's total output because it is

Generally,the greater the amount of productive activities generated by the household sector,

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

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