Question 1

If the consumer price index (CPI)at the end of year one was 100 and was 108 at the end of year two,the inflation rate during year two was

Accepted Answer

A) zero;the CPI of 100 indicates that prices were stable. 
B) 8 percent. 
C) 5 percent. 
D) 108 percent. 
A) zero;the CPI of 100 indicates that prices were stable. 
B) 8 percent. 
C) 5 percent. 
D) 108 percent.

Question 2

Use the table below to answer the following question(s).
Table 7-12
  
-Refer to Table 7-12.Between 2000 and 2005,the general level of prices increased by approximately

Accepted Answer

A) 16.7 percent. 
B) 33.3 percent. 
C) 66.7 percent. 
D) 133.3 percent. 
A) 16.7 percent. 
B) 33.3 percent. 
C) 66.7 percent. 
D) 133.3 percent.

Question 3

As inflation drives up prices,people attempt to find substitutes and adjust what they buy.The resulting substitution bias problem causes the CPI to

Accepted Answer

A) overstate the impact of higher prices on consumers. 
B) consistently underestimate the true inflation rate. 
C) omit the benefits of product quality improvements. 
D) have larger fluctuations than other price indexes. 
A) overstate the impact of higher prices on consumers. 
B) consistently underestimate the true inflation rate. 
C) omit the benefits of product quality improvements. 
D) have larger fluctuations than other price indexes.

Question 4

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 5

Which of the following would increase U.S.GDP?

Accepted Answer

A) The city government of New York buys file cabinets directly from a Mexican company. 
B) A Mexican citizen buys stock in a U.S.company. 
C) A Japanese automobile company produces cars within the U.S. 
D) A U.S.automobile company produces cars in a foreign country. 
A) The city government of New York buys file cabinets directly from a Mexican company. 
B) A Mexican citizen buys stock in a U.S.company. 
C) A Japanese automobile company produces cars within the U.S. 
D) A U.S.automobile company produces cars in a foreign country.

Question 6

A firm purchases $600,000 worth of raw materials and pays wages and salaries of $100,000 and dividends of $200,000.If the firm sells its output for $1 million,the firm's value added to GDP is

Accepted Answer

A) $300,000. 
B) $400,000. 
C) $900,000. 
D) $1,000,000. 
A) $300,000. 
B) $400,000. 
C) $900,000. 
D) $1,000,000.

Question 7

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal.Most of his income was,and continues to be,from gambling.His move

Accepted Answer

A) necessarily raises GDP. 
B) necessarily decreases GDP. 
C) doesn't change GDP because gambling is never included in GDP. 
D) doesn't change GDP because in either case his income is included. 
A) necessarily raises GDP. 
B) necessarily decreases GDP. 
C) doesn't change GDP because gambling is never included in GDP. 
D) doesn't change GDP because in either case his income is included.

Question 8

Which of the following transactions would increase GDP?

Accepted Answer

A) a new tricycle purchased at a department store sale by the parents of a three-year-old child 
B) the retirement check your uncle received for spending 25 years in the Marine Corps 
C) the five shares of Microsoft stock your grandparents gave you for making an A in economics 
D) the $200 you lost when your wallet was stolen 
A) a new tricycle purchased at a department store sale by the parents of a three-year-old child 
B) the retirement check your uncle received for spending 25 years in the Marine Corps 
C) the five shares of Microsoft stock your grandparents gave you for making an A in economics 
D) the $200 you lost when your wallet was stolen

Question 9

To encourage formation of small businesses,the government could provide subsidies;these subsidies would be

Accepted Answer

A) included in GDP because they are part of government expenditures. 
B) included in GDP because they are part of investment expenditures. 
C) omitted from GDP because they are transfer payments. 
D) omitted from GDP because the government raises taxes to pay for them. 
A) included in GDP because they are part of government expenditures. 
B) included in GDP because they are part of investment expenditures. 
C) omitted from GDP because they are transfer payments. 
D) omitted from GDP because the government raises taxes to pay for them.

Question 10

A real estate salesperson sells a house in 2009 that was built in 1990.How does this transaction get counted in the GDP statistics?

Accepted Answer

A) The price of the house and the real estate salesperson's commission are both included in 2009's GDP. 
B) Neither the price of the house or the commission is included in 2009's GDP. 
C) The real estate salesperson's commission but not the price of the house is included in 2009's GDP. 
D) The price of the house would be included in both 1990's GDP and the GDP for 2009. 
A) The price of the house and the real estate salesperson's commission are both included in 2009's GDP. 
B) Neither the price of the house or the commission is included in 2009's GDP. 
C) The real estate salesperson's commission but not the price of the house is included in 2009's GDP. 
D) The price of the house would be included in both 1990's GDP and the GDP for 2009.

Question 11

The largest component of GDP as measured by the expenditure approach is

Accepted Answer

A) wages and salary earnings. 
B) personal consumption. 
C) net profits of corporations. 
D) gross private investment. 
A) wages and salary earnings. 
B) personal consumption. 
C) net profits of corporations. 
D) gross private investment.

Question 12

Which of the following is true of inflation?

Accepted Answer

A) It is an increase in the general price level of goods and services. 
B) The purchasing power of money increases as the result of inflation. 
C) Inflation is similar to interest payments on future money income,such as pensions and receipts from outstanding loans. 
D) Inflation has no effect on real resources. 
A) It is an increase in the general price level of goods and services. 
B) The purchasing power of money increases as the result of inflation. 
C) Inflation is similar to interest payments on future money income,such as pensions and receipts from outstanding loans. 
D) Inflation has no effect on real resources.

Question 13

If nominal GDP rises from one year to the next,then

Accepted Answer

A) the economy must be producing a larger output of goods and services. 
B) prices at which goods and services are sold must be higher. 
C) either output,or the general level of prices,or both must be rising. 
D) employment and productivity must be rising. 
A) the economy must be producing a larger output of goods and services. 
B) prices at which goods and services are sold must be higher. 
C) either output,or the general level of prices,or both must be rising. 
D) employment and productivity must be rising.

Question 14

Given the following figures,by approximately what percentage did Henry's real income change between 2010 and 2011?
Henry's 2010 money income = $50,000
Henry's 2011 money income = $60,000
2010 CPI = 150.0
2011 CPI = 165.0

Accepted Answer

A) zero 
B) 2.5 percent 
C) 5 percent 
D) 7.5 percent 
E) 9 percent 
A) zero 
B) 2.5 percent 
C) 5 percent 
D) 7.5 percent 
E) 9 percent

Question 15

The CPI is based on

Accepted Answer

A) a basket of goods that is updated every year. 
B) a broader range of goods and services than the GDP deflator. 
C) the same set of goods and services as the GDP deflator. 
D) a fixed basket of goods purchased during an earlier base period. 
A) a basket of goods that is updated every year. 
B) a broader range of goods and services than the GDP deflator. 
C) the same set of goods and services as the GDP deflator. 
D) a fixed basket of goods purchased during an earlier base period.

Question 16

As per capita GDP has risen over time in the United States and other countries,the

Accepted Answer

A) life expectancy has decreased. 
B) rate of illiteracy has increased. 
C) rate of infant mortality has increased. 
D) amount of leisure time has increased. 
A) life expectancy has decreased. 
B) rate of illiteracy has increased. 
C) rate of infant mortality has increased. 
D) amount of leisure time has increased.

Question 17

Given the following figures,by approximately what percentage did Mike's real income increase between 2004 and 2005?
Mike's 2004 money income = $50,000
Mike's 2005 money income = $55,000
2004 CPI = 120.0
2005 CPI = 128.0

Accepted Answer

A) zero 
B) 3.1 percent 
C) 6.7 percent 
D) 10 percent 
A) zero 
B) 3.1 percent 
C) 6.7 percent 
D) 10 percent

Question 18

In computing GDP,market prices are used to value final goods and services because

Accepted Answer

A) market prices reflect the values of goods and services to the buyer. 
B) market prices do not change much over time,so it is easy to make comparisons between years. 
C) if market prices are out of line with how people value goods,the government sets price ceilings and price floors. 
D) None of the above is correct;market prices are not used in computing GDP. 
A) market prices reflect the values of goods and services to the buyer. 
B) market prices do not change much over time,so it is easy to make comparisons between years. 
C) if market prices are out of line with how people value goods,the government sets price ceilings and price floors. 
D) None of the above is correct;market prices are not used in computing GDP.

Question 19

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 20

The economist responsible for developing the basic concepts of the national income accounting system is

Accepted Answer

A) John Maynard Keynes. 
B) Alfred Marshall. 
C) Simon Kuznets. 
D) Adam Smith. 
A) John Maynard Keynes. 
B) Alfred Marshall. 
C) Simon Kuznets. 
D) Adam Smith.

Exam 7: Ataking the Nations Economic Pulse

If the consumer price index (CPI)at the end of year one was 100 and was 108 at the end of year two,the inflation rate during year two was

Use the table below to answer the following question(s). Table 7-12 -Refer to Table 7-12.Between 2000 and 2005,the general level of prices increased by approximately

As inflation drives up prices,people attempt to find substitutes and adjust what they buy.The resulting substitution bias problem causes the CPI to

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

Which of the following would increase U.S.GDP?

A firm purchases $600,000 worth of raw materials and pays wages and salaries of $100,000 and dividends of $200,000.If the firm sells its output for $1 million,the firm's value added to GDP is

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal.Most of his income was,and continues to be,from gambling.His move

Which of the following transactions would increase GDP?

To encourage formation of small businesses,the government could provide subsidies;these subsidies would be

A real estate salesperson sells a house in 2009 that was built in 1990.How does this transaction get counted in the GDP statistics?

The largest component of GDP as measured by the expenditure approach is

Which of the following is true of inflation?

If nominal GDP rises from one year to the next,then

Given the following figures,by approximately what percentage did Henry's real income change between 2010 and 2011? Henry's 2010 money income = $50,000 Henry's 2011 money income = $60,000 2010 CPI = 150.0 2011 CPI = 165.0

The CPI is based on

As per capita GDP has risen over time in the United States and other countries,the

Given the following figures,by approximately what percentage did Mike's real income increase between 2004 and 2005? Mike's 2004 money income = $50,000 Mike's 2005 money income = $55,000 2004 CPI = 120.0 2005 CPI = 128.0

In computing GDP,market prices are used to value final goods and services because

National income is

The economist responsible for developing the basic concepts of the national income accounting system is

The Economic Approach

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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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