Question 1

GDP is not a perfect measure of welfare because it

Accepted Answer

A) treats a dollar spent on candy bars the same as a dollar spent on education 
B) treats a dollar spent on exports the same as a dollar spent on imports 
C) double counts the value of leisure time 
D) double counts depreciation 
E) counts illegal activities in the underground economy 
A) treats a dollar spent on candy bars the same as a dollar spent on education 
B) treats a dollar spent on exports the same as a dollar spent on imports 
C) double counts the value of leisure time 
D) double counts depreciation 
E) counts illegal activities in the underground economy

Question 2

Because GDP does not fully account for improvements in the quality of goods,

Accepted Answer

A) the inflation rate is understated and real GDP is overstated. 
B) the inflation rate is overstated and real GDP is understated. 
C) both the inflation rate and real GDP are overstated. 
D) both the inflation rate and real GDP are understated. 
A) the inflation rate is understated and real GDP is overstated. 
B) the inflation rate is overstated and real GDP is understated. 
C) both the inflation rate and real GDP are overstated. 
D) both the inflation rate and real GDP are understated.

Question 3

Real GDP in the current year is equal to nominal GDP in the current year multiplied by the

Accepted Answer

A) GDP deflator. 
B) GDP deflator in the base year divided by the GDP deflator in the current year. 
C) GDP deflator in the current year divided by the GDP deflator in the base year. 
D) consumer price index. 
A) GDP deflator. 
B) GDP deflator in the base year divided by the GDP deflator in the current year. 
C) GDP deflator in the current year divided by the GDP deflator in the base year. 
D) consumer price index.

Question 4

Given the following information about quantity purchased and the price for each good in this simple three-good economy,what would be the 2007 consumer price index using a 2000 base year?

Accepted Answer

A) 50 
B) 200 
C) 210 
D) 225 
E) 250 
A) 50 
B) 200 
C) 210 
D) 225 
E) 250

Question 5

Use the table below to choose the correct answer.
Table 7-1
  
-Given the information in Table 7-1,the GDP equals

Accepted Answer

A) $1,140. 
B) $1,330. 
C) $1,650. 
D) $2,670. 
A) $1,140. 
B) $1,330. 
C) $1,650. 
D) $2,670.

Question 6

The consumer price index is

Accepted Answer

A) a measure of the increase in the average price of all of the goods that are included in the calculation of GDP. 
B) a comparison of the cost of buying a typical bundle of goods during a given period with the cost of buying the same bundle during an earlier base period. 
C) the ratio of the average price of a typical market basket of goods compared to the cost of producing those goods during the previous year. 
D) a comparison of the cost of the typical bundle of goods consumed in period 1 with the cost of a different bundle of goods typically consumed in period 2. 
A) a measure of the increase in the average price of all of the goods that are included in the calculation of GDP. 
B) a comparison of the cost of buying a typical bundle of goods during a given period with the cost of buying the same bundle during an earlier base period. 
C) the ratio of the average price of a typical market basket of goods compared to the cost of producing those goods during the previous year. 
D) a comparison of the cost of the typical bundle of goods consumed in period 1 with the cost of a different bundle of goods typically consumed in period 2.

Question 7

The consumer price index (CPI)and the GDP deflator are designed to measure the degree to which

Accepted Answer

A) there have been changes in the proportions of national income generated by (and thus earned by)the rich relative to the poor. 
B) the cost of purchasing a bundle of goods has changed over time. 
C) consumption patterns have changed with time. 
D) consumer prices have risen over and above increases in worker wages. 
A) there have been changes in the proportions of national income generated by (and thus earned by)the rich relative to the poor. 
B) the cost of purchasing a bundle of goods has changed over time. 
C) consumption patterns have changed with time. 
D) consumer prices have risen over and above increases in worker wages.

Question 8

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

Accepted Answer

A) Johnson purchases a five-year-old house from Smith. 
B) Johnson rents a five-year-old house from Smith. 
C) Johnson purchases 100 shares of AT&T stock from Smith. 
D) Johnson purchases an antique at Smith's garage sale. 
A) Johnson purchases a five-year-old house from Smith. 
B) Johnson rents a five-year-old house from Smith. 
C) Johnson purchases 100 shares of AT&T stock from Smith. 
D) Johnson purchases an antique at Smith's garage sale.

Question 9

If nominal GDP increased 2 percent during a year,while real GDP increased 4 percent,the

Accepted Answer

A) price level must have increased approximately 2 percent compared to the prior year. 
B) price level must have decreased approximately 2 percent compared to the prior year. 
C) price level must have decreased approximately 50 percent compared to the prior year. 
D) unemployment rate must have increased during the year. 
A) price level must have increased approximately 2 percent compared to the prior year. 
B) price level must have decreased approximately 2 percent compared to the prior year. 
C) price level must have decreased approximately 50 percent compared to the prior year. 
D) unemployment rate must have increased during the year.

Question 10

Gross domestic product equals the sum of

Accepted Answer

A) all income earned by domestic producers of goods and services minus indirect business taxes and depreciation during the year. 
B) the purchases of final goods and services produced domestically during a year. 
C) the amount received by firms for consumer goods and services. 
D) incomes received by households minus the sale of factor services supplied domestically. 
A) all income earned by domestic producers of goods and services minus indirect business taxes and depreciation during the year. 
B) the purchases of final goods and services produced domestically during a year. 
C) the amount received by firms for consumer goods and services. 
D) incomes received by households minus the sale of factor services supplied domestically.

Question 11

Which of the following is GDP designed to measure?

Accepted Answer

A) the total market value of goods and services produced domestically during the year 
B) changes in the cost of purchasing the typical consumer market basket of goods from one year to another 
C) the total size of the domestic underground economy 
D) the standard of living of the average citizen 
A) the total market value of goods and services produced domestically during the year 
B) changes in the cost of purchasing the typical consumer market basket of goods from one year to another 
C) the total size of the domestic underground economy 
D) the standard of living of the average citizen

Question 12

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

Accepted Answer

A) life expectancy and leisure time have also risen and infant mortality and illiteracy have gone down.. 
B) life expectancy has risen but leisure time has gone down,while infant mortality and illiteracy have remained the same. 
C) various quality of life variables have been unaffected. 
D) most quality of life variables such as life expectancy and expenditures on leisure time activities have fallen. 
A) life expectancy and leisure time have also risen and infant mortality and illiteracy have gone down.. 
B) life expectancy has risen but leisure time has gone down,while infant mortality and illiteracy have remained the same. 
C) various quality of life variables have been unaffected. 
D) most quality of life variables such as life expectancy and expenditures on leisure time activities have fallen.

Question 13

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 14

Which of the following would increase GDP?

Accepted Answer

A) buying a used car 
B) buying a newly constructed house 
C) buying an imported rug 
D) giving a domestically produced rug to charity 
A) buying a used car 
B) buying a newly constructed house 
C) buying an imported rug 
D) giving a domestically produced rug to charity

Question 15

If the GDP deflator in 2009 was 120 compared to a value of 100 during the 2004 base year,this would indicate that

Accepted Answer

A) the inflation rate during 2009 was 20 percent. 
B) the general level of prices during 2009 was 20 percent higher than during 2004. 
C) the inflation rate during 2009 was 120 percent. 
D) real GDP was 20 percent higher in 2009 than 2004. 
A) the inflation rate during 2009 was 20 percent. 
B) the general level of prices during 2009 was 20 percent higher than during 2004. 
C) the inflation rate during 2009 was 120 percent. 
D) real GDP was 20 percent higher in 2009 than 2004.

Question 16

Geri purchases a newly constructed house built by a private contractor.Her spending on the house is included in GDP as a part of

Accepted Answer

A) personal consumption expenditures. 
B) depreciation. 
C) gross private investment. 
D) personal saving. 
A) personal consumption expenditures. 
B) depreciation. 
C) gross private investment. 
D) personal saving.

Question 17

If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is 115,this indicates that the general level of prices

Accepted Answer

A) declined by 15 percent between 2005 and 2011. 
B) increased by 15 percent each year during 2005-2011. 
C) was approximately 15 percent higher in 2011 than in 2005. 
D) was approximately 115 percent higher in 2011 than in 2005. 
A) declined by 15 percent between 2005 and 2011. 
B) increased by 15 percent each year during 2005-2011. 
C) was approximately 15 percent higher in 2011 than in 2005. 
D) was approximately 115 percent higher in 2011 than in 2005.

Question 18

Which of the following expenditures are not included in the consumption component of GDP?

Accepted Answer

A) maid service 
B) purchase of a new home 
C) a new videocassette recorder 
D) a restaurant meal 
E) tax preparation service 
A) maid service 
B) purchase of a new home 
C) a new videocassette recorder 
D) a restaurant meal 
E) tax preparation service

Question 19

GDP will tend to overstate the productive capacity of a country when

Accepted Answer

A) economic bads like pollution are produced and then must be cleaned up. 
B) there is a sizable underground economy. 
C) nonmarket production represents a large portion of the economy. 
D) working conditions improve,allowing jobs to be completed safer and faster. 
A) economic bads like pollution are produced and then must be cleaned up. 
B) there is a sizable underground economy. 
C) nonmarket production represents a large portion of the economy. 
D) working conditions improve,allowing jobs to be completed safer and faster.

Question 20

Assume that between 1995 and 2000 nominal GDP increased from $1,000 to $2,500,and the index of prices increased from 100 to 200.Which of the following expresses GDP for 2000 in terms of 1995 prices?

Accepted Answer

A) $1,000 
B) $1,250 
C) $2,500 
D) $5,000 
A) $1,000 
B) $1,250 
C) $2,500 
D) $5,000

Exam 7: Ataking the Nations Economic Pulse

GDP is not a perfect measure of welfare because it

Because GDP does not fully account for improvements in the quality of goods,

Real GDP in the current year is equal to nominal GDP in the current year multiplied by the

Given the following information about quantity purchased and the price for each good in this simple three-good economy,what would be the 2007 consumer price index using a 2000 base year?

Use the table below to choose the correct answer. Table 7-1 -Given the information in Table 7-1,the GDP equals

The consumer price index is

The consumer price index (CPI)and the GDP deflator are designed to measure the degree to which

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

If nominal GDP increased 2 percent during a year,while real GDP increased 4 percent,the

Gross domestic product equals the sum of

Which of the following is GDP designed to measure?

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

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

Which of the following would increase GDP?

If the GDP deflator in 2009 was 120 compared to a value of 100 during the 2004 base year,this would indicate that

Geri purchases a newly constructed house built by a private contractor.Her spending on the house is included in GDP as a part of

If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is 115,this indicates that the general level of prices

Which of the following expenditures are not included in the consumption component of GDP?

GDP will tend to overstate the productive capacity of a country when

Assume that between 1995 and 2000 nominal GDP increased from $1,000 to $2,500,and the index of prices increased from 100 to 200.Which of the following expresses GDP for 2000 in terms of 1995 prices?

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

Filters