Question 1

The purchase of a new home is categorized as

Accepted Answer

A) consumption expenditure. 
B) consumption expenditure and investment. 
C) investment only if the home owners take out a mortgage. 
D) investment. 
E) consumption expenditure only if the home owners do not take out a mortgage. 
A) consumption expenditure. 
B) consumption expenditure and investment. 
C) investment only if the home owners take out a mortgage. 
D) investment. 
E) consumption expenditure only if the home owners do not take out a mortgage.

Question 2

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2014, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500. At the end of 2014, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
-Refer to Fact 20.1.1. Peter's capital at the end of 2014 is

Accepted Answer

A) $7,000. 
B) $9,600. 
C) $4,400. 
D) $7,600. 
E) $4,000. 
A) $7,000. 
B) $9,600. 
C) $4,400. 
D) $7,600. 
E) $4,000.

Question 3

In calculating GDP, all of the following are excluded except

Accepted Answer

A) the value of intermediate goods. 
B) the value of all homes built in the year in question. 
C) the value of used goods. 
D) purchases of stocks and bonds. 
E) subsidies from the government. 
A) the value of intermediate goods. 
B) the value of all homes built in the year in question. 
C) the value of used goods. 
D) purchases of stocks and bonds. 
E) subsidies from the government.

Question 4

A hypothetical economy produced four final goods during the year: plates, TVs, bicycles, and computers. Forty plates were produced and sold for $10 each. Five TVs were produced and sold for $300 each. Fifty bicycles were produced and sold for $100 each. Three computers were produced and sold for $750 each. With this information, one could determine

Accepted Answer

A) gross investment for this economy. 
B) net investment for this economy. 
C) indirect taxes less subsidies for this economy. 
D) whether factors had been fully employed in this economy. 
E) total income for this economy. 
A) gross investment for this economy. 
B) net investment for this economy. 
C) indirect taxes less subsidies for this economy. 
D) whether factors had been fully employed in this economy. 
E) total income for this economy.

Question 5

The reference base year is 2013. To calculate the chained-dollar real GDP in 2012 we calculate

Accepted Answer

A) the value of the final goods and services produced in 2014 valued at the prices that prevailed in 2014. 
B) the value of the final goods and services produced in 2014 valued at the prices that prevailed in the base year. 
C) nominal GDP in 2014 multiplied by price level. 
D) the value of final goods and services produced in the base year valued at the 2014 prices. 
E) the base-year GDP and add the average of the increases in real GDP calculated using 2013 prices and 2014 prices. 
A) the value of the final goods and services produced in 2014 valued at the prices that prevailed in 2014. 
B) the value of the final goods and services produced in 2014 valued at the prices that prevailed in the base year. 
C) nominal GDP in 2014 multiplied by price level. 
D) the value of final goods and services produced in the base year valued at the 2014 prices. 
E) the base-year GDP and add the average of the increases in real GDP calculated using 2013 prices and 2014 prices.

Question 6

Business cycles are

Accepted Answer

A) irregular, with some having two recessions and no expansion. 
B) predictable, with a recession following a trough. 
C) unpredictable, but always have two phases and two turning points. 
D) unpredictable, and don't always have two phases and two turning points. 
E) predictable, with an expansion following a trough. 
A) irregular, with some having two recessions and no expansion. 
B) predictable, with a recession following a trough. 
C) unpredictable, but always have two phases and two turning points. 
D) unpredictable, and don't always have two phases and two turning points. 
E) predictable, with an expansion following a trough.

Question 7

Use the table below to answer the following questions.
Table 20.2.3
  
-Refer to Table 20.2.3. Consider the economy represented in the table. GDP in this economy, in millions of dollars, is

Accepted Answer

A) $1,150,000. 
B) $850,000. 
C) $1,350,000. 
D) $1,050,000. 
E) $1,100,000. 
A) $1,150,000. 
B) $850,000. 
C) $1,350,000. 
D) $1,050,000. 
E) $1,100,000.

Question 8

Use the table below to answer the following question.
Table 20.4.3
  
-Refer to Table 20.4.3. An economy produces only cell phones, pens, and pizza. The table gives the quantities produced and prices in 2012 and 2013.
The base year is 2012.
The chained-dollar real GDP in 2013 is

Accepted Answer

A) $13. 
B) $21. 
C) $125. 
D) $88. 
E) $19. 
A) $13. 
B) $21. 
C) $125. 
D) $88. 
E) $19.

Question 9

Which of the following is not a reason for GDP incorrectly measuring the value of total output?

Accepted Answer

A) leisure time 
B) household production 
C) underground economic activity 
D) depreciation 
E) environmental quality 
A) leisure time 
B) household production 
C) underground economic activity 
D) depreciation 
E) environmental quality

Question 10

Nominal GDP will increase

Accepted Answer

A) only if the average level of prices rises. 
B) only if the quantity of goods and services produced increases. 
C) only if the unemployment rate rises. 
D) only if both the average level of prices rises and the quantity of goods and services produced increases. 
E) if either the average level of prices rises or the quantity of goods and services produced increases. 
A) only if the average level of prices rises. 
B) only if the quantity of goods and services produced increases. 
C) only if the unemployment rate rises. 
D) only if both the average level of prices rises and the quantity of goods and services produced increases. 
E) if either the average level of prices rises or the quantity of goods and services produced increases.

Question 11

Which one of the following would be included in the calculation of GDP by the expenditure approach?

Accepted Answer

A) the purchase of 20 shares of a new issue of IBM stock 
B) the purchase of an original eighteenth century work of art 
C) the value of your brother's services when he mows the lawn for the family 
D) the cost of adding a new kitchen to your house 
E) the income you pay to your gardener 
A) the purchase of 20 shares of a new issue of IBM stock 
B) the purchase of an original eighteenth century work of art 
C) the value of your brother's services when he mows the lawn for the family 
D) the cost of adding a new kitchen to your house 
E) the income you pay to your gardener

Question 12

Use the table below to answer the following questions.
Table 20.2.1
Data From Eastland
  
-Refer to Table 20.2.1. From the data in the table, what is total income in Eastland?

Accepted Answer

A) $1,120 
B) $1,180 
C) $1,360 
D) $1,420 
E) $1,280 
A) $1,120 
B) $1,180 
C) $1,360 
D) $1,420 
E) $1,280

Question 13

One of the reasons why real GDP grows is that

Accepted Answer

A) prices increase. 
B) governments collect more taxes. 
C) capital grows as a result of investment. 
D) imports increase. 
E) people have more income. 
A) prices increase. 
B) governments collect more taxes. 
C) capital grows as a result of investment. 
D) imports increase. 
E) people have more income.

Question 14

Use the table below to answer the following questions.
Table 20.4.1
  
-Refer to Table 20.4.1. In this table, at 2014 prices, the value of production from 2013 to 2014 has increased by

Accepted Answer

A) 56 percent. 
B) 91.7 percent. 
C) 10.8 percent. 
D) 54.5 percent. 
E) 77.3 percent. 
A) 56 percent. 
B) 91.7 percent. 
C) 10.8 percent. 
D) 54.5 percent. 
E) 77.3 percent.

Question 15

Suppose in current dollar terms, GDP increased by approximately 7 percent between one period and the next, but real GDP fell by 2 percent. Which one of the following explanations is most likely?

Accepted Answer

A) Prices fell by 9 percent. 
B) Prices fell by 2 percent. 
C) Output rose by 2 percent. 
D) Prices increased by 7 percent. 
E) Prices increased by 9 percent. 
A) Prices fell by 9 percent. 
B) Prices fell by 2 percent. 
C) Output rose by 2 percent. 
D) Prices increased by 7 percent. 
E) Prices increased by 9 percent.

Question 16

Suppose Angela falls in love with and subsequently marries her regularly employed housekeeper, Tony. What effect would this action have on GDP?

Accepted Answer

A) It would stay the same. 
B) It would fall. 
C) It would rise. 
D) It would fall but then increase after the honeymoon was over. 
E) It depends on whether he starts to work in the house free of charge or whether she still pays him. 
A) It would stay the same. 
B) It would fall. 
C) It would rise. 
D) It would fall but then increase after the honeymoon was over. 
E) It depends on whether he starts to work in the house free of charge or whether she still pays him.

Question 17

Which of the following are equal to one another?
I. aggregate production
II. aggregate expenditure
III. aggregate income

Accepted Answer

A) I equals II, but I does not equal III. 
B) I equals III, but I does not equal II. 
C) II equals III, but II does not equal I. 
D) III equals II, but III does not equal I 
E) I equals II equals III. 
A) I equals II, but I does not equal III. 
B) I equals III, but I does not equal II. 
C) II equals III, but II does not equal I. 
D) III equals II, but III does not equal I 
E) I equals II equals III.

Question 18

The expenditure approach measures GDP by adding together

Accepted Answer

A) wages, salaries and supplementary labour income, and other factor incomes. 
B) wages, salaries and supplementary labour income, other factor income, subsidies paid by the government, indirect taxes paid, and income of nonfarm unincorporated businesses. 
C) compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and capital consumption expenditures, and by subtracting subsidies paid by the government. 
D) the total expenditures of consumers, firms, net exporters, and by governments at all levels. 
E) the total expenditures of consumers and firms. 
A) wages, salaries and supplementary labour income, and other factor incomes. 
B) wages, salaries and supplementary labour income, other factor income, subsidies paid by the government, indirect taxes paid, and income of nonfarm unincorporated businesses. 
C) compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and capital consumption expenditures, and by subtracting subsidies paid by the government. 
D) the total expenditures of consumers, firms, net exporters, and by governments at all levels. 
E) the total expenditures of consumers and firms.

Question 19

Use the table below to answer the following questions.
Table 20.2.5
Data from Southton
  
-Refer to Table 20.2.5. From the data in the table, compute Southton's nominal GDP in the base year.

Accepted Answer

A) $208 
B) $197 
C) $209 
D) $226 
E) It cannot be calculated given the data. 
A) $208 
B) $197 
C) $209 
D) $226 
E) It cannot be calculated given the data.

Question 20

The circular flow diagram illustrates the expenditures made by

Accepted Answer

A) households only. 
B) households and firms only. 
C) households and investors only. 
D) firms, households, and governments only. 
E) households, firms, governments, and the rest of the world. 
A) households only. 
B) households and firms only. 
C) households and investors only. 
D) firms, households, and governments only. 
E) households, firms, governments, and the rest of the world.

Exam 20: Measuring Gdp and Economic Growth

The purchase of a new home is categorized as

In calculating GDP, all of the following are excluded except

The reference base year is 2013. To calculate the chained-dollar real GDP in 2012 we calculate

Business cycles are

Use the table below to answer the following questions. Table 20.2.3 -Refer to Table 20.2.3. Consider the economy represented in the table. GDP in this economy, in millions of dollars, is

Use the table below to answer the following question. Table 20.4.3 -Refer to Table 20.4.3. An economy produces only cell phones, pens, and pizza. The table gives the quantities produced and prices in 2012 and 2013. The base year is 2012. The chained-dollar real GDP in 2013 is

Which of the following is not a reason for GDP incorrectly measuring the value of total output?

Nominal GDP will increase

Which one of the following would be included in the calculation of GDP by the expenditure approach?

Use the table below to answer the following questions. Table 20.2.1 Data From Eastland -Refer to Table 20.2.1. From the data in the table, what is total income in Eastland?

One of the reasons why real GDP grows is that

Use the table below to answer the following questions. Table 20.4.1 -Refer to Table 20.4.1. In this table, at 2014 prices, the value of production from 2013 to 2014 has increased by

Suppose in current dollar terms, GDP increased by approximately 7 percent between one period and the next, but real GDP fell by 2 percent. Which one of the following explanations is most likely?

Suppose Angela falls in love with and subsequently marries her regularly employed housekeeper, Tony. What effect would this action have on GDP?

Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income

The expenditure approach measures GDP by adding together

Use the table below to answer the following questions. Table 20.2.5 Data from Southton -Refer to Table 20.2.5. From the data in the table, compute Southton's nominal GDP in the base year.

The circular flow diagram illustrates the expenditures made by

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

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Governments Actions in Markets

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Possibilities, Preferences, and Choices

Organizing Production

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Perfect Competition

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Markets for Factors of Production

Economic Inequality

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

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The Business Cycle, Inflation, and Deflation

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