Question 1

If nominal GDP is $12,000 and the GDP deflator is 80, then real GDP is $15,000.

Accepted Answer

A) True 
 B)False

Question 2

U.S. GDP and U.S. GNP are related as follows:

Accepted Answer

A)  GNP = GDP + Value of exported goods - Value of imported goods. 
B)  GNP = GDP - Value of exported goods + Value of imported goods. 
C)  GNP = GDP + Income earned by foreigners in the U.S. - Income earned by U.S. citizens abroad. 
D)  GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad. 
A)  GNP = GDP + Value of exported goods - Value of imported goods. 
B)  GNP = GDP - Value of exported goods + Value of imported goods. 
C)  GNP = GDP + Income earned by foreigners in the U.S. - Income earned by U.S. citizens abroad. 
D)  GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.

Question 3

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

Accepted Answer

A)  U.S. investment, GDP, and GNP all increase by the same amount. 
B)  U.S. investment increases, but GDP and GNP are unaffected by the purchase. 
C)  U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount. 
D)  U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount. 
A)  U.S. investment, GDP, and GNP all increase by the same amount. 
B)  U.S. investment increases, but GDP and GNP are unaffected by the purchase. 
C)  U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount. 
D)  U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount.

Question 4

A German citizen buys an automobile produced in the United States by a Japanese company. As a result,

Accepted Answer

A)  U.S. net exports increase, U.S. GDP is unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. 
B)  U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, German GNP is unaffected, and German GDP decreases. 
C)  U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. 
D)  U.S. net exports and GDP are unaffected, Japanese GNP increases, and German net exports, GNP, and GDP decrease. 
A)  U.S. net exports increase, U.S. GDP is unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. 
B)  U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, German GNP is unaffected, and German GDP decreases. 
C)  U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. 
D)  U.S. net exports and GDP are unaffected, Japanese GNP increases, and German net exports, GNP, and GDP decrease.

Question 5

GDP is a good measure of economic well-being for all purposes.

Accepted Answer

A) True 
 B)False

Question 6

In a simple circular-flow diagram, households buy goods and services with the income they get from

Accepted Answer

A)  wages. 
B)  rents. 
C)  profits. 
D)  All of the above are correct. 
A)  wages. 
B)  rents. 
C)  profits. 
D)  All of the above are correct.

Question 7

Table 23-10
A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 .  
-Refer to Table 23-10. In which year was this country's real GDP highest?

Accepted Answer

A)  2014 
B)  2015 
C)  2016 
D)  2017 
A)  2014 
B)  2015 
C)  2016 
D)  2017

Question 8

In the economy of Talikastan in 2015, consumption was two-thirds of GDP, government purchases were $1000 more than investment, investment was one-ninth of GDP, and the value of exports exceeded the value of imports by $500. What was Talikastan's GDP in 2015?

Accepted Answer

A)  $1688 
B)  $9000 
C)  $13,500 
D)  $15,000 
A)  $1688 
B)  $9000 
C)  $13,500 
D)  $15,000

Question 9

If an economy's GDP falls, then it must be the case that the economy's

Accepted Answer

A)  income falls and saving rises. 
B)  income and saving both fall. 
C)  income falls and expenditure rises. 
D)  income and expenditure both fall. 
A)  income falls and saving rises. 
B)  income and saving both fall. 
C)  income falls and expenditure rises. 
D)  income and expenditure both fall.

Question 10

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)  raises GDP. 
B)  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)  raises GDP. 
B)  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 11

Which of the following is included in the investment component of GDP?

Accepted Answer

A)  spending on new business equipment such as power tools and spending on stocks and bonds 
B)  spending on new business equipment such as power tools but not spending on stocks and bonds 
C)  spending on stocks and bonds but not spending on new business equipment such as power tools 
D)  neither spending on new business equipment such as power tools nor spending on stocks and bonds 
A)  spending on new business equipment such as power tools and spending on stocks and bonds 
B)  spending on new business equipment such as power tools but not spending on stocks and bonds 
C)  spending on stocks and bonds but not spending on new business equipment such as power tools 
D)  neither spending on new business equipment such as power tools nor spending on stocks and bonds

Question 12

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010,

Accepted Answer

A)  real output and the price level both rose. 
B)  real output rose and the price level fell. 
C)  real output fell and the price level rose. 
D)  real output and the price level both fell. 
A)  real output and the price level both rose. 
B)  real output rose and the price level fell. 
C)  real output fell and the price level rose. 
D)  real output and the price level both fell.

Question 13

Transfer payments

Accepted Answer

A)  are payments that flow from government to households. 
B)  are not made in exchange for currently produced goods or services. 
C)  alter household income, but they do not reflect the economy's production. 
D)  All of the above are correct. 
A)  are payments that flow from government to households. 
B)  are not made in exchange for currently produced goods or services. 
C)  alter household income, but they do not reflect the economy's production. 
D)  All of the above are correct.

Question 14

Additions to inventory subtract from GDP, and when the goods in inventory are sold, the reductions in inventory add to GDP.

Accepted Answer

A) True 
 B)False

Question 15

In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014?

Accepted Answer

A)  $3 million 
B)  $7 million 
C)  $8 million 
D)  $11 million 
A)  $3 million 
B)  $7 million 
C)  $8 million 
D)  $11 million

Question 16

The output of goods and services produced in the United States has grown on average 3 percent per year since 1965.

Accepted Answer

A) True 
 B)False

Question 17

A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer's inventory. How much is added to GDP?

Accepted Answer

A)  $8,000 
B)  $15,000 
C)  $17,000 
D)  $13,000 
A)  $8,000 
B)  $15,000 
C)  $17,000 
D)  $13,000

Question 18

Table 23-11
The country of Batavia produces only chocolates and watches. Below is a table with recent information on Batavia production and prices. The base year is 2009.
Prices and Quantities  
-Refer to Table 23-11.
What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work.

Accepted Answer

Nominal GDP was $5x100 + $60x1

Question 19

Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, Inc., which produces and sells leather furniture. With each $1,000 worth of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch and sells it for $2,600. Neither firm had any inventory at the beginning of 2015. During that year, Cowhide produced enough leather for 25 couches. Couches, Inc. bought 80% of that leather for $20,000 and promised to buy the remaining 20% for $5,000 in 2016. Couches, Inc. produced 20 couches during 2015 and sold each one during that year for $2,600. What was the economy's GDP for 2015?

Accepted Answer

A)  $25,000 
B)  $52,000 
C)  $57,000 
D)  $65,000 
A)  $25,000 
B)  $52,000 
C)  $57,000 
D)  $65,000

Question 20

GDP does not make adjustments for leisure time, environmental quality, or volunteer work.

Accepted Answer

A) True 
 B)False

Exam 23: Measuring a Nations Income

If nominal GDP is $12,000 and the GDP deflator is 80, then real GDP is $15,000.

U.S. GDP and U.S. GNP are related as follows:

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

A German citizen buys an automobile produced in the United States by a Japanese company. As a result,

GDP is a good measure of economic well-being for all purposes.

In a simple circular-flow diagram, households buy goods and services with the income they get from

Table 23-10 A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 . -Refer to Table 23-10. In which year was this country's real GDP highest?

In the economy of Talikastan in 2015, consumption was two-thirds of GDP, government purchases were $1000 more than investment, investment was one-ninth of GDP, and the value of exports exceeded the value of imports by $500. What was Talikastan's GDP in 2015?

If an economy's GDP falls, then it must be the case that the economy's

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 is included in the investment component of GDP?

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010,

Transfer payments

Additions to inventory subtract from GDP, and when the goods in inventory are sold, the reductions in inventory add to GDP.

The output of goods and services produced in the United States has grown on average 3 percent per year since 1965.

A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer's inventory. How much is added to GDP?

Table 23-11 The country of Batavia produces only chocolates and watches. Below is a table with recent information on Batavia production and prices. The base year is 2009. Prices and Quantities -Refer to Table 23-11. What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work.

GDP does not make adjustments for leisure time, environmental quality, or volunteer work.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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