Question 1

An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.

Accepted Answer

A) True 
 B)False

Question 2

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 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 3

Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of

Accepted Answer

A)  market prices. 
B)  statistical estimates of the value of goods and services to consumers. 
C)  prices based on the assumption that producers make no profits. 
D)  the maximum amount consumers would be willing to pay. 
A)  market prices. 
B)  statistical estimates of the value of goods and services to consumers. 
C)  prices based on the assumption that producers make no profits. 
D)  the maximum amount consumers would be willing to pay.

Question 4

Real GDP per person tells us the income and expenditure of the average person in the economy.

Accepted Answer

A) True 
 B)False

Question 5

If the U.S. government reports that GDP in the third quarter was $16 trillion at an annual rate, then the amount of income and expenditure during quarter three was $4 trillion.

Accepted Answer

A) True 
 B)False

Question 6

In the equation Y = C + I + G + NX,

Accepted Answer

A)  Y represents the economy's total expenditure. 
B)  C represents household expenditures on services and durable goods. 
C)  all of the variables are always positive numbers. 
D)  All of the above are correct. 
A)  Y represents the economy's total expenditure. 
B)  C represents household expenditures on services and durable goods. 
C)  all of the variables are always positive numbers. 
D)  All of the above are correct.

Question 7

A farmer sells five pounds of pecans to a Smith's Fresh Pecans for $10. Smith's Fresh Pecans resells three pounds for $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP?

Accepted Answer

A)  $22.50 
B)  $29.50 
C)  $21.50 
D)  $31.50 
A)  $22.50 
B)  $29.50 
C)  $21.50 
D)  $31.50

Question 8

GDP is not a perfect measure of well-being; for example,

Accepted Answer

A)  GDP incorporates a large number of non-market goods and services that are of little value to society. 
B)  GDP places too much emphasis on the value of leisure. 
C)  GDP fails to account for the quality of the environment. 
D)  All of the above are correct. 
A)  GDP incorporates a large number of non-market goods and services that are of little value to society. 
B)  GDP places too much emphasis on the value of leisure. 
C)  GDP fails to account for the quality of the environment. 
D)  All of the above are correct.

Question 9

Which of the following is a way to compute GDP?

Accepted Answer

A)  total income earned. 
B)  total expenditures on final goods. 
C)  add up the market values of all final goods and services. 
D)  All of the above are correct. 
A)  total income earned. 
B)  total expenditures on final goods. 
C)  add up the market values of all final goods and services. 
D)  All of the above are correct.

Question 10

The GDP deflator can be used to take inflation out of nominal GDP.

Accepted Answer

A) True 
 B)False

Question 11

Table 23-6
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013.  
-Refer to Table 23-6. In 2012, this country's real GDP was

Accepted Answer

A)  $510. 
B)  $690. 
C)  $930. 
D)  $780. 
A)  $510. 
B)  $690. 
C)  $930. 
D)  $780.

Question 12

onsumer goods that are produced, go into inventory, and are not sold during the current period are

Accepted Answer

A)  counted as intermediate goods and so are not included in current period GDP. 
B)  counted in current period GDP only if the firm that produced them sells them to another firm. 
C)  included in current period GDP as inventory investment. 
D)  included in current period GDP as consumption. 
A)  counted as intermediate goods and so are not included in current period GDP. 
B)  counted in current period GDP only if the firm that produced them sells them to another firm. 
C)  included in current period GDP as inventory investment. 
D)  included in current period GDP as consumption.

Question 13

For an economy as a whole, income must equal expenditure because

Accepted Answer

A)  the number of firms is equal to the number of households in an economy. 
B)  individuals can only spend what they earn each period. 
C)  every dollar of spending by some buyer is a dollar of income for some seller. 
D)  every dollar of saving by some consumer is a dollar of spending by some other consumer. 
A)  the number of firms is equal to the number of households in an economy. 
B)  individuals can only spend what they earn each period. 
C)  every dollar of spending by some buyer is a dollar of income for some seller. 
D)  every dollar of saving by some consumer is a dollar of spending by some other consumer.

Question 14

Because every transaction has a buyer and a seller,

Accepted Answer

A)  GDP is more closely associated with an economy's income than it is with an economy's expenditure. 
B)  every transaction contributes equally to an economy's income and to its expenditure. 
C)  the number of firms must be equal to the number of households in a simple circular-flow diagram. 
D)  firms' profits are necessarily zero in a simple circular­flow diagram. 
A)  GDP is more closely associated with an economy's income than it is with an economy's expenditure. 
B)  every transaction contributes equally to an economy's income and to its expenditure. 
C)  the number of firms must be equal to the number of households in a simple circular-flow diagram. 
D)  firms' profits are necessarily zero in a simple circular­flow diagram.

Question 15

For monitoring fluctuations in the national economy, which measure of income is best?

Accepted Answer

A)  GDP 
B)  GNP 
C)  NNP 
D)  It does not matter very much which measure we use. 
A)  GDP 
B)  GNP 
C)  NNP 
D)  It does not matter very much which measure we use.

Question 16

GDP excludes the value of intermediate goods because their value is included in the value of final goods.

Accepted Answer

A) True 
 B)False

Question 17

Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,

Accepted Answer

A)  nominal GDP is $50, real GDP is $100, and the GDP deflator is 50. 
B)  nominal GDP is $50, real GDP is $100, and the GDP deflator is 200. 
C)  nominal GDP is $100, real GDP is $50, and the GDP deflator is 50. 
D)  nominal GDP is $100, real GDP is $50, and the GDP deflator is 200. 
A)  nominal GDP is $50, real GDP is $100, and the GDP deflator is 50. 
B)  nominal GDP is $50, real GDP is $100, and the GDP deflator is 200. 
C)  nominal GDP is $100, real GDP is $50, and the GDP deflator is 50. 
D)  nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.

Question 18

GDP is defined as the

Accepted Answer

A)  value of all goods and services produced within a country in a given period of time. 
B)  value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. 
C)  value of all final goods and services produced within a country in a given period of time. 
D)  value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. 
A)  value of all goods and services produced within a country in a given period of time. 
B)  value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. 
C)  value of all final goods and services produced within a country in a given period of time. 
D)  value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

Question 19

What are exports, and how are they different from imports?

Accepted Answer

Exports are domestically produ

Question 20

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?

Accepted Answer

A)  Since the televisions eventually will be bought by consumers, they will be included as consumption in the first quarter. 
B)  Since the televisions were not purchased in the first quarter, they will be counted as an increase in second- quarter GDP. 
C)  The televisions will be counted as a change in inventory in the first quarter and so will be included in first- quarter GDP. 
D)  The televisions will be counted as a change in inventory in the first quarter, and when sold in the second quarter will raise second-quarter GDP. 
A)  Since the televisions eventually will be bought by consumers, they will be included as consumption in the first quarter. 
B)  Since the televisions were not purchased in the first quarter, they will be counted as an increase in second- quarter GDP. 
C)  The televisions will be counted as a change in inventory in the first quarter and so will be included in first- quarter GDP. 
D)  The televisions will be counted as a change in inventory in the first quarter, and when sold in the second quarter will raise second-quarter GDP.

Exam 23: Measuring a Nations Income

An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,

Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of

Real GDP per person tells us the income and expenditure of the average person in the economy.

If the U.S. government reports that GDP in the third quarter was $16 trillion at an annual rate, then the amount of income and expenditure during quarter three was $4 trillion.

In the equation Y = C + I + G + NX,

A farmer sells five pounds of pecans to a Smith's Fresh Pecans for $10. Smith's Fresh Pecans resells three pounds for $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP?

GDP is not a perfect measure of well-being; for example,

Which of the following is a way to compute GDP?

The GDP deflator can be used to take inflation out of nominal GDP.

Table 23-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013. -Refer to Table 23-6. In 2012, this country's real GDP was

onsumer goods that are produced, go into inventory, and are not sold during the current period are

For an economy as a whole, income must equal expenditure because

Because every transaction has a buyer and a seller,

For monitoring fluctuations in the national economy, which measure of income is best?

GDP excludes the value of intermediate goods because their value is included in the value of final goods.

GDP is defined as the

What are exports, and how are they different from imports?

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?

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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