Question 1

To avoid the problem of _____, the value of ______ goods must be excluded when country's GDP is being calculated.

Accepted Answer

A)  inflation; capital 
B)  double counting; durable 
C)  double counting; intermediate 
D)  inflation; intermediate

Question 2

If the net exports of a country are positive, then we can conclude that its imports are:

Accepted Answer

A)  greater than exports. 
B)  less than exports. 
C)  equal to exports. 
D)  zero.

Question 3

If the CPI in 2017 is 100 and the inflation rate between 2017 and 2018 is 6 percent, then the CPI for 2018 is

Accepted Answer

A)  102. 
B)  104. 
C)  106. 
D)  108.

Question 4

Suppose that a baker buys flour from a store to bake a wedding cake that has been sold to a couple getting married. In this case, the flour is an example of _____ good, and the cake is an example of _____ good.

Accepted Answer

A)  an intermediate; a capital 
B)  a final; an intermediate 
C)  a capital; an intermediate 
D)  an intermediate; a final

Question 5

Which one of the following will be included in the GDP of a country?

Accepted Answer

A)  the value of volunteer work done by students on their college campus 
B)  the value of leisure time enjoyed by the citizens of the country 
C)  the value of a car manufactured in the country but held as inventory 
D)  the value of goods and services transacted in the underground economy

Question 6

Which one of the following is included in calculating the GDP?

Accepted Answer

A)  net exports 
B)  purchase of stocks 
C)  value of intermediate goods 
D)  unemployment benefits

Question 7

If the nominal GDP of a country increases and the real GDP remains constant, then we can conclude that:

Accepted Answer

A)  both prices and production increased. 
B)  only production increased while prices remained constant. 
C)  only prices increased while production remained constant. 
D)  both prices and production remained constant.

Question 8

Which one of the following transactions will be included in the GDP of a country?

Accepted Answer

A)  the purchase of stocks and bonds by the people who live in that country 
B)  the purchase of goods and services that are made in that country but are bought by people who live abroad 
C)  the value of volunteer work that is done by the people who live in the country 
D)  the value of environmental degradation that is caused from manufacturing activities

Question 9

Ford Motors produces a $20,000 car in Detroit in November 2017. This car is sold to a consumer in January 2018 for $20,000, who in turn sells it to a college student in June 2018 for $18,000. Because of these transactions, the 2017 GDP increased by _____, and the 2018 GDP increased by:

Accepted Answer

A)  zero; $38,000. 
B)  zero; $20,000. 
C)  $20,000; $18,000. 
D)  $20,000; zero.

Question 10

Which one of the following will NOT be included in the GDP of a country?

Accepted Answer

A)  the value of a car manufactured in the country but exported abroad 
B)  volunteer work done by students at their college campus 
C)  the amount spent by firms on replacing worn-out machines 
D)  the amount spent by the federal government on hurricane relief

Question 11

The costs associated with people who are trying to minimize the erosive effects of inflation on the value of money are known as _____ costs.

Accepted Answer

A)  shoe-leather 
B)  menu 
C)  marginal 
D)  fixed

Question 12

The Consumer Price Index (CPI) in January 2017 was 244.02 and the CPI in January 2018 was 249.24. Therefore, the rate of inflation between January 2017-January 2018 was _____ percent.

Accepted Answer

A)  5.22 
B)  2.14 
C)  6.31 
D)  4.86

Question 13

If the total labor force of an economy is 1,000 and 40 of these people are unemployed, then the unemployment rate of the economy is _____ percent.

Accepted Answer

A)  40 
B)  10 
C)  5 
D)  4

Question 14

An economy has an unemployment rate of 10 percent and a total labor force of 2,000. Therefore, the economy has _____ employed workers and _____ unemployed workers.

Accepted Answer

A)  1,500; 500 
B)  1,600; 400 
C)  1,700; 300 
D)  1,800; 200

Question 15

Alex is a skilled furniture maker, but there are no jobs available in the economy that utilize his furniture-making skills. If Alex remains unemployed, then in which category of unemployment will he fall under?

Accepted Answer

A)  frictional unemployment 
B)  seasonal unemployment 
C)  cyclical unemployment 
D)  structural unemployment

Question 16

Final goods and services are goods and services that are:

Accepted Answer

A)  purchased by the government. 
B)  purchased by the ultimate consumers. 
C)  exported out of the country. 
D)  purchased by firms to produce more goods.

Question 17

Suppose that a grocery store has to constantly keep changing the list price of all the products that it sells because of inflation. The costs that are associated with this are known as _____ costs.

Accepted Answer

A)  menu 
B)  sunk 
C)  variable 
D)  shoe-leather

Question 18

The nominal GDP and the Consumer Price Index (CPI) for the country of Stewarton in 2017 were $15 trillion and 125, respectively. In 2012, the CPI for Stewarton was 120. Therefore, the real GDP of Stewarton in 2012 dollars is _____ trillion.

Accepted Answer

A)  $16.2 
B)  $15.2 
C)  $14.4 
D)  $14.2

Question 19

If the Consumer Price Index (CPI) in 2015 was 243 and the CPI in 2016 was 248, then the inflation rate between 2015 and 2016 was _____ percent, and the inflation rate between the base year and 2016 was _____ percent.

Accepted Answer

A)  5; 48 
B)  2.05; 148 
C)  2.05; 48 
D)  5; 148

Question 20

Suppose that the cost of a representative basket used to calculate the Consumer Price Index (CPI) was $1,000 in the base year 2000. The same basket cost $1,100 in 2016 and $1,150 in 2017. Therefore, the rate of inflation between 2016 and 2017 is _____ percent.

Accepted Answer

A)  4 
B)  4.5 
C)  5 
D)  15

Exam 13: Measuring an Economys Performance

To avoid the problem of _, the value of __ goods must be excluded when country's GDP is being calculated.