Question 1

Which of the following is a true statement about real and nominal GDP?

Accepted Answer

A)  If nominal GDP increases from one year to the next, we know that production of goods and services has risen. 
B)  Nominal GDP is a better measure than real GDP in comparing changes in the production of goods and service year after year. 
C)  Increases in average prices do not affect the calculation of nominal GDP. 
D)  If real GDP increases from one year to the next, we know that production of goods and services has risen.

Question 2

Which of the following could cause nominal GDP to increase next year,but real GDP to decrease?

Accepted Answer

A)  The price level rises and the quantity of final goods and services produced rises. 
B)  The price level rises and the quantity of final goods and services produced falls. 
C)  The price level falls and the quantity of final goods and services produced rises. 
D)  The price level falls and the quantity of final goods and services produced falls.

Question 3

Increases in real GDP would understate the well-being of a country over time if,over that time period,the

Accepted Answer

A)  crime rate increased. 
B)  percentage of people addicted to illegal drugs increased. 
C)  amount of pollution decreased. 
D)  average hours worked per week increased.

Question 4

The GDP deflator is the

Accepted Answer

A)  difference between real GDP and nominal GDP multiplied by 100. 
B)  difference between nominal GDP and real GDP divided by 100. 
C)  ratio of real GDP to nominal GDP multiplied by 100. 
D)  ratio of nominal GDP to real GDP multiplied by 100.

Question 5

Which of the following statements about the underground economy is true?

Accepted Answer

A)  The underground economy in developing countries amounts to less than 10% of measured GDP. 
B)  Most transactions that occur in the underground economy are included in the calculation of GDP. 
C)  Excluding underground economy production from measured GDP causes errors in GDP growth estimates in the long run. 
D)  Income that is earned but not reported as income for tax purposes is included in the calculation of GDP.

Question 6

If an increase in crime causes households to spend money on police and security systems,GDP will rise.

Accepted Answer

A) True 
 B)False

Question 7

The nominal GDP of the U.S.in 2016 was approximately $18.6 trillion.This means that

Accepted Answer

A)  the value of output in 2016 was around $18.6 trillion. 
B)  total income in 2016 was around $18.6 trillion. 
C)  total spending in 2016 was around $18.6 trillion. 
D)  all of the above are true.

Question 8

In the circular flow model,the value of total production for an economy ________ the value of total expenditures on final goods and services.

Accepted Answer

A)  equals 
B)  is greater than 
C)  is less than 
D)  may be greater than or less than

Question 9

In 2016,Ford's sales were rising,but in early 2017,Ford's sales declined.Ford and the U.S.automobile industry were experiencing the effects of

Accepted Answer

A)  inflation. 
B)  the underground economy. 
C)  the business cycle. 
D)  depreciation.

Question 10

Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.

Accepted Answer

A)  2 percent 
B)  8 percent 
C)  13 percent 
D)  over 50 percent

Question 11

Use the formula for the GDP deflator to explain how it is affected by an increase in prices in the economy.If the value of the deflator equals 100,what does that tell you about that year with respect to the base year?

Accepted Answer

The answer of Use the formula for the GDP deflator...

Question 12

Relative to Canada,China has a ________ growth rate in GDP and a ________ level of real GDP.

Accepted Answer

A)  higher; lower 
B)  higher; higher 
C)  lower; lower 
D)  lower; higher

Question 13

Which of the following would not be included in the expenditure category called investment expenditures?

Accepted Answer

A)  spending on new houses 
B)  a purchase of shares of preferred stock 
C)  a purchase of a copy machine by FedEx Office 
D)  the cars held in inventory on a local Ford dealer's lot

Question 14

An example of an intermediate good would be

Accepted Answer

A)  the bread that goes into a sub sandwich that is sold by Quiznos. 
B)  the soda pop sold by Quiznos. 
C)  a sub sandwich sold by Quiznos. 
D)  the potato chips sold by Quiznos.

Question 15

The purchase of a new house is included in

Accepted Answer

A)  consumption expenditures. 
B)  investment expenditures. 
C)  government purchases. 
D)  net exports.

Question 16

The best measure of the income households actually have available to spend is

Accepted Answer

A)  personal income. 
B)  disposable personal income. 
C)  national income. 
D)  net national income.

Question 17

Government spending on transfer payments is included in government purchases when calculating GDP because it results in the production of new goods and services.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would increase gross private domestic investment in an economy?

Accepted Answer

A)  an increase in the shares of Apple stock households own 
B)  an increase in the number of workers Apple hires 
C)  an increase in the level of Apple's inventory 
D)  an increase in the number of highway construction projects the government is funding

Question 19

An example of business fixed investment spending is

Accepted Answer

A)  a purchase of a home by a household. 
B)  a purchase of a computer by an accounting firm. 
C)  a purchase of a bond by General Electric Corporation. 
D)  $200 million of unsold cars at a car dealership.

Question 20

Table 12-24
 $\begin{array}{|l|r|c|}
\hline & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} \
\hline \text { Nominal GDP } & \mathbf{\$ 1 0 , 0 0 0} & \$ 15,000 \
\hline \text { Real GDP } & 9,500 & 10,500 \
\hline
\end{array}$
-Refer to Table 12-24.Given the following information,calculate the rate of increase in the price level from 2017 to 2018.Use the percent change in the GDP deflator.

Accepted Answer

The answer of Table 12-24
 \(\begin{array}{|l|r|c|}
\hline & \mathbf{2 0 1...

Exam 12: GDP: Measuring Total Production and Income

Which of the following is a true statement about real and nominal GDP?

Which of the following could cause nominal GDP to increase next year,but real GDP to decrease?

Increases in real GDP would understate the well-being of a country over time if,over that time period,the

The GDP deflator is the

Which of the following statements about the underground economy is true?

If an increase in crime causes households to spend money on police and security systems,GDP will rise.

The nominal GDP of the U.S.in 2016 was approximately $18.6 trillion.This means that

In the circular flow model,the value of total production for an economy ________ the value of total expenditures on final goods and services.

In 2016,Ford's sales were rising,but in early 2017,Ford's sales declined.Ford and the U.S.automobile industry were experiencing the effects of

Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.

Use the formula for the GDP deflator to explain how it is affected by an increase in prices in the economy.If the value of the deflator equals 100,what does that tell you about that year with respect to the base year?

Relative to Canada,China has a growth rate in GDP and a level of real GDP.

Which of the following would not be included in the expenditure category called investment expenditures?

An example of an intermediate good would be

The purchase of a new house is included in

The best measure of the income households actually have available to spend is

Government spending on transfer payments is included in government purchases when calculating GDP because it results in the production of new goods and services.

Which of the following would increase gross private domestic investment in an economy?

An example of business fixed investment spending is