Question 1

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

Accepted Answer

A)   $150 to GDP.
B)   $250 to GDP.
C)   between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.
D)   $400 to GDP. B

Question 2

How is net national product (NNP) calculated?

Accepted Answer

A)   Saving is added to the total income of a nation's citizens.
B)   Saving is added to the total income earned within a nation.
C)   Depreciation losses are subtracted from the total income of a nation's citizens.
D)   Depreciation losses are subtracted from the total income earned within a nation. C

Question 3

Table 23-4
The table below reports nominal and real GDP for the U.S. from 1929 to 1932. 
-Refer to Table 23-4. What are the GDP deflator and the inflation rate for 1931?

Accepted Answer

A)   9.16, -11.5
B)   9.16, -10.3
C)   1091.37, 10.3
D)   1091.37, 11.5 B

Question 4

Which of the following is included in the consumption component of U.S. GDP?

Accepted Answer

A)   purchases of staplers, paper clips, and pens by U.S. business firms
B)   purchases of natural gas by U.S. households
C)   purchases of newly constructed homes by U.S. households
D)   All of the above are correct.

Question 5

Table 23-5
The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015.
Prices and Quantities 
-Refer to Table 23-5. In 2018, this country's

Accepted Answer

A)   real GDP was $1080, and the GDP deflator was 156.3.
B)   real GDP was $1080, and the GDP deflator was 177.8.
C)   real GDP was $1920, and the GDP deflator was 177.8.
D)   real GDP was $1920, and the GDP deflator was 156.3.

Question 6

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

Accepted Answer

A)   GDP is not a useful measure of society's welfare.
B)   GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government.
C)   GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare.
D)   GDP is still the best measure of society's welfare because these other values cannot actually be measured.

Question 7

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

Accepted Answer

A)   It more than doubled.
B)   It increased, but it less than doubled.
C)   It was unchanged.
D)   It decreased.

Question 8

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?

Accepted Answer

A)   Sam's and Ellen's.
B)   Sam's but not Ellen's.
C)   Ellen's but not Sam's.
D)   Neither Sam's nor Ellen's.

Question 9

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. What was this country's real GDP in 2016?

Accepted Answer

A)   $10,575
B)   $11,250
C)   $10,950
D)   $12,550

Question 10

Disposable income is

Accepted Answer

A)   the total income earned by a nation's permanent residents.
B)   the total income earned by a nation's residents in the production of goods and services.
C)   the income that households and non-corporate businesses receive.
D)   the income that households and businesses have remaining after satisfying their obligations to the government.

Question 11

The GDP deflator for years subsequent to the base year measures the change in

Accepted Answer

A)   nominal GDP from the base year that cannot be attributable to a change in real GDP.
B)   real GDP from the base year that cannot be attributable to a change in nominal GDP.
C)   nominal GDP from the base year that cannot be attributable to a change in prices.
D)   real GDP from the base year that cannot be attributable to a change in prices.

Question 12

Which of the following examples of production of goods and services would be included in U.S. GDP?

Accepted Answer

A)   Sally, a Canadian citizen, works on a drilling crew in North Dakota for Northland Gas Services, and Northland sells the natural gas to a utility company in Canada.
B)   Jim grows pecans for his family in the yard of their San Antonio home.
C)   Joe grows marijuana in his Kansas City home and sells it to his friends and neighbors.
D)   None of the above examples of production would be included in U.S. GDP.

Question 13

The government's purchases of goods but not its purchases of services are included in GDP.

Accepted Answer

A) True 
 B)False

Question 14

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 2013, this country's real GDP was

Accepted Answer

A)   $500.
B)   $700.
C)   $900.
D)   $1200.

Question 15

Consider the following three items of spending by the government: (i) the federal government pays a $500 unemployment benefit to an unemployed person; (ii) the federal government makes a $2,000 salary payment to a Navy lieutenant; (iii) the city of Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman. Which of these payments contributes directly to government purchases in the national income accounts?

Accepted Answer

A)   only item (i) 
B)   only item (ii) 
C)   only items (i)  and (ii) 
D)   only items (ii)  and (iii)

Question 16

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

Question 17

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2008, Quality Motors produced $25 million worth of automobiles and sold $12 million in the U.S. and $13 million in Mexico. In addition, it sold $2 million from the previous year's inventory in the U.S. The transactions just described contribute how much to U.S. GDP for 2008?

Accepted Answer

A)   $12 million
B)   $14 million
C)   $25 million
D)   $27 million

Question 18

Table 23-1
The table below contains data for Chereaux for the year 2015. 
-Refer to Table 23-1. Net national product for Chereaux in 2015 is

Accepted Answer

A)   $194.
B)   $196.
C)   $198.
D)   $204.

Question 19

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study

Accepted Answer

A)   nominal GDP.
B)   real GDP.
C)   the GDP deflator.
D)   GNP.

Question 20

Table 23-5
The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015.
Prices and Quantities 
-Refer to Table 23-5. This country's inflation rate from 2017 to 2018 was

Accepted Answer

A)   20.0%.
B)   21.8%.
C)   38.9%.
D)   28.0%.

Exam 23: Measuring a Nations Income

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

How is net national product (NNP) calculated?

Table 23-4 The table below reports nominal and real GDP for the U.S. from 1929 to 1932. -Refer to Table 23-4. What are the GDP deflator and the inflation rate for 1931?

Which of the following is included in the consumption component of U.S. GDP?

Table 23-5 The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015. Prices and Quantities -Refer to Table 23-5. In 2018, this country's

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?

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. What was this country's real GDP in 2016?

Disposable income is

The GDP deflator for years subsequent to the base year measures the change in

Which of the following examples of production of goods and services would be included in U.S. GDP?

The government's purchases of goods but not its purchases of services are included in 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 2013, this country's real GDP was

A country reported a nominal GDP of $85 billion in 2010 and $100 billion in 2009. It also reported a GDP deflator of 100 in 2010 and 105 in 2009. Between 2009 and 2010,

Table 23-1 The table below contains data for Chereaux for the year 2015. -Refer to Table 23-1. Net national product for Chereaux in 2015 is

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study

Table 23-5 The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015. Prices and Quantities -Refer to Table 23-5. This country's inflation rate from 2017 to 2018 was