Macroeconomics Ch 7

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Name Test Bank Chapter 07: Tracking the Macroeconomy Description Question pool for Chapter 07: Tracking the Macroeconomy Instructions

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Question 1

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Question The economic crisis in Portugal in December 1975: Answer was inevitable because capitalism does not work in Europe. ended in the government's seizing control of the nation's factories. was somewhat overstated due to problems in measuring economic activity. caused Poland to lose its membership in the European Union. Add Question Here

Question 2

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Question According to the circular flow diagram, which of the following economic agents engages in consumer spending? Answer firms households factor markets financial markets Add Question Here

Question 3

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Question A share in the ownership of a company held by a shareholder is considered a(n): Answer bond. stock. dividend. IOU. Add Question Here

Question 4

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Question Which of the following would accurately characterize the portion of a firm's profit paid to the owner of one share of its stock? Answer interest dividend stock bond Add Question Here

Question 5

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Question Which of the following is considered to be an IOU? Answer stock bond interest dividend Add Question Here

Question 6

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Question Households derive income from all of the following except: Answer wages or labor income. interest from lending. rent from allowing firms to use their land. imports. Add Question Here

Question 7

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Question Total income households have after paying taxes and receiving government transfers is called: Answer disposable income. private savings. aggregate spending. investment. Add Question Here

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Question 8

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Question The national accounts keep track of all except: Answer the spending of consumers and the government. the sales of producers. business investment. exchange rates. Add Question Here

Question 9

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Question Private savings is: Answer disposable income less taxes. disposable income less consumption. wealth. wealth plus government transfer payments. Add Question Here

Question 10

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Question A stock in a company is: Answer a share of ownership of a company held by a shareholder. an IOU that pays interest. a portion of a firm's profits paid to stock owners. part of private savings. Add Question Here

Question 11

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a share of ownership of a company held by a shareholder. an IOU that pays interest. a portion of a firm's profits paid to stock owners. part of private savings. Add Question Here

Question 12

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) What is GDP in this economy? Answer $100 $400 $500 $600 Add Question Here

Question 13

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Question Figure: Circular Flow Model

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Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in consumer spending? Answer an increase in the nominal GDP a decrease in the nominal GDP an increase in the unemployment rate a decrease in the inflation rate Add Question Here

Question 14

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in consumer spending? Answer an increase in the nominal GDP an increase in the real GDP an increase in the unemployment rate an increase in the inflation rate Add Question Here

Question 15

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in investment spending? Answer a decrease in the nominal GDP an increase in the nominal GDP an increase in the unemployment rate

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a decrease in the inflation rate Add Question Here

Question 16

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in investment spending? Answer an increase in the nominal GDP an increase in the real GDP an increase in the unemployment rate an increase in the inflation rate Add Question Here

Question 17

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in government spending? Answer an increase in the nominal GDP a decrease in the real GDP an increase in the unemployment rate a decrease in the inflation rate Add Question Here

Question 18

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Question Figure: Circular Flow Model

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Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in government spending? Answer an increase in the nominal GDP an increase in the real GDP an increase in the unemployment rate an increase in the inflation rate Add Question Here

Question 19

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in exports? Answer a decrease in the nominal GDP a decrease in the real GDP a decrease in the unemployment rate a decrease in the inflation rate Add Question Here

Question 20

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in exports? Answer a decrease in the nominal GDP an increase in the real GDP a decrease in the unemployment rate

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an increase in the inflation rate Add Question Here

Question 21

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in imports? Answer an increase in the nominal GDP a decrease in the nominal GDP a decrease in the unemployment rate an increase in the nominal GDP and in the unemployment rate Add Question Here

Question 22

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is a decrease in imports? Answer an increase in the nominal GDP a decrease in the nominal GDP an increase in the unemployment rate an increase in the nominal GDP, a decrease in the nominal GDP, and an increase in the unemployment rate Add Question Here

Question 23

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Question Figure: Circular Flow Model

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Reference: Ref 7-01

(Figure: Circular Flow Model) What are net exports in this economy? Answer $0 $30 $60 $100 Add Question Here

Question 24

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) What is disposable income in this economy? Answer $0 $100 $400 $500 Add Question Here

Question 25

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Question Figure: Circular Flow Model

Reference: Ref 7-01

(Figure: Circular Flow Model) How does the government finance its purchases of goods and services? Answer by printing money by taxes by borrowing by taxes and borrowing Add Question Here

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Question 26

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Question In the circular flow model, households: Answer receive transfer payments from the government. buy resources in the factor markets. sell products in the market for goods and services. issue stocks and bonds to raise capital. Add Question Here

Question 27

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Question The indirect ownership of physical capital refers to households owning: Answer cash. stock. savings accounts. their houses. Add Question Here

Question 28

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Question The money spent on domestically produced final goods and services: Answer is the GDP. appears as income to someone. appears in the circular flow model. is the GDP, appears as income to someone, and appears in the circular flow model. Add Question Here

Question 29

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Question Most households derive the bulk of their income from which of the following sources? Answer wages interest profit rent Add Question Here

Question 30

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Question An example of a government transfer is a(n): Answer expenditure on an interstate highway. bequest from a deceased relative. Social Security payment. salary for members of the armed forces. Add Question Here

Question 31

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Question Which of the following would NOT be considered a government transfer? Answer unemployment compensation food stamps payments by the Defense Department for a new weapons system Medicare benefits paid to someone who is indigent Add Question Here

Question 32

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Question Disposable income equals: Answer income plus government transfers minus taxes. income plus government spending minus taxes. income minus taxes plus government spending. income minus taxes minus government transfers. Add Question Here

Question 33

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Question The market(s) that channel excess savings of households into investment spending by firms is(are) known as: Answer the stock market. the financial markets. the international market. the bond market. Add Question Here

Question 34

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Question Goods that are produced domestically but sold abroad are: Answer imports.

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exports. part of domestic consumption. investment. Add Question Here

Question 35

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Question Investment spending represents spending on: Answer productive physical capital. stocks. mutual funds. corporate bonds. Add Question Here

Question 36

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Question Disposable income in a particular period is: Answer total income earned. income earned plus government transfer payments. income earned plus government transfer payments less taxes. income earned plus government transfer payments less taxes and savings. Add Question Here

Question 37

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Question Goods and services sold to people in other countries are known as: Answer imports. investments. exports. transfer payments. Add Question Here

Question 38

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Question Investment spending is: Answer spending on productive physical capital. spending on bonds. spending on shares of stock. spending on productive physical capital, on bonds, and on shares of stock. Add Question Here

Question 39

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Question An example of investment spending would be: Answer purchase of a bond. purchase of a loaf of bread. purchase of a new productive machine. purchase of a bond, a loaf of bread or a new productive machine. Add Question Here

Question 40

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Question Government borrowing is: Answer the amount of funds raised by government in the financial markets. government spending on goods and services. government tax revenues. the amount of funds raised by government in the financial markets, government spending on goods and services, and government tax revenues. Add Question Here

Question 41

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Question If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's _____. Answer disposable income. gross domestic product. trade deficit. value added. Add Question Here

Question 42

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Question Which of the following represents an outflow of funds from a domestic economy? Answer household savings government tax collections government transfer payments imports

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Question 43

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Question The value, at current market prices, of the final goods and services produced during a particular period is: Answer disposable personal product. gross foreign factor output. gross personal product. gross domestic product. Add Question Here

Question 44

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Question If we add up all the values added at every stage of production for a good, we will get: Answer the total cost of the labor used to produce the good. the prices of the factors of production used to produce the good. the final value of the good. the intermediate value of the good. Add Question Here

Question 45

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Question Gross domestic product is defined as: Answer consumer spending + government purchases + financial spending + exports – imports. consumer spending + government transfers + investment spending + exports – imports. disposable income + taxes + investment spending + exports + imports. consumer spending + government purchases + investment spending + exports – imports. Add Question Here

Question 46

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Question Which of the following is the best definition of GDP? Answer the total dollar value of all final goods and services produced in the economy during a given year the total value of all goods and services produced in the economy during a given year the total value of all primary, intermediate, and final goods and services produced in the economy during a given year the total value of all goods and services produced and sold in the economy during a given year Add Question Here

Question 47

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Question Gross domestic product or GDP is: Answer the total dollar value intermediate goods and services produced in the economy in a given time period. the total dollar value of wages paid to producing workers in a given time period. the total dollar value of final goods and services produced in the economy in a given time period. the total dollar value of government production in a given time period. Add Question Here

Question 48

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Question GDP is the: Answer total market value of all final goods and services produced in one year. total accumulated wealth of an economy. volume of all dollar transactions made in an economy in one year. dollar amount of all sales made in the economy in one year. Add Question Here

Question 49

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Question Gross domestic product is the economy's total production of _______ for a given time period. Answer good and services final goods and services intermediate goods and services consumer goods and services Add Question Here

Question 50

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Question Which of the following is false? Gross domestic product: Answer is aggregate output. is the total production of final goods and services. grows during an expansion. is the total production of all final and intermediate goods and services. Add Question Here

Question 51

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Question Which one of the following transactions is included in a current year's GDP as investment spending?

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Answer

ABC company purchased 10,000 shares of IBM stock. Ronnie bought a new BMW. Anton purchased his friend's condo. Maggie bought a play-gym set for her day-care business. Add Question Here

Question 52

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Question Table: Calculating GDP

Reference: Ref 7-02

(Table: Calculating GDP) Using the information in the table provided, which of the following is the correct calculation for GDP in 2008? Answer $47,475 $12,200 $21,485 $34,085 Add Question Here

Question 53

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Question Which one of the following is an example of consumption expenditure? Answer Samantha bought an oven for her cooking show on Food Network. Stephanie bought a laptop for her brother. Jim purchased 200 shares of Google stock. Mr. Smith spent $1500 to buy a used car for his son. Add Question Here

Question 54

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Question GDP is the sum of: Answer personal consumption, investment, government purchases, exports and imports. personal consumption, investment, government purchases, and net exports. personal consumption, investment, government purchases, and net imports. value added, net imports, and government purchases. Add Question Here

Question 55

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Question Table: GDP

Reference: Ref 7-03

(Table: GDP) The GDP for 2007, was: Answer $94 billion. $188 billion. $168 billion. $139 billion. Add Question Here

Question 56

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Question The Arcadia Entertainment Co. produced 20,000 DVD's of the movie Hulk in 2007. Only 4000 copies remained unsold at the end of 2007, as a result: Answer only 16,000 DVD's should be included in GDP in 2007 as consumption expenditure. all 20,000 DVD's will be included in GDP in 2007, 16,000 as consumption expenditure and 4,000 as investment

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expenditure only 16,000 DVD's are included in GDP of 2007, remaining 4,000 is counted in GDP of 2008. all 20,000 DVD's are initially counted in 2007 GDP as consumption expenditure, but subtracted and added to 2008 GDP as the merchandise gets sold. Add Question Here

Question 57

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Question In 2008, consumption spending is $7,000, government purchases is $2,000 and investment spending is $1,500. If GDP for 2008 is $10,300, then: Answer export is $400 and import is $200. export is $100 and import is $200. export is $600 and import is $800. export is $500 and import is $300. Add Question Here

Question 58

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Question A transfer payment is a payment for: Answer a military transfer to a war-zone. which no services were rendered during the current year. transfer of a debt to a different person. being transferred to a different city by your employer. Add Question Here

Question 59

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Question Enchante Inc., a designer clothing company buys $400 worth of silk from a silk trader, and $30 worth of accessories from AccessoriesRUs to produce each dress. If the value-added by Enchante is equal to $200, then according to the value-added approach, the price of the designer dress should be: Answer $630. $230. $200. $830. Add Question Here

Question 60

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Question The Boeing Corporation buys $3 million worth of steel from the Steel manufacturers, $2.5 million worth of computerized hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing Corporation sells this particular model of aircraft at $10 million. The value-added by Boeing is equal to: Answer $3.5 million. $16.5 million. $13 million. $15.5 million. Add Question Here

Question 61

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Question Which one of the following equations correctly measures GDP? Answer C + I + G + IM – X C + I + G + X – IM C + I + G + X + IM C + I + G – T + TR Add Question Here

Question 62

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Question Don has built an extension to his house, this transaction will be: Answer not included in GDP because it is not produced for the marketplace. included in GDP because Don is a professional builder. not included in GDP because it is an intermediate good. included in GDP because building is Don's hobby. Add Question Here

Question 63

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Question Which one of the following transactions will be included in the official measurement of GDP? Answer Stan sold his house at a huge gain. Monica illegally downloaded movies to her laptop. Ben won the state lottery. Sean bought a new iPhone. Add Question Here

Question 64

Multiple Choice Question An example of an intermediate good will be: Answer

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wages paid to an employee. steel purchased by the aircraft manufacturers. vegetables purchased for your dinner. electric bills for the office. Add Question Here

Question 65

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Question The intermediate goods are not counted in the calculation of GDP, because: Answer that involves double-counting. these goods are not produced for the market. these are produced in the underground economy. these goods involve financial transactions. Add Question Here

Question 66

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Question Which of the following would NOT be included in this year's GDP? Answer the production of a television show the purchase of a new work truck the hiring of a new police officer your purchase of your neighbor's 2001 Toyota Add Question Here

Question 67

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Question Which of the following best represents the equation for GDP? Answer GDP = C+ I + G – X + IM GDP = C + I + G + X – IM GDP = C + I + G + Taxes – Value Added GDP = C + I + G + Taxes + X + IM Add Question Here

Question 68

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Question Of the following items, which would NOT be included in GDP? Answer the dollar value of a repair job done by your professor on his or her own car the dollar value of a lawyer's service new car sales by a local car dealer the production of new cars that were not sold in the current year Add Question Here

Question 69

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Question Goods that are produced in a particular period but not sold in that period: Answer count as consumption in the next year. are included in investment. are treated like exports. are classified as purely financial transactions. Add Question Here

Question 70

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Question Purchases of foreign-produced goods and services during a period are: Answer net exports. exports. imports. transfer payments. Add Question Here

Question 71

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Question A country's exports minus its imports during a period are: Answer net exports. gross exports. net imports. gross imports. Add Question Here

Question 72

Multiple Choice Question Net exports are calculated by subtracting: Answer imports from exports. exports from imports. out all intermediate goods. I, G, and value added from GDP.

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Question 73

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Question A nation's exports minus its imports: Answer equals its private investment. is net exports. is always a positive number. is equal to net transfer payments. Add Question Here

Question 74

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Question Which of the following would NOT be a part of GDP? Answer used car sales new residential construction a new truck purchased by a building contractor telephone service purchased for a home Add Question Here

Question 75

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Question An intermediate good would be: Answer a new boat purchased by a professor to be used on vacation. lumber used in building a house. payments to military personnel. a professor's salary. Add Question Here

Question 76

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Question The total volume of business sales in the economy is much larger than GDP because: Answer GDP understates the value of total output. the output approach to measuring GDP excludes intermediate transactions. GDP includes transfer payments. GDP excludes exports. Add Question Here

Question 77

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Question In the United States: Answer GNP is about twice GDP. GDP is about twice GNP. GDP exceeds GNP by depreciation plus indirect business taxes. GNP and GDP are about equal. Add Question Here

Question 78

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Question Which of the following would NOT be included in this year's GDP? Answer the production of a television show the purchase of a new hybrid truck the hiring of a new school teacher your purchase of your neighbor's house which was built in 1994 Add Question Here

Question 79

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Question If your professor wins the lottery: Answer GDP goes up. GDP goes down. GDP is not affected. the economy will clearly be better off. Add Question Here

Question 80

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Question Goods that are produced in a particular period but NOT sold in that period: Answer go into inventories and are called consumption. end up in inventories and are included in investment. are finally included in depreciation when they are sold. are classified as intermediate goods. Add Question Here

Question 81

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Question Which of the following would be classified as consumption?

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Answer

a new computer purchased by Federal Express for one of its corporate executives. a storage facility for a moving company. a new car purchased by an employee of a company for personal use. a dump truck purchased by a demolition company. Add Question Here

Question 82

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Question Which of the following would be an example of an intermediate good? Answer stocks and bonds purchased by a business executive a cellular telephone purchased by a college student a wedding ring purchased by an engineer for his fiancée tires purchased from Goodyear by General Motors for newly produced electric cars Add Question Here

Question 83

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Question The purchases of which of the following goods are included in GDP? Answer used goods newly issued stocks foreign-produced investment goods capital goods Add Question Here

Question 84

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Question Inventory investment is counted as investment because: Answer inventory is used for future production. inventory is a source of future sales. inventory has no opportunity cost. inventory is tax deductible. Add Question Here

Question 85

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Question The reason the dollar value of only final goods and services are counted in GDP is that: Answer we can only measure the value of final goods and services and can not measure the value of inputs. if we counted the value of all goods we would count inputs, like the value of steel in a new automobile, more than once. intermediate goods reduce GDP. only final goods and services matter for the economy. Add Question Here

Question 86

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Question The value of all the following goods is included in the calculation of Gross Domestic Product EXCEPT: Answer the value of Firestone tires sold at your local garage. the value of Bridgestone tires purchased by Ford Motor Co. the value of Goodyear tires purchased by the United States Secret Service. the value of Michelin tires purchased by Canadian car collectors. Add Question Here

Question 87

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Question A country's Gross National Product (GNP): Answer must be larger than its Gross Domestic Product (GDP). is the total factor income earned by residents of a country. includes factor income earned by foreigners. excludes factor income earned abroad by Americans. Add Question Here

Question 88

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Question Table: Furniture Production Schedule

Reference: Ref 7-04

(Table: Furniture Production Schedule) What is the value added at all stages of the production process of the furniture as described in the accompanying table? Answer $800 $1,200 $1,800 $2,000

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Question 89

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Question Which of the following is NOT included in investment spending in the national income accounts? Answer new residential construction the purchase of machinery and other productive physical capital the purchase of stocks and bonds by a business spending on inventories Add Question Here

Question 90

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Question Suppose that Mr. Green Jeans sells $5,000 of wheat to Big Ben Bakery. Big Ben uses the wheat to make flour and then hamburger buns, which they sell to Hamburger Heaven for $11,000. Hamburger Heaven also buys $20,000 of beef from a rancher. Hamburger Heaven uses the beef and buns to make 10,000 hamburgers which are sold for $5 each. How much do these transactions add to GDP? Answer $86,000 $36,000 $31,000 $50,000 Add Question Here

Question 91

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Question Value added in national income accounts refers to the: Answer value added by labor to the production process. difference in the final price and the value of inputs purchased. difference in profits at various stages of production. value of all the inputs used by the final producer. Add Question Here

Question 92

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Question Table: Measuring GDP

Reference: Ref 7-05

(Table: Measuring GDP) GDP is: Answer $500 billion. $850 billion. $995 billion. $1,000 billion. Add Question Here

Question 93

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Question Table: Measuring GDP

Reference: Ref 7-05

(Table: Measuring GDP) Total expenditures on GDP by the household sector are: Answer $100 billion. $150 billion. $200 billion. $500 billion. Add Question Here

Question 94

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Question Table: Measuring GDP

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Reference: Ref 7-05

(Table: Measuring GDP) Government purchases of goods and services are: Answer $50 billion. $100 billion. $200 billion. $300 billion. Add Question Here

Question 95

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Question Table: Measuring GDP

Reference: Ref 7-05

(Table: Measuring GDP) Exports are: Answer –$5 billion. $0 billion. $5 billion. $10 billion. Add Question Here

Question 96

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Question A laptop computer purchased by an accounting firm is considered to be: Answer consumption spending. investment spending. private saving. a pre-tax dividend. Add Question Here

Question 97

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Question An example of investment spending is: Answer the amount of funds raised by the government in the financial markets. the purchase of government bonds by a private household. the purchase of a freezer by an ice-cream parlor. the purchase of stock shares by a mutual fund. Add Question Here

Question 98

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Question Which of the following is included in GDP? Answer the purchase of 100 shares of Microsoft stock the purchase of a 1965 Ford Mustang Social Security payments from the U.S. government to retired people the purchase of a ticket to a Rolling Stones concert Add Question Here

Question 99

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Question A laptop computer purchased by a private individual is considered to be: Answer consumption spending. investment spending. private saving. a transfer of income. Add Question Here

Question 100

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Question Suppose that a doctor who lives alone hires the services of a maid and pays her $15,000 a year to clean his house. Suppose that he marries her the following year. Other things equal, which of the following can we safely conclude would be true about the reported official GDP the following year? Answer It would rise.

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It would fall. It would stay the same. There is not enough information to evaluate the impact that it would have on GDP. Add Question Here

Question 101

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Question GDP excludes all of the following EXCEPT: Answer the value of leisure. damage done to the environment. the value of housework. the value of owner-occupied housing. Add Question Here

Question 102

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Question Which of the following would be included in the calculation of GDP? Answer expenditure on new construction a retiree's monthly Social Security check buying an existing house buying shares of Home Depot stock Add Question Here

Question 103

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Question Included in GDP would be: Answer the dollar value of a used car sold during the period. the dollar value of a new car imported during the period. the dollar value of a new car exported during the period. the purchase of 100 shares of General Motors stock. Add Question Here

Question 104

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Question The value of which of the following would be counted in GDP? Answer glass for windshields purchased by a car manufacturer a new car sold by a car dealer a used car sold by a car dealer a share of stock in a car manufacturer Add Question Here

Question 105

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Question Which of the following transactions would be included in the nation's gross domestic product? Answer A college student buys a used textbook from his roommate. A construction company purchases lumber to use in building a new house. A college student has a pizza delivered to her dormroom. A group of college students volunteer to rake leaves at an assisted living facility for senior citizens. Add Question Here

Question 106

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Question If during 2005, the country of Sildavia recorded investment spending for $3 billion, government purchases for $3 billion, consumer spending for $7 billion, imports for $5 billion, government transfers for $1 billion, and exports for $3 billion. Sildavia's GDP in 2005 was: Answer $11 billion. $12 billion. $13 billion. $14 billion. Add Question Here

Question 107

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Question Suppose a consumer buys a frozen cheese pizza at the grocery store at a price of $10. The frozen pizza company sold the pizza to the store for $5. The frozen pizza company purchased the pizza dough and tomato sauce from a food processing company at a price of $2 and bought the cheese from a dairy at a price of $1. How much has GDP increased? Answer $2 $5 $10 $18 Add Question Here

Question 108

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Question The equation that breaks GDP down by the four sources of aggregate spending is: Answer GDP = C + I + G + X + IM GDP = C + I + G – X – IM GDP = C – I – G – X + IM

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GDP = C + I + G + X – IM Add Question Here

Question 109

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Question Which of the following transactions would not be counted in the GDP for the United States? Answer Nike builds a “Niketown” retail store in Chicago. Your mother buys a pound of Washington grown apples at the grocery store. Your mother buys 100 shares of Nike stock. The Indiana state government spends taxpayer money to repair a damaged bridge over the Wabash River. Add Question Here

Question 110

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Question Gross Domestic Product (GDP) is: Answer the total dollar value of all transactions in the economy in a year. the total value of all final goods and services produced in the economy in a year. the total value of all final goods and services produced by Americans at home and abroad in a year. the total dollar value of all goods produced in the economy in a year. Add Question Here

Question 111

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Question Gross Domestic Product (GDP) may be calculated as the sum of: Answer consumer spending, investment spending, government purchases of goods and services, and exports minus imports. consumer spending, investment spending, government transfer payments, and exports minus imports. consumer spending, investment spending, government purchases of goods and services, and exports. exports and imports only. Add Question Here

Question 112

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Question Table: Pizza Economy I

Reference: Ref 7-06

(Table: Pizza Economy I) Based on the accompanying table, GDP in this economy is: Answer $73,000. $65,000. $57,000. $51,000. Add Question Here

Question 113

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Question Table: Pizza Economy II

Reference: Ref 7-07

(Table: Pizza Economy II) Based on the accompanying table, GDP in this economy is: Answer $74,000. $45,000. $29,000. $16,000. Add Question Here

Question 114

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Question If during 2009 the country of Sildavia recorded a value added of $78 billion, wages of $40 billion, profits of $8 billion, and total sales of $90 billion, the value of intermediate goods purchased during 2009 in Sildavia was: Answer $42 billion. $30 billion. $12 billion. $4 billion. Add Question Here

Question 115

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Question If during 2009, the country of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2009 in Sildavia were:

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Answer

$36 billion. $38 billion. $51 billion. $64 billion. Add Question Here

Question 116

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Question Households receive income in the form of all the following EXCEPT: Answer wages. dividends. interest and rent. investment spending. Add Question Here

Question 117

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Question In the United States, consumer spending accounts for approximately what percentage of GDP? Answer 50% 60% 70% 80% Add Question Here

Question 118

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Question The largest component of U.S. GDP involves value added in: Answer household production. business production. government production. production of goods sold overseas. Add Question Here

Question 119

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Question In the United States, investment spending accounts for approximately what percentage of GDP? Answer 6% 16% 24% 33% Add Question Here

Question 120

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Question In the United States, government spending accounts for approximately what percentage of GDP? Answer 7% 9% 19% 29% Add Question Here

Question 121

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Question In 2007, _____ was the largest component of U.S. GDP, at 70% of the total aggregate spending. Answer government spending consumer spending investment spending net export spending Add Question Here

Question 122

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Question GDP tends to understate our economic well being because it: Answer includes the value of services produced in the home. excludes the value of leisure. includes expenditures on crime prevention equipment. includes health care costs related to the consumption of cigarettes. Add Question Here

Question 123

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Question GDP tends to overstate our economic well being by including which of the following? Answer expenditures on crime prevention payments for cleaning up the environment repairs to structures destroyed by storms expenditures on crime prevention, payments for cleaning up the environment, and repairs to structures destroyed by

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storms Add Question Here

Question 124

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Question The person who is usually credited with developing national income accounts is: Answer Adam Smith. John Maynard Keynes. Simon Kuznets. Milton Friedman. Add Question Here

Question 125

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Question The value of all the following goods is included in the calculation of aggregate output EXCEPT: Answer the value of Firestone tires sold at your local garage. the value of a new shower installed in a recently purchased 1920's house. the value of the 6-CD player installed to replace the factory-mounted radio-cassette in your new car. the value of Firestone tires installed on brand-new Volvo station wagons. Add Question Here

Question 126

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Question The actual numerical measure of aggregate output typically used by economists is called: Answer aggregated output. nominal gross domestic product. net domestic product. real gross domestic product. Add Question Here

Question 127

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Question Real GDP is nominal GDP adjusted for: Answer double counting. changes in prices. population. imports. Add Question Here

Question 128

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Question If real GDP rises while nominal GDP falls, then prices on average have: Answer risen. fallen. stayed the same. Real GDP can not rise when nominal GDP falls. Add Question Here

Question 129

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Question Consider an economy that only produces two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is: Answer $100. $700. $1,100. $900. Add Question Here

Question 130

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Question Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Nominal GDP this year is: Answer $100. $650. $700. $500 Add Question Here

Question 131

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Question Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20 each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is: Answer $100. $700. $1,300.

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$300 Add Question Here

Question 132

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Question Suppose that nominal GDP is $1000 in 2006 and nominal GDP is $1500 in 2007. If the overall price level ____ between 2006 and 2007, we could say that real GDP _____. Answer increased by 50%; stayed constant. increased by less than 50%; decreased. increased by more than 50%; increased. increased by 50%; increased. Add Question Here

Question 133

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Question Table: Peanut Butter and Jelly Economy

Reference: Ref 7-08

(Table: Peanut Butter and Jelly Economy) A simple economy produces only peanut butter and jelly. Using the data in the attached table, nominal GDP in 2009 was ____ and real GDP in 2009 was _____. Answer $450; $400 $525; $450 $525; $400 $450; $575 Add Question Here

Question 134

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Question Table: Peanut Butter and Jelly Economy

Reference: Ref 7-08

(Table: Peanut Butter and Jelly Economy) A simple economy produces only peanut butter and jelly. Using the data in the attached table, from 2008 to 2009 real GDP ____ by _____%. Answer increased; 12.5 decreased; 50 increased; 43.75 decreased; 12.5 Add Question Here

Question 135

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Question Table: Price and Output Data

Reference: Ref 7-09

(Table: Price and Output Data) The value of Year 4's output in nominal dollars is: Answer $6. $24. $30. $36. Add Question Here

Question 136

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Question Table: Price and Output Data

Reference: Ref 7-09

(Table: Price and Output Data) The value of Year 2's output in real dollars is: Answer $4.

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$12. $15. $16. Add Question Here

Question 137

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Question Table: Price and Output Data

Reference: Ref 7-09

(Table: Price and Output Data) The value of Year 3's output in real dollars is: Answer $5. $20. $27. $36. Add Question Here

Question 138

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Question Table: Real and Nominal Output

Reference: Ref 7-10

(Table: Real and Nominal Output) Nominal GDP in Year 4 is equal to: Answer $40. $60. $100. $280. Add Question Here

Question 139

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Question Table: Real and Nominal Output

Reference: Ref 7-10

(Table: Real and Nominal Output) Nominal GDP in Year 2 is equal to: Answer $40. $60. $100. $280. Add Question Here

Question 140

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Question Table: Real and Nominal Output

Reference: Ref 7-10

(Table: Real and Nominal Output) The year in which the increase in nominal GDP is exclusively due to the increase in the price level rather than physical output is Year: Answer 2. 3. 4. 6.

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Question 141

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Question Chained dollars: Answer is money that banks are required to keep in their vaults to back deposits. is the measure for the value of intermediate goods. is a method for calculating changes in real GDP which uses an early base year and a late base year. is a method used to convert real to nominal GDP. Add Question Here

Question 142

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Question Real GDP is: Answer the value of the production of all final goods and services measured in current prices. the value of the production of all final goods and services adjusted for price changes. the projected future value of GDP. calculated by adding up only the real number of all items sold in the U.S. regardless of their prices. Add Question Here

Question 143

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Question When measuring a nation's standard of living, of the following, the best measure is: Answer nominal GDP. market GDP. real GDP per capita. nominal GDP per capita. Add Question Here

Question 144

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Question Dividing real GDP by the population: Answer will result in consumption per capita. results in nominal GDP per person. gives real GDP per capita. is a measure of happiness. Add Question Here

Question 145

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Question Use this scenario to answer questions 145–148. Scenario: Real GDP Suppose that in Year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Reference: Ref 7-11

(Scenario: Real GDP) The value of nominal GDP in Years 1 and 2 respectively is: Answer $900; $1,077.50. $900; $990. $180,000; $257,400. $1,000; $1,005. Add Question Here

Question 146

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Question Use this scenario to answer questions 145–148. Scenario: Real GDP Suppose that in Year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Reference: Ref 7-11

(Scenario: Real GDP) Using Year 1 as the base year, real GDP in Year 2 is: Answer $900. $970. $1,000. $1,077.50. Add Question Here

Question 147

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Question Use this scenario to answer questions 145–148. Scenario: Real GDP Suppose that in Year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Reference: Ref 7-11

(Scenario: Real GDP) The growth rate of nominal GDP from Year 1 to Year 2 is: Answer 10%. 7.8%. 19.7%. 8.8%.

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Question 148

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Question Use this scenario to answer questions 145–148. Scenario: Real GDP Suppose that in Year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Reference: Ref 7-11

(Scenario: Real GDP) Using Year 1 as the base year, the growth rate of real GDP from Year 1 to Year 2 is: Answer 10%. 7.8%. 19.7%. 8.8%. Add Question Here

Question 149

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Question Table: Pizza Economy III

Reference: Ref 7-12

(Table: Pizza Economy III) Considering 2008 as the base year, nominal GDP in 2009 was: Answer $47,000. $69,000. $72,000. $114,000. Add Question Here

Question 150

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Question Table: Pizza Economy III

Reference: Ref 7-12

(Table: Pizza Economy III) Considering 2008 as the base year, real GDP in 2009 was: Answer $47,000. $69,000. $72,000. $114,000. Add Question Here

Question 151

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Question Table: Pizza Economy III

Reference: Ref 7-12

(Table: Pizza Economy III) Considering 2008 as the base year, real GDP between 2008 and 2009 grew at a rate of: Answer 53.19%. 39.47%. –39.47%. –58.67%. Add Question Here

Question 152

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Question Table: Pizza Economy III

Reference: Ref 7-12

(Table: Pizza Economy III) Considering 2008 as the base year, given that total population was 1,140 in 2008 and 1,300 in 2009, real GDP per capita in 2008 was:

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Answer

$80. $53. $60. $100. Add Question Here

Question 153

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Question Table: Pizza Economy III

Reference: Ref 7-12

(Table: Pizza Economy III) Considering 2008 as the base year, given that total population was 1,140 in 2008 and 1,380 in 2009, real GDP per capita between 2008 and 2009 grew at a rate of: Answer –50%. –25%. 50%. 75%. Add Question Here

Question 154

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Question Nominal GDP may be used to compare: Answer the dollar amount of final goods produced in different years. the price of final goods times the number of goods produced in one year. output if prices are held constant. living standards among different countries. Add Question Here

Question 155

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Question Nominal GDP: Answer has not been adjusted for changes in prices over time. has been adjusted for changes in prices over time. is a small or nominal amount of output. excludes the international sector. Add Question Here

Question 156

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Question If both aggregate output and the aggregate price level increase: Answer real GDP will increase faster than nominal GDP. nominal GDP will increase faster than real GDP. it makes no difference to real or nominal GDP. real GDP and nominal GDP will increase faster than the price level. Add Question Here

Question 157

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Question If nominal GDP increased from one year to the next, we can conclude that: Answer prices rose from one year to the next. real GDP rose from one year to the next. prices and real GDP rose from one year to the next. prices rose from one year to the next, real GDP rose from one year to the next or that prices and real GDP rose from one year to the next. Add Question Here

Question 158

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Question If nominal GDP decreased from one year to the next, we can conclude that: Answer prices fell from one year to the next. real GDP fell from one year to the next. prices and real GDP fell from one year to the next. prices fell from one year to the next, real GDP fell from one year to the next, or that prices and real GDP fell from one year to the next. Add Question Here

Question 159

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Question Assume that the real GDP of the U.S. is approximately $12 trillion and the population of the United States is approximately 300 million. What is per capita real GDP? Answer $4,000 $36,000

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$40,000 Real per capita GDP can't be determined without more information. Add Question Here

Question 160

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Question If nominal GDP of 2009 is higher than nominal GDP of 2008, we can state that: Answer production in 2009 is higher than production in 2008, while prices remain unchanged. production or prices or both are higher in 2009, compared to 2008. prices in 2009 are higher than prices in 2008, while production remains unchanged. production in 2009 has gone down while prices have increased. Add Question Here

Question 161

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Question If the price level in the economy and the nominal wages both doubled, then the real wages would: Answer also double. increase by one half. remain unchanged. decrease by one half. Add Question Here

Question 162

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Question Real GDP is the same as Answer current dollar GDP. inflation adjusted GDP. nominal GDP. value added GDP. Add Question Here

Question 163

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Question Nominal GDP is: Answer the inflation adjusted GDP. the real GDP minus depreciation. the current dollar GDP. the constant dollar GDP. Add Question Here

Question 164

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Question The government economists have adopted a new method of calculating the change in real GDP known as ________, which uses the average between the GDP growth rate calculated using an early base year and the GDP growth rate calculated using a late base year. Answer cost indexation method. straight line depreciation method. chain-linking method. fixed base year method. Add Question Here

Question 165

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Question Assume that in the base year (2008), a country's nominal GDP is 10,000 billion dollars. The country has been experiencing inflation at a rate of 5% each year since the year 2003. Based on this information, the real GDP of 2008 is equal to: Answer $10,500 billion. $11,025 billion. $10,000 billion. $9,500 billion. Add Question Here

Question 166

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Question A country's living standard is best measured by the: Answer per capita nominal GDP. real GDP. nominal GDP. per capita real GDP. Add Question Here

Question 167

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Question Economists frequently use GDP per capita to better reflect: Answer the impact of prices on GDP. differences in living standards across countries. people who are employed. people who are both employed and unemployed.

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Question 168

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Question GDP per capita is: Answer a perfect measure of a country's standard of living. the only way to measure living standards among different countries. an incomplete measure of a country's standard of living. used by the U.N. to compare nations based on measures of welfare. Add Question Here

Question 169

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Question The aggregate price level is: Answer the average price of shares on the stock market. the average price of commodities. the overall level of prices in the economy. the average rate of inflation. Add Question Here

Question 170

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Question Inflation is when there is: Answer a rising aggregate price level. an expansion of output. a rise in wages. a rise in the unemployment rate. Add Question Here

Question 171

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Question Deflation is when there is: Answer a decrease in unemployment. a decreasing aggregate price level. a decline in wages. a recession. Add Question Here

Question 172

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Question A price index: Answer always includes a base year. measures the cost of purchasing a market basket of output across different years. is normalized to 100 for the base year. always includes a base year, measures the cost of purchasing a market basket of output across different years and is normalized to 100 for the base year. Add Question Here

Question 173

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Question In a market basket of goods: Answer the quantities stay constant and the prices change. the quantities change and the prices are held constant. both the prices and the quantities are held constant. both the prices and the quantities change. Add Question Here

Question 174

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Question Use this scenario to answer questions 174–175. Scenario: Price Index Suppose that in the base period a college student buys 20 gallons of gasoline at $2.00 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50. Reference: Ref 7-13

(Scenario: Price Index) The price index for the second month is: Answer 94. 106.4. 100. impossible to determine without more information. Add Question Here

Question 175

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Question Use this scenario to answer questions 174–175. Scenario: Price Index Suppose that in the base period a college student buys 20 gallons of gasoline at $2.00 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50.

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Reference: Ref 7-13

(Scenario: Price Index) The change in prices for the month is: Answer

7.6%. 94%. 6.4%. –6%. Add Question Here

Question 176

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Question In the country of Sildavia, a market basket of goods and services cost $130 in 2007, $140 in 2008, and $160 in 2009. Based on this information and considering 2007 as the base year, the price index in 2009 was: Answer 100. 107.69. 123.07. 130. Add Question Here

Question 177

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Question In the country of Sildavia, a market basket of goods and services cost $130 in 2003, $140 in 2004, and $160 in 2005. Based on this information and considering 2003 as the base year, inflation from 2003 to 2005 was: Answer 7.14%. 7.69%. 14.28%. 23.07%. Add Question Here

Question 178

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Question The ______ is the most widely used measure of inflation in the United States. Answer producer price index consumer price index GDP deflator national income account Add Question Here

Question 179

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Question Table: Market Basket of School Supplies

Reference: Ref 7-14

(Table: Market Basket of School Supplies) The accompanying table shows the prices of three common school supplies in 2008 and 2009, and the quantities of each school supply that consumers bought in 2008, the base year. If we were to construct a school supply index (SSI) in 2009, it would be equal to: Answer 81.8 100 122.2 112,500 Add Question Here

Question 180

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Question Table: Market Basket of School Supplies

Reference: Ref 7-14

(Table: Market Basket of School Supplies) The accompanying table shows the prices of three common school supplies in 2008 and 2009, and the quantities of each school supply that consumers bought in 2008, the base year. If we were to construct a school supply index (SSI) to measure the rate at which average school supply prices have changed, we would find an inflation rate of: Answer 22% 122% 82% 18% Add Question Here

Question 181

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Question If the cost of a market basket is $200 in Year 1 and $230 in Year 2, the price index for Year 2 with a Year 1 base is: Answer 100. 115.

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130. 200. Add Question Here

Question 182

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Question If the cost of a market basket is $150 in Year 1 and $200 in Year 2, the price index for Year 1 with a Year 2 base is: Answer 75. 100. 133. 150. Add Question Here

Question 183

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Question Table: Price and Output Data

Reference: Ref 7-15

(Table: Price and Output Data) The value of Year 3's output in nominal dollars is: Answer $5. $5.20. $20. $36. Add Question Here

Question 184

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Question Table: Price and Output Data

Reference: Ref 7-15

(Table: Price and Output Data) The value of Year 4's output in real dollars is: Answer $5.20. $6. $30. $36. Add Question Here

Question 185

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Question Table: Price and Output Data

Reference: Ref 7-15

(Table: Price and Output Data) The price index for Year 2 is: Answer $4. $12. $60. $80. Add Question Here

Question 186

Multiple Choice Question Table: Price and Output Data

Reference: Ref 7-15

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(Table: Price and Output Data) The price index for Year 4 is: Answer $80. $120. $0. $6. Add Question Here

Question 187

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Question Suppose that the market basket for the University Student Price Index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2007, which is the base year for this index, textbooks cost $50 each and gas costs $1.00 per gallon. Suppose that in 2008, textbooks cost $80 each and gasoline costs $3.00 per gallon. Then, the USPI for 2008 is: Answer 100. 150. 200. 250. Add Question Here

Question 188

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Question Suppose that the market basket for the University Student Price Index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2007, which is the base year for this index, textbooks cost $50 each and gas costs $1.00 per gallon. Suppose that in 2008, textbooks still cost $50 each and gasoline costs $4.00 per gallon. Then, the USPI for 2008 is: Answer 250. 200. 150. 100. Add Question Here

Question 189

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Question The inflation or deflation rate is: Answer the change in a price index divided by the initial value of the index. the change in a price index divided by the new index number. the difference between the initial price index number and the new price index number. computed by dividing the old price index number by the new price index number. Add Question Here

Question 190

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Question Inflation can be measured by: Answer the percentage change in the CPI. the absolute change in the CPI. the absolute change in the GDP deflator. the percentage change in GDP. Add Question Here

Question 191

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Question If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____. Answer 10% 20% 25% 50% Add Question Here

Question 192

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Question Table: The Consumer Price Index

Reference: Ref 7-16

(Table: The Consumer Price Index) The approximate rate of inflation in Year 3 is _____ percent. Answer 5 10 19 20 Add Question Here

Question 193

Multiple Choice Question Table: The Consumer Price Index

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Reference: Ref 7-16

(Table: The Consumer Price Index) The approximate rate of inflation in Year 5 is _____ percent. Answer 5 10 19 20 Add Question Here

Question 194

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Question Table: The Consumer Price Index

Reference: Ref 7-16

(Table: The Consumer Price Index) The approximate rate of inflation in Year 2 is _____. Answer 10% 19% 20% 25% Add Question Here

Question 195

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Question If the consumer price index changes from 120 to 125 between December 2007 and December 2008, the: Answer inflation rate for 2008 is 4.2%. inflation rate for 2008 is 5%. deflation rate for 2008 is 5%. deflation rate for 2008 is –4.2%. Add Question Here

Question 196

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Question If a price index in Year 1 is 146 and in Year 2 is 163, the rate of inflation between Year 1 and Year 2 is _____. Answer 8.2% 10.43% 11.64% 15.0% Add Question Here

Question 197

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Question If the consumer price index is 180 in Year 1 and 190 in Year 2, the inflation rate between Year 1 and Year 2 is about ________. Answer 5.26% 5.56% 6.5% 10% Add Question Here

Question 198

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Question Assume that the Consumer Price Index (CPI) for 2007 was 72.6 and that the CPI was 82.4 in 2008. What was the inflation rate between the two years? Answer 0.88% 1.13% 11.9% 13.5% Add Question Here

Question 199

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Question Assume that the Consumer Price Index (CPI) for 2007 was 103.9 and that the CPI was 107.6 in 2008. What was the inflation rate between the two years? Answer 0.97% 1.04% 3.56% –3.70%

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Question 200

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Question Assume that the Consumer Price Index (CPI) for 2007 was 124.0 and that the CPI was 130.7 in 2008. What was the inflation rate between the two years? Answer 0.95% 5.40% 6.70% 3.20% Add Question Here

Question 201

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Question If the Consumer Price Index (CPI) for 2007 was 148.3 and 152.5 in 2008, what was the inflation rate between the two years? Answer 0.97% 2.83% 4.20% 9.72% Add Question Here

Question 202

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Question If the Consumer Price Index (CPI) for 2007 was 160.6 and 163.1 in 2008, what was the inflation rate between the two years? Answer 0.25% 1.56% 2.59% 5.00% Add Question Here

Question 203

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Question The consumer price index reflects the: Answer changes in the prices of goods and services typically purchased by consumers. level of prices for intermediate goods and services purchased by business. level of prices for raw materials. prices of all goods and services computed from the ratio of nominal GDP to real GDP. Add Question Here

Question 204

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Question Which of the following is not true concerning the consumer price index? The consumer price index: Answer reflects changes in the prices of goods typically purchased by consumers. contains thousands of goods and services. is calculated by the Bureau of Labor Statistics. changes only in the base year, every 5-7 years. Add Question Here

Question 205

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Question In the consumer price index of the United States: Answer the current cost of a basket of goods is compared to the base-period cost of the same basket of goods. calculation of the base-period index is always equal to 100. the base period is 1982–1984. the current cost of a basket of goods is compared to the base-period cost of the same basket of goods, the calculation of the base-period index is always equal to 100, and the base period is 1982-1984. Add Question Here

Question 206

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Question The CPI is used for calculating payments from the U.S. government to individuals. To the extent it is biased upward, this index: Answer leads to lower benefits than would be the case if it weren't biased upward. raises government expenditures. lowers government expenditures. leads to lower benefits than would be the case if it weren't biased upward and raises government expenditures. Add Question Here

Question 207

Multiple Choice Question Table: Real and Nominal Output

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Reference: Ref 7-17

(Table: Real and Nominal Output) The price index in Year 1, using Year 3 as the base period, is equal to: Answer 25. 50. 100. 150. Add Question Here

Question 208

Multiple Choice

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Question Table: Real and Nominal Output

Reference: Ref 7-17

(Table: Real and Nominal Output) The price index in Year 1, using Year 4 as the base period, is equal to: Answer 25. 50. 100. 150. Add Question Here

Question 209

Multiple Choice

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Question You read in the newspaper that the CPI in 2008 was 120, you will conclude that a typical market basket in 2008 would have cost Answer 20 percent more than the same market basket purchased in 2007. 120 percent more than the same market basket purchased in 2007. 20 percent more than the same market basket purchased in the base year. 120 percent more than the same market basket purchased in the base year. Add Question Here

Question 210

Multiple Choice

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Question Table: Price Index

Reference: Ref 7-18

(Table: Price Index) Consider the information in table provided. Which year is most likely to be the base year? Answer 2006 2008 2007 2005 Add Question Here

Question 211

Multiple Choice

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Question Table: Price Index

Reference: Ref 7-18

(Table: Price Index) Consider the information in table provided. What is the inflation rate between the years 2007 and 2008? Answer 6.8% 4% –1% 6% Add Question Here

Question 212

Multiple Choice

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Question Which one of the following price indices measures the cost of living? Answer producer price index wholesale price index consumer price index GDP deflator

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Question 213

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Question The GDP deflator is equal to: Answer nominal GDP/real GDP x 100 real GDP/nominal GDP x 100 real GDP x nominal GDP x 100 [(real GDP x nominal GDP) / real GDP] x 100 Add Question Here

Question 214

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Question Table: GDP II

Reference: Ref 7-19

(Table: GDP II) Using the information in the table provided, calculate the GDP deflator for 2007. Answer 111 104 90 96 Add Question Here

Question 215

Multiple Choice

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Question Table: GDP II

Reference: Ref 7-19

(Table: GDP II) Using the information in the table provided, calculate the GDP deflator for 2008. Answer 111 104 90 96 Add Question Here

Question 216

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Question Table: CPI

Reference: Ref 7-20

(Table: CPI) Suppose the economy only produces three goods: bread, laptops, and movies. Calculate the CPI of 2008, using 2004 as the base year. Answer 81.9 100 75.8 95 Add Question Here

Question 217

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Question Table: CPI II

Reference: Ref 7-21

(Table: CPI II) Calculate by how much the prices changed between 2007 and 2008. Answer Prices fell by 5%. Prices fell by 4%. Prices increased by 4%. Prices increased by 5%. Add Question Here

Question 218

Multiple Choice

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Question Many economists believe that the CPI overstates inflation because: Answer innovation forces consumers to pay more for most goods and services.

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the Bureau of Labor Statistics collects data on the prices of only a few goods and services. the CPI market basket doesn't reflect the fact that consumers shift consumption away from more expensive goods. people use it to bargain for wage increases. Add Question Here

Question 219

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Question Which of the following statistics is used to measure changes in the prices that firms pay for goods and services? Answer Producer Price Index Consumer Price Index GDP Deflator Cost of Living Index Add Question Here

Question 220

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Question Which of the following is true concerning the Producer Price Index? Answer The Producer Price Index is just another term for the GDP deflator. Changes in the Producer Price Index generally follow changes in the Consumer Price Index. The Producer Price Index measures the cost of a basket of goods typically purchased by producers. The Producer Price Index shows how the cost of all purchases by urban families changes. Add Question Here

Question 221

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Question The major difference between the Consumer Price Index and the Producer Price Index is that: Answer the PPI is based on retail prices and CPI is based on wholesale prices. the PPI measures the cost of living of self-employed workers and the CPI measures the cost of living of salaried workers. the PPI generally registers a higher rate of inflation than the CPI. the PPI is based on the cost of a basket typically purchased by producers, while the CPI is based on the cost of a basket typically purchased by consumers. Add Question Here

Question 222

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Question The PPI is often regarded as a warning sign of inflation: Answer because commodity producers are relatively quick to raise prices. because producers are more likely to have monopoly control over prices. because consumers have to pay the prices charged. because commodity producers can sell whatever they want at higher prices. Add Question Here

Question 223

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Question The purpose of indexing Social Security payments to the CPI is to: Answer increase corporate profits. justify continued government funding of the Bureau of Labor Statistics. avoid the privatization of Social Security. maintain the purchasing power of retirees. Add Question Here

Question 224

True/False

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Question The government returns part of the money it raises from taxes in the form of government transfers. Answer True False Add Question Here

Question 225

True/False

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Question When measuring GDP as spending on domestically produced final goods and services, spending on inputs like steel in manufacturing a car is counted in GDP, but spending on a new factory in which the cars are produced is NOT counted in GDP. Answer True False Add Question Here

Question 226

True/False

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Question When Disney builds a new amusement park in the United States, it is counted as part of GDP. Answer True False Add Question Here

Question 227

True/False

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Question Final goods and services are sold to the final or end user. Answer

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True False Add Question Here

Question 228

True/False

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Question Most of the value added in GDP in the United States is added by businesses rather than consumers. Answer True False Add Question Here

Question 229

True/False

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Question The largest spending category in GDP is consumption. Answer True False Add Question Here

Question 230

True/False

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Question If the United States exports $500 of goods and services and imports $700 of goods and services, net exports are $1200. Answer True False Add Question Here

Question 231

True/False

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Question The national income accounts were developed in the early 1970s by Robert McNamara to document spending on the Vietnam War. Answer True False Add Question Here

Question 232

True/False

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Question Steel manufactured for the purpose of producing a car is not counted in aggregate output, but the car that results is counted. Answer True False Add Question Here

Question 233

True/False

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Question Overcounting of GDP can be avoided by including both “final” and “intermediate” production. Answer True False Add Question Here

Question 234

True/False

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Question Renting a car to go on a vacation will result in more GDP than if you used your own car. Answer True False Add Question Here

Question 235

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Question GDP per capita measures the value of all intermediate goods and services produced in the economy. Answer True False Add Question Here

Question 236

True/False

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Question U.S. GDP was $5,803 billion in 1994 and $11,734 billion in 2008, so we can conclude that aggregate output roughly doubled over the fourteen year period in the United States. Answer True False Add Question Here

Question 237

True/False

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Question Chain-linking is a method used to measure the change in real GDP. Answer True False Add Question Here

Question 238

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Question The price index in the base year is normalized so that it equals 100 in the base year. Answer True False Add Question Here

Question 239

True/False

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Question If the price index in year 1 is 110 and the price index in year 2 is 115, then the inflation rate is exactly 5% from year 1 to year 2. Answer True False Add Question Here

Question 240

True/False

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Question The CPI is intended to measure the cost of all goods purchased in the economy over time. Answer True False Add Question Here

Question 241

True/False

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Question The inflation rate is measured as the percentage change per year in a price index. Answer True False Add Question Here

Question 242

True/False

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Question The producer price index and the consumer price index are both examples of price indices. Answer True False Add Question Here

Question 243

True/False

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Question The producer price index usually responds to price changes more quickly than the consumer price index (CPI). Answer True False Add Question Here

Question 244

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Question The GDP deflator is another name for the consumer price index (CPI). Answer True False Add Question Here

Question 245

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Question Income tax brackets are indexed to the consumer price index (CPI). Answer True False Add Question Here

Question 246

True/False

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Question If the CPI increases from 125 to 130 in one year, the rate of inflation is 5 percent. Answer True False Add Question Here

Question 247

True/False

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Question Economists generally agree that the CPI understates the rate of inflation. Answer True False Add Question Here

Question 248

True/False

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Question The CPI does not fully account for quality changes in goods and services, and does not, therefore, indicate a correct measure of inflation. Answer True False

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Add Question Here

Question 249

True/False

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Question Because consumers tend to look for the cheapest substitute available, the CPI (which tracks only certain products) is thought to be overstated. Answer True False Add Question Here

Question 250

Essay

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Question For each of the following transactions, explain why, or why not, they would be counted in the GDP of the United States. a. Japanese auto producer Honda builds a factory in Indiana. b. You buy a new pair of pants produced at a factory in Honduras. c. You mow your uncle's yard and he gives you $10 for a job well done. Answer a. Yes. If a factory is being built in America, it would count as investment spending in the U.S. GDP. It doesn't matter if the builder is headquartered in Japan or any other nation. b. No. You did purchase the pants in the U.S., which does count as consumption spending, but this garment was produced in a foreign country. Thus it would be deducted from U.S. GDP as an import. c. No. In an accountant's perfect world, this sort of “cash under the table” transaction would count, because you have produced a service and received payment for it. However you are unlikely to report this income on your tax returns and your uncle is unlikely to demand a receipt for his payment. Official GDP tabulations would miss almost all of these smaller transactions. Add Question Here

Question 251

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Question For each of the following transactions, explain why, or why not, they would be counted in the GDP of the United States. a. American auto producer Ford builds a factory in Alberta, Canada. b. You buy a blueberry muffin at your local coffee shop. c. A Ford dealership in Ohio has 15 unsold new 2008 model cars at the end of 2008. Answer a. No. This is investment spending, but not in America, so it does not count in U.S. GDP. b. Yes. This is consumer spending. c. Yes. These unsold cars would be counted as unsold inventory in investment spending. Add Question Here

Question 252

Essay

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Question A single woman is a busy attorney who is too busy to take care of her yard so she hires a local firm to perform monthly lawn service like mowing the grass, raking the leaves and trimming the rose bushes. After several years she and the owner of the lawn service fall madly in love and get married. After the honeymoon, her new husband takes care of the yard maintenance, and she no longer pays his company the monthly fee. What has happened to GDP? Answer Official GDP accounts would show a decrease. While the lawn service is still being performed, the husband's firm is no longer receiving a payment. Domestic work performed by a family member is not captured by the standard measure of GDP. Add Question Here

Question 253

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Question Why do economists bother to compute real GDP? Why can't we just compare nominal GDP from one year to the next? Answer Nominal GDP shows the value of a nation's output of goods and services in a given year, but part of that value is determined by the prices of those goods and services. If those prices increase, nominal GDP will increase, even if output levels stayed the same. Real GDP computes the value of goods and services produced during a year, using prices from a reference year, or base year. This way a person can see whether the nation's output changed, holding prices constant. Add Question Here

Question 254

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Question Table: Gadget GDP in Rayistan

Reference: Ref 7-22

(Table: Gadget GDP in Rayistan) Rayistan is a small nation that produces only one good, the gadget. The table shows production and prices of gadgets for two consecutive years, as well as the population of Rayistan. a. Compute nominal GDP in 2007 and 2008. b. Compute real GDP in 2007 and 2008. c. Has Rayistan's standard of living, as measured by real GDP per capita, increased, decreased, or stayed the same? Answer a. Nominal GDP in 2007 = 4000*$500 = $2,000,000. Nominal GDP 2008 = 4400*$600 = $2,640,000 b. Real GDP in 2007 = $2,000,000 because it is the base year. Real GDP 2008 = 4400*$500 = $2,200,000 c. Real per capita GDP in 2007 = $2,000,000/10,000 = $200. Real per capita GDP in 2008 = $2,200,000/12,000 = $183. So the standard of living has actually fallen, as measured by real GDP per capita. Add Question Here

Question 255

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Question Suppose the consumer price index last year was 180.5 and this year the CPI is equal to 202.2. What is the rate of inflation between last year and this year? What is the rate of inflation between the base year and this year? Answer Inflation between last year and this year = (202.2 – 180.5)/180.5 = 12%. We don't need to know how many years separate this year from the base year because the CPI is always 100 in the base year. So inflation since the base year is = (202.2 – 100)/100 = 102.2% Add Question Here Essay

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Question 256 Question Table: Muffin Price Index

Reference: Ref 7-23

(Table: Muffin Price Index) A college town has a booming number of small coffee shops and each coffee shop offers a variety of muffins for sale. As an economics project you have been assigned the creation of a muffin price index (MPI) and the accompanying table summarizes price data for recent years. Use this data to compute the MPI for each year. Assume that the base year is 2007. Answer The first step is to calculate the cost of the market basket of muffins in the base year 2007. The cost of muffins in 2007 = 4*$1.10 + 1*$1.10 + 2*$1.25 = $8. Now using the market basket quantities in 2007 and prices in 2008, we compute the cost of muffins in 2008 as: = 4*$1.15 + 1*$1.10 + 2*$1.45 = $8.60. The MPI in 2008 is = (8.60/8)*100 = 107.5. Following the same steps for 2009, the cost of muffins in 2009 is: = 4*$1.25 + 1*$1.20 + 2*$1.50 = $9.20. The MPI in 2009 is = (9.20/8)*100 = 115. Add Question Here

Question 257

Essay

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Question Table: Muffin Price Index

Reference: Ref 7-23

(Table: Muffin Price Index) A college town has a booming number of small coffee shops and each coffee shop offers a variety of muffins for sale. As an economics project you have been assigned the creation of a muffin price index (MPI) and the accompanying table summarizes price data for three years. Assume that the base year is 2007. Use this data to compute the rate of inflation in the MPI between a. 2007 and 2008 b. 2008 and 2009 Answer a. The first step is to calculate the cost of the market basket of muffins in the base year 2007. The cost of muffins in 2007 = 4*$1.10 + 1*$1.10 + 2*$1.25 = $8. The MPI in the base year is 100. Now using the market basket quantities in 2007 and prices in 2008, we compute the cost of muffins in 2008 as: = 4*$1.15 + 1*$1.10 + 2*$1.45 = $8.60. The MPI in 2008 is = (8.60/8)*100 = 107.5. Thus the rate of inflation is (107.5 – 100)/100 = .075 or 7.5%. b. The rate of inflation between 2008 and 2009 is the percentage change in the MPI between the two years: (115-107.5)/107.5 = .07 or 7% Add Question Here

Question 258

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Question Explain the difference between the CPI and the PPI. Which is likely to be the first to indicate inflation? Answer The CPI measures the overall price level of typical goods and services that consumers and households consume. The PPI measures the overall price level of typical goods and services, like raw materials, that firms (producers) are likely to consume. The PPI is likely to be the first to indicate inflation in the economy because producers of commodities can often more quickly identify changes in the demand for their goods. These changes in the price of raw materials will eventually result in changes in the prices of consumer goods. Add Question Here

Question 259

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Question Some economists say that the CPI is biased and actually overstates the true rise in the cost of living. Describe the two main reasons for this claim. Answer The first reason is that consumers, when faced with higher prices, will change their buying habits. They will decrease their consumption of goods that have prices rising faster than the prices of other substitutable goods. If consumers are buying fewer of these relatively expensive items, and more of the relatively inexpensive items, then the actual inflation facing consumers is lower than the CPI might indicate. The second reason is that products available to us today were not available a few years ago, or they are dramatically improved compared to the same products from a few years ago. For example, the computer you could purchase today for $1000 is vastly more powerful and faster than a computer you could buy 5 years ago for $1000. On paper, the price of these hypothetical computers has not changed, but the $1000 buys you much more. Thus each dollar spent on the computer buys you more, and this acts as a decrease in the price of a computer. Add Question Here

Question 260

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Question Gross domestic product measures the: Answer amount of money circulating through an economy during a year. value of final goods and services produced within the borders of a country during a given time period. value of final goods and services produced by the citizens of a country regardless of their location during a given time period. amount of government spending undertaken during a given time period. Add Question Here

Question 261

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Question In the circular flow diagram, government purchases of goods and services are financed by: Answer tax revenues. tax revenues net of transfer payments. tax revenues net of transfer payments plus government borrowing from financial markets. tax revenues plus government borrowing from financial markets. Add Question Here

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Question 262

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Question When a household makes a loan to a firm with the firm providing interest to the household, this is known as: Answer a stock. a bond. a transfer payment. disposable income. Add Question Here

Question 263

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Question The indirect ownership of physical capital used by firms by households is considered: Answer stock. a bond. a transfer payment. public debt. Add Question Here

Question 264

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Question Private saving by households is: Answer the portion of disposable income not spent on goods and services. the portion of income coming from transfer payments. often larger than consumption spending. does not impact consumption spending. Add Question Here

Question 265

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Question Investment refers to the: Answer accumulation of stocks by an individual. addition to the economy's supply of productive physical capital. total net amount of assets sold to foreigners. total spending by households in an economy. Add Question Here

Question 266

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Question Construction of new homes is considered part of: Answer investment spending. consumption. government spending. private saving. Add Question Here

Question 267

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Question Flows into the financial markets are equal to the sum of: Answer foreign lending. foreign lending and purchases of stock plus private saving. borrowing and stock issues plus foreign borrowing and sales of stock. private saving. Add Question Here

Question 268

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Question A decrease in inventories is considered: Answer a fall in investment spending which will lead to a drop in future sales. an increase in investment spending which will lead to an increase in future sales. to have no impact on investment since it is not part of investment spending. part of government spending. Add Question Here

Question 269

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Question An economy's gross domestic product is made up of: Answer consumption, saving, investment and government spending. consumption, investment, government spending and net exports. consumption, saving, inventories, financial markets, and government spending. consumption and saving. Add Question Here

Question 270

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Question Within the circular flow diagram, the value of household income, the sum of wages, dividends, interest, and rent plus transfer payments equals the sum of:

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Answer

the value of household tax payments. consumer spending, private saving, and the value of household tax payments. the money supply. transfer payments and household tax payments. Add Question Here

Question 271

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Question Transfer payments: Answer are a means by which government raises funds. represent a redistribution of funds from one individual to another individual in the economy. are counted in GDP. is another term for government taxation. Add Question Here

Question 272

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Question Wages represent: Answer the income earned by households from the selling of their labor. the interest earned from bonds. rent earned from the use of land to firms. indirect ownership of physical capital used by firms. Add Question Here

Question 273

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Question Disposable income refers to: Answer income spent on imports. household income and government transfers less taxes paid to the government. gross income. government transfer payments. Add Question Here

Question 274

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Question Suppose only two countries existed in the world. Country A imported $200 million worth of goods and services from Country B. Country B imported $100 million worth of goods and services from Country A. This means that net exports for: Answer Country A equals $200 million. Country B equals $200 million. Country A equals –$100 million. Country B equals –$100 million. Add Question Here

Question 275

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Question When a firm buys a new machine for its business, this is considered: Answer consumption. investment. government spending. private saving. Add Question Here

Question 276

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Question When intermediate goods are included in the GDP calculation, this is referred to as: Answer the value added method. double counting. deflating the value of GDP. the expenditure method of GDP calculation. Add Question Here

Question 277

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Question Calculating GDP via the factor payments approach would include payments such as: Answer wages, interest payments, rent and profits. taxes, wages, interest payments and rents. rents, profits, value added adjustments, and taxes. consumption, investment and government. Add Question Here

Question 278

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Question Which of the following is false? GDP can be calculated by summing: Answer total market value of all final goods and services within a country's borders in a given year. all factor payments within a country's borders in a given year. the value added for all goods and services.

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government spending and tax revenues. Add Question Here

Question 279

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Question The value added is equal to: Answer the value of sales by a company. the value of sales minus the value of intermediate goods used by a company. the value of intermediate goods. the sum of payments to labor and capital. Add Question Here

Question 280

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Question Which of the following is NOT included in the calculation of GDP? Answer the Social Security check your relative receives each month the new textbook you purchase for a college course a coffee you purchase from the coffee shop down the street the wages you pay to the employee who cleans your house Add Question Here

Question 281

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Question Double counting would occur if: Answer GDP was calculated by adding together C, I, G, and NX. used goods were included in the GDP calculation. imports were subtracted from GDP. inventories were added to the GDP calculation. Add Question Here

Question 282

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Question When consumers purchase imported products, this is: Answer subtracted from GDP. considered domestic spending since it is spent by a domestic consumer. double counting. not a part of the GDP calculation. Add Question Here

Question 283

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Question Spending on inputs is __________________ and spending on investment is _______________. Answer part of GDP, part of GDP not a part of GDP, part of GDP part of GDP, not a part of GDP not a part of GDP, not a part of GDP Add Question Here

Question 284

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Question Scenario: Good A and Good B The town of York produces two goods, Good A and Good B. The following is information regarding York's production of these two goods and their prices the following three years.

Reference: Ref 7-24

(Scenario: Good A and Good B) In 2007, nominal GDP is: Answer greater than the nominal GDP in 2008. greater than the nominal GDP in 2006. equal to the nominal GDP in 2008. equal to the nominal GDP in 2006. Add Question Here

Question 285

Multiple Choice

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Question Scenario: Good A and Good B The town of York produces two goods, Good A and Good B. The following is information regarding York's production of these two goods and their prices the following three years.

Reference: Ref 7-24

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(Scenario: Good A and Good B) Using 2006 as the base year, then one would find that the real GDP in 2006: Answer is equal to the real GDP in 2007. is equal to the nominal GDP in 2006. is greater than the real GDP in 2007. cannot be calculated. Add Question Here

Question 286

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Question Scenario: Good A and Good B The town of York produces two goods, Good A and Good B. The following is information regarding York's production of these two goods and their prices the following three years.

Reference: Ref 7-24

(Scenario: Good A and Good B) Using 2006 as the base year, real GDP is greatest in: Answer 2006. 2007. 2008. Its base year always. Add Question Here

Question 287

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Question Real per capita GDP is: Answer real GDP divided by the population. real GDP divided by the amount of capital available in the economy. not a good useful measure of human welfare. rarely used as a tool to compare countries' possible resources. Add Question Here

Question 288

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Question Scenario: Market Basket Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume the price per unit of these goods is as follows for the years noted and 2007 is the base year.

Reference: Ref 7-25

(Scenario: Market Basket) What is the value of the price index in 2008? Answer 100 90 111 132 Add Question Here

Question 289

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Question Scenario: Market Basket Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume the price per unit of these goods is as follows for the years noted and 2007 is the base year.

Reference: Ref 7-25

(Scenario: Market Basket) What is the rate of inflation between 2007 and 2008? Answer –10% 11% 32% 0% Add Question Here

Question 290

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Question Scenario: Market Basket Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume the price per unit of these goods is as follows for the years noted and 2007 is the base year.

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Reference: Ref 7-25

(Scenario: Market Basket) What is the value of the price index in 2007? Answer 100 111 90 0 Add Question Here

Question 291

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Question The GDP deflator is: Answer a price index. equal to 100 in the base year. the ratio of real GDP for Year x divided by nominal GDP for Year x 100. a measure that tracks price changes for consumer goods. Add Question Here