Question 1

When there is inflation, the reliability of changes in GDP as an indicator of changes in production

Accepted Answer

A)  improves. 
B)  is not affected. 
C)  declines. 
D)  is not affected, unless the change in prices is extreme. 
E)  None of these 
A)  improves. 
B)  is not affected. 
C)  declines. 
D)  is not affected, unless the change in prices is extreme. 
E)  None of these C

Question 2

A computer dealer has 20 computers at the beginning of the month and receives an additional 35 computers during the month. If the computer dealer has 15 computers in stock at the end of the month, the dealer's inventory investment for that month would be

Accepted Answer

A)  minus 15 computers. 
B)  plus 5 computers. 
C)  minus 5 computers. 
D)  plus 15 computers. 
E)  plus 35 computers. 
A)  minus 15 computers. 
B)  plus 5 computers. 
C)  minus 5 computers. 
D)  plus 15 computers. 
E)  plus 35 computers. C

Question 3

Consider the case of a hypothetical economy that has no government or foreign trade. This economy produces one final product, books. Moreover, there are only two stages of production, writing by authors and publishing by a single publishing company, Inco. In 2010, Inco produced $4 million worth of books, and consumers purchased $3 million of those books.
(A)In 2010, for this economy, how much were C and I? How much was GDP? In 2010, Inco paid $500,000 to its workers, $200,000 in interest to its creditors, $300,000 for rent, and $2 million to its authors.
(B)How much were Inco's profits in 2010?
(C)How much value added was produced by the authors in 2010? How much value added was produced by Inco? What was the total value added produced in the economy that year?

Accepted Answer

(A)C = $3 million, I = $1 million (inventory), GDP = $4 million.
(B)Profits = $4 million - $.5 million - $.2 million - $.3 million -$.2 million = $1 million.
(C)Value added by authors = $2 million.
Value added produced by Inco = $4 million - $2 million = $2 million.
Total value added produced was $2 million (value added produced by authors) + $2 million (value added produced by Inco) = $4 million.

Question 4

Suppose that real GDP grew faster than nominal GDP between year 1 and year 2. What must have happened to prices on average?

Accepted Answer

Prices must have decreased. Since nomina

Question 5

Exhibit 18-7  
-The information in Exhibit 18-7 gives the 2005 base period market basket and prices used to construct the CPI for a small nation. It also has the 2010 prices. What is the value of the CPI for the period 2010?

Accepted Answer

A)  1.00 
B)  1.40 
C)  1.33 
D)  0.71 
E)  1.25 
A)  1.00 
B)  1.40 
C)  1.33 
D)  0.71 
E)  1.25

Question 6

Where are the goods and services included in a country's GDP produced?

Accepted Answer

A)  Within the borders of that country plus those goods produced abroad by that country's residents, less domestic goods produced by foreign residents 
B)  Within the borders of that country except for those goods produced in the country by nonresidents or with capital owned by foreigners 
C)  Anywhere that country's residents produce goods and services 
D)  Within that country's borders 
E)  Anywhere that country's businesses produce goods and services 
A)  Within the borders of that country plus those goods produced abroad by that country's residents, less domestic goods produced by foreign residents 
B)  Within the borders of that country except for those goods produced in the country by nonresidents or with capital owned by foreigners 
C)  Anywhere that country's residents produce goods and services 
D)  Within that country's borders 
E)  Anywhere that country's businesses produce goods and services

Question 7

The figure below shows real and nominal GDP for a hypothetical economy between 1967 and 1978. Assume this economy had the same inflationary experience as the United States did over this period.    (A)What year is the base year?
(B)Which series is real GDP?
(C)Prior to the base year, is real GDP greater than or less than nominal GDP? Why?

Accepted Answer

(A)1972
(B)X is real GDP.
(C)Prior to th

Question 8

In which spending category would you enter the following transaction? Company A successfully launches a hostile takeover of Company B, in which it purchases all the assets of Company B.

Accepted Answer

A)  Government purchases 
B)  Net exports 
C)  Investment 
D)  Consumption 
E)  None of these 
A)  Government purchases 
B)  Net exports 
C)  Investment 
D)  Consumption 
E)  None of these

Question 9

If nominal GDP is $5 trillion, and the GDP price deflator is 1.25, what is real GDP?

Accepted Answer

A)  $0.4 trillion 
B)  $6.25 trillion 
C)  $625 trillion 
D)  $4 trillion 
E)  Not enough information is given. 
A)  $0.4 trillion 
B)  $6.25 trillion 
C)  $625 trillion 
D)  $4 trillion 
E)  Not enough information is given.

Question 10

Consumption expenditures include

Accepted Answer

A)  expenditures by households on goods and services produced only in the United States. 
B)  purchases of consumer goods produced in the United States by households, businesses, government, and other countries. 
C)  purchases of consumer goods produced in the United States and the rest of the world by households, businesses, government, and other countries. 
D)  expenditures by households on goods and services produced in the United States and the rest of the world. 
E)  the purchase of new homes by households. 
A)  expenditures by households on goods and services produced only in the United States. 
B)  purchases of consumer goods produced in the United States by households, businesses, government, and other countries. 
C)  purchases of consumer goods produced in the United States and the rest of the world by households, businesses, government, and other countries. 
D)  expenditures by households on goods and services produced in the United States and the rest of the world. 
E)  the purchase of new homes by households.

Question 11

What are the three ways to measure GDP? Explain what they mean.

Accepted Answer

One technique is the spending approach.

Question 12

The CPI tends to overstate inflation because too little weight is placed on goods with rising prices and too much weight is placed on goods with falling prices.

Accepted Answer

A) True 
 B)False

Question 13

GDP can be calculated by adding the value of

Accepted Answer

A)  all final goods produced in a country within a given period. 
B)  all intermediate and final goods produced in a country within a given period. 
C)  all intermediate goods produced in a country within a given period. 
D)  all final goods produced in a country within a given period minus the value of all intermediate goods produced. 
E)  all final goods or the value of all intermediate goods produced in a country within a given period, whichever is smaller. 
A)  all final goods produced in a country within a given period. 
B)  all intermediate and final goods produced in a country within a given period. 
C)  all intermediate goods produced in a country within a given period. 
D)  all final goods produced in a country within a given period minus the value of all intermediate goods produced. 
E)  all final goods or the value of all intermediate goods produced in a country within a given period, whichever is smaller.

Question 14

Which of the following statements is true?

Accepted Answer

A)  Inventory investment is the only component of investment spending that is not included in business fixed investment. 
B)  Residential investment is the only component of investment spending that is not included in business fixed investment. 
C)  Investment spending is the same as business fixed investment. 
D)  Inventory investment and residential investment are not part of business fixed investment. 
E)  Purchases of intermediate goods by businesses are included in business fixed investment. 
A)  Inventory investment is the only component of investment spending that is not included in business fixed investment. 
B)  Residential investment is the only component of investment spending that is not included in business fixed investment. 
C)  Investment spending is the same as business fixed investment. 
D)  Inventory investment and residential investment are not part of business fixed investment. 
E)  Purchases of intermediate goods by businesses are included in business fixed investment.

Question 15

What best describes what is included in the GDP measure?

Accepted Answer

A)  Only newly produced goods 
B)  Only newly produced services 
C)  All goods and services sold 
D)  Only newly produced goods and services 
E)  Any economic interaction 
A)  Only newly produced goods 
B)  Only newly produced services 
C)  All goods and services sold 
D)  Only newly produced goods and services 
E)  Any economic interaction

Question 16

Which of the following statements is true?

Accepted Answer

A)  Capital income includes sales taxes paid by businesses to the government. 
B)  Capital income includes indirect business taxes. 
C)  GDP includes indirect business taxes. 
D)  GDP does not include indirect business taxes. 
E)  None of these 
A)  Capital income includes sales taxes paid by businesses to the government. 
B)  Capital income includes indirect business taxes. 
C)  GDP includes indirect business taxes. 
D)  GDP does not include indirect business taxes. 
E)  None of these

Question 17

The state of individual well-being affects the production of goods and services in the economy.

Accepted Answer

A) True 
 B)False

Question 18

Can real GDP per capita serve, by itself, as an adequate measure of individual well-being?

Accepted Answer

No. There are parts of well-be

Question 19

In dollar terms, U.S. GDP in 2010 is approximately

Accepted Answer

A)  $8,600,000,000,000,000. 
B)  $8,600,000,000,000. 
C)  $14,600,000,000,000,000. 
D)  $14,600,000,000,000. 
E)  $14,600,000. 
A)  $8,600,000,000,000,000. 
B)  $8,600,000,000,000. 
C)  $14,600,000,000,000,000. 
D)  $14,600,000,000,000. 
E)  $14,600,000.

Question 20

The measure for GDP is reported in the United States every

Accepted Answer

A)  month. 
B)  other month. 
C)  two weeks. 
D)  three months. 
E)  six months. 
A)  month. 
B)  other month. 
C)  two weeks. 
D)  three months. 
E)  six months.

Exam 6: Measuring the Production, Income, and Spending of Nations

When there is inflation, the reliability of changes in GDP as an indicator of changes in production

A computer dealer has 20 computers at the beginning of the month and receives an additional 35 computers during the month. If the computer dealer has 15 computers in stock at the end of the month, the dealer's inventory investment for that month would be

Suppose that real GDP grew faster than nominal GDP between year 1 and year 2. What must have happened to prices on average?

Exhibit 18-7 -The information in Exhibit 18-7 gives the 2005 base period market basket and prices used to construct the CPI for a small nation. It also has the 2010 prices. What is the value of the CPI for the period 2010?

Where are the goods and services included in a country's GDP produced?

In which spending category would you enter the following transaction? Company A successfully launches a hostile takeover of Company B, in which it purchases all the assets of Company B.

If nominal GDP is $5 trillion, and the GDP price deflator is 1.25, what is real GDP?

Consumption expenditures include

What are the three ways to measure GDP? Explain what they mean.

The CPI tends to overstate inflation because too little weight is placed on goods with rising prices and too much weight is placed on goods with falling prices.

GDP can be calculated by adding the value of

Which of the following statements is true?

What best describes what is included in the GDP measure?

Which of the following statements is true?

The state of individual well-being affects the production of goods and services in the economy.

Can real GDP per capita serve, by itself, as an adequate measure of individual well-being?

In dollar terms, U.S. GDP in 2010 is approximately

The measure for GDP is reported in the United States every

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters