Question 1

The reason economists include only the value of final goods and services when they calculate GDP is that intermediate goods:

Accepted Answer

A) do not create value added. 
B) do not add to economic welfare. 
C) have no social value. 
D) would be double counted otherwise. 
A) do not create value added. 
B) do not add to economic welfare. 
C) have no social value. 
D) would be double counted otherwise.

Question 2

Purchases of stocks and bonds in economic terminology are not investment.Explain why this statement is true.

Accepted Answer

Even though most of us think of buying s

Question 3

The World Values Survey, a group of international social scientists, who ranks the well-being of society based on social indicators ranks Puerto Rico higher than the United States. This approach to measuring well-being is similar to the approach that the text calls:

Accepted Answer

A) nominal gross domestic product. 
B) real gross domestic product. 
C) disposable personal income. 
D) genuine progress indicator. 
A) nominal gross domestic product. 
B) real gross domestic product. 
C) disposable personal income. 
D) genuine progress indicator.

Question 4

What is the GDP using the information shown? $\begin{array}{ |l | c | } 
\hline&\text { In billims of dallars }\
\hline \text { Consurngtion } & 5,100 \
\hline \text { Irnvestment } & 1,100 \
\hline \text { Transfer payments } & 1,050 \
\hline \text { Government Purchases } & 1,400 \
\hline \text { Exports } & 850 \
\hline \text { Imports } & 950 \
\hline \text { Net foreign factor incorne } & 20 \
\hline

\end{array}$

Accepted Answer

A) 6,400 
B) 7,500 
C) 9,400 
D) 10,470 
A) 6,400 
B) 7,500 
C) 9,400 
D) 10,470

Question 5

If the inflation rate is 6% and the nominal interest rate is 8%,what is the real rate of interest?

Accepted Answer

The real rate of interest is 2

Question 6

Transfers of assets, such as stock sales are:

Accepted Answer

A) included in GDP because they raise domestic production. 
B) included in GDP because they increase domestic wealth. 
C) not included in GDP because they do not increase domestic production. 
D) not included in GDP because they do not increase domestic wealth. 
A) included in GDP because they raise domestic production. 
B) included in GDP because they increase domestic wealth. 
C) not included in GDP because they do not increase domestic production. 
D) not included in GDP because they do not increase domestic wealth.

Question 7

Robert Summers and Alan Heston published data for 130 countries that used purchasing power parity, rather than market exchange rates, to compare GDP across countries. As a result, measured per capita incomes of developing countries rose relative to per capita incomes in developed countries. This is most likely because:

Accepted Answer

A) prices of standard goods in developing countries are generally higher than those in developed countries. 
B) prices of standard goods in developing countries are generally lower than those in developed countries. 
C) nonmarket activity is more extensive in developing countries than in developed countries. 
D) nonmarket activity is less extensive in developing countries than in developed countries. 
A) prices of standard goods in developing countries are generally higher than those in developed countries. 
B) prices of standard goods in developing countries are generally lower than those in developed countries. 
C) nonmarket activity is more extensive in developing countries than in developed countries. 
D) nonmarket activity is less extensive in developing countries than in developed countries.

Question 8

To calculate GDP:

Accepted Answer

A) add the quantity of all final goods and services produced in an economy in a year. 
B) add the quantity of all goods and services sold in an economy in a year. 
C) weight the output of each final good and service produced in an economy in a year by its price in that year and then total the result. 
D) weight the output of each good and service produced in an economy in a year by its price in that year and then total the result. 
A) add the quantity of all final goods and services produced in an economy in a year. 
B) add the quantity of all goods and services sold in an economy in a year. 
C) weight the output of each final good and service produced in an economy in a year by its price in that year and then total the result. 
D) weight the output of each good and service produced in an economy in a year by its price in that year and then total the result.

Question 9

In calculating GDP by the expenditure method,there are two ways to avoid the double counting of intermediate goods.Demonstrate your understanding of these two methods by showing how both produce the same calculation of contribution to GDP.Assume the following: 1)Iron ore is produced by iron mining,which is sold to steel makers for $30 million (we will make the simplifying assumption that iron mining uses no intermediate goods).2)The iron ore is all used to make steel,which is sold to automobile makers for $100 million.3)The steel is all used to make automobiles,which are sold to dealers for $250 million.4)All of the automobiles are sold by the dealers to consumers for $350 million.What are the two methods,and what contribution to GDP can be calculated by each method,from the above assumptions?

Accepted Answer

One method is to calculate the value of

Question 10

How does stock differ from flow?

Accepted Answer

A) A flow concept has meaning over a specified period of time, while a stock concept is a value at a point in time. 
B) A flow concept is a value at a point in time, while a stock concept has meaning over a specified period of time. 
C) They do not differ; both flow and stock concepts have meaning only over a specified period of time. 
D) The do not differ; both flow and stock concepts are values at a point in time. 
A) A flow concept has meaning over a specified period of time, while a stock concept is a value at a point in time. 
B) A flow concept is a value at a point in time, while a stock concept has meaning over a specified period of time. 
C) They do not differ; both flow and stock concepts have meaning only over a specified period of time. 
D) The do not differ; both flow and stock concepts are values at a point in time.

Question 11

Define the following price indices: PPI,GDP Deflator,CPI,and PCE deflator.

Accepted Answer

The PPI is the producer price index: a m

Question 12

If the percent change in nominal GDP is 3 percent and inflation is 4 percent, the percent change in real GDP is:

Accepted Answer

A) -1 percent. 
B) 0 percent. 
C) 1 percent. 
D) 2 percent. 
A) -1 percent. 
B) 0 percent. 
C) 1 percent. 
D) 2 percent.

Question 13

Which of the following is a part of GDP?

Accepted Answer

A) The value of a homemaker's services 
B) The value of a haircut 
C) The value of an old car purchased during a year 
D) The value of an existing house sold during a year 
A) The value of a homemaker's services 
B) The value of a haircut 
C) The value of an old car purchased during a year 
D) The value of an existing house sold during a year

Question 14

Why is it difficult to measure real wealth?

Accepted Answer

It is difficult to measure real wealth b

Question 15

Investment includes:

Accepted Answer

A) an increase in corporate stock volumes during the year. 
B) the purchase of medical supplies by the National Guard. 
C) an increase in government purchases. 
D) an increase in business inventories. 
A) an increase in corporate stock volumes during the year. 
B) the purchase of medical supplies by the National Guard. 
C) an increase in government purchases. 
D) an increase in business inventories.

Question 16

Conceptually, a country's GDP equals the:

Accepted Answer

A) sum of the value of its final output and the value of the intermediate goods used to produce that output. 
B) difference between the value of its final output and the value of the intermediate goods used to produce that output. 
C) sum of the value added at all stages of production. 
D) sum of the value of all the intermediate goods used to produce final output. 
A) sum of the value of its final output and the value of the intermediate goods used to produce that output. 
B) difference between the value of its final output and the value of the intermediate goods used to produce that output. 
C) sum of the value added at all stages of production. 
D) sum of the value of all the intermediate goods used to produce final output.

Question 17

For the purposes of calculating GDP using the expenditure approach, which of the following payments is not included in the government expenditures component?

Accepted Answer

A) Social Security payments 
B) The wages paid by a local government to its road crew 
C) The wages paid by a state government to the workers in its welfare department 
D) The federal government's purchase of a submarine from a shipbuilder 
A) Social Security payments 
B) The wages paid by a local government to its road crew 
C) The wages paid by a state government to the workers in its welfare department 
D) The federal government's purchase of a submarine from a shipbuilder

Question 18

In what category is the purchase of a computer by a person for household use in national income accounting?

Accepted Answer

A) It is counted as consumption. 
B) It is counted as consumption if the computer was manufactured in the United States; otherwise it is ignored. 
C) It is included as part of investment. 
D) The purchase is not included at all, but the value of services the computer gives is included in consumption each year. 
A) It is counted as consumption. 
B) It is counted as consumption if the computer was manufactured in the United States; otherwise it is ignored. 
C) It is included as part of investment. 
D) The purchase is not included at all, but the value of services the computer gives is included in consumption each year.

Question 19

What is the distinction between gross domestic product (GDP)and net domestic product (NDP)? In theory,which is a superior measure of aggregate output?

Accepted Answer

The difference between GDP and NDP is de

Question 20

Which of the following provides the closest measure of the rate of change in the prices paid by households?

Accepted Answer

A) PCE deflator 
B) BLS deflator 
C) GDP deflator 
D) PPI 
A) PCE deflator 
B) BLS deflator 
C) GDP deflator 
D) PPI

Exam 25: Measuring and Describing the Aggregate Economy

The reason economists include only the value of final goods and services when they calculate GDP is that intermediate goods:

Purchases of stocks and bonds in economic terminology are not investment.Explain why this statement is true.

The World Values Survey, a group of international social scientists, who ranks the well-being of society based on social indicators ranks Puerto Rico higher than the United States. This approach to measuring well-being is similar to the approach that the text calls:

What is the GDP using the information shown? In billims of dallars Consurngtion 5,100 Irnvestment 1,100 Transfer payments 1,050 Government Purchases 1,400 Exports 850 Imports 950 Net foreign factor incorne 20

If the inflation rate is 6% and the nominal interest rate is 8%,what is the real rate of interest?

Transfers of assets, such as stock sales are:

To calculate GDP:

How does stock differ from flow?

Define the following price indices: PPI,GDP Deflator,CPI,and PCE deflator.

If the percent change in nominal GDP is 3 percent and inflation is 4 percent, the percent change in real GDP is:

Which of the following is a part of GDP?

Why is it difficult to measure real wealth?

Investment includes:

Conceptually, a country's GDP equals the:

For the purposes of calculating GDP using the expenditure approach, which of the following payments is not included in the government expenditures component?

In what category is the purchase of a computer by a person for household use in national income accounting?

What is the distinction between gross domestic product (GDP)and net domestic product (NDP)? In theory,which is a superior measure of aggregate output?

Which of the following provides the closest measure of the rate of change in the prices paid by households?

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