Question 1

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

Accepted Answer

A) selling price of a product includes these taxes, which are income to the government . 
B) selling price of a product includes these taxes, which are resource payments. 
C) selling price of a product excludes these taxes and therefore they have to be added. 
D) selling price includes these taxes which are actually not income to any sector of the economy. 
A) selling price of a product includes these taxes, which are income to the government . 
B) selling price of a product includes these taxes, which are resource payments. 
C) selling price of a product excludes these taxes and therefore they have to be added. 
D) selling price includes these taxes which are actually not income to any sector of the economy. A

Question 2

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of about

Accepted Answer

A) $536,000. 
B) $828,000. 
C) $1,131,000. 
D) $1,216,000. 
A) $536,000. 
B) $828,000. 
C) $1,131,000. 
D) $1,216,000. C

Question 3

Gross domestic product

Accepted Answer

A) is the sum of all exchanges of goods and services during a period. 
B) includes financial transactions such as the purchase of stocks or bonds traded during a period. 
C) is the sum of expenditures for both intermediate and final user goods. 
D) is the sum of the total spending on all final-user goods and services produced domestically during a period. 
A) is the sum of all exchanges of goods and services during a period. 
B) includes financial transactions such as the purchase of stocks or bonds traded during a period. 
C) is the sum of expenditures for both intermediate and final user goods. 
D) is the sum of the total spending on all final-user goods and services produced domestically during a period. D

Question 4

The primary value of data for real GDP lies in its ability to

Accepted Answer

A) reflect the welfare of a society relative to a previous period. 
B) compare a nation's productivity during two periods widely separated in time. 
C) indicate short-term changes in the output rate of a nation. 
D) indicate how hard the people of a nation are working. 
A) reflect the welfare of a society relative to a previous period. 
B) compare a nation's productivity during two periods widely separated in time. 
C) indicate short-term changes in the output rate of a nation. 
D) indicate how hard the people of a nation are working.

Question 5

The amount of U.S. exports purchased by the rest of the world is primarily determined by

Accepted Answer

A) real disposable income in the United States 
B) real disposable income in other nations 
C) the real interest rate in other nations 
D) the real interest rate in the United States 
E) the government budget deficits in other nations 
A) real disposable income in the United States 
B) real disposable income in other nations 
C) the real interest rate in other nations 
D) the real interest rate in the United States 
E) the government budget deficits in other nations

Question 6

If nominal or money GDP increases 6 percent in 2011 (compared to 2010), and real GDP increases 4 percent over the same period, which of the following must be true?

Accepted Answer

A) Exports exceeded imports. 
B) The general price level as measured by the GDP deflator fell during 2011. 
C) The economy entered a recession in 2011. 
D) Inflation during 2011 was 2 percent. 
A) Exports exceeded imports. 
B) The general price level as measured by the GDP deflator fell during 2011. 
C) The economy entered a recession in 2011. 
D) Inflation during 2011 was 2 percent.

Question 7

Which of the following would increase the GDP of the United States?

Accepted Answer

A) A resident of California buys a case of wine from a winery in France. 
B) A resident of Germany buys a software program from a company in Washington. 
C) A resident of Florida spends $3,000 on a vacation in Mexico. 
D) A Japanese investor purchases 100 shares of a computer company located in Illinois. 
A) A resident of California buys a case of wine from a winery in France. 
B) A resident of Germany buys a software program from a company in Washington. 
C) A resident of Florida spends $3,000 on a vacation in Mexico. 
D) A Japanese investor purchases 100 shares of a computer company located in Illinois.

Question 8

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI) is currently 110. This indicates the price of the market basket of goods and services is now

Accepted Answer

A) $110. 
B) $1,000. 
C) $1,100. 
D) $1,225. 
A) $110. 
B) $1,000. 
C) $1,100. 
D) $1,225.

Question 9

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Accepted Answer

A) It would increase GNP and GDP. 
B) It would increase GNP and leave GDP unchanged. 
C) It would increase GDP and leave GNP unchanged. 
D) It would leave both GDP and GNP unchanged. 
A) It would increase GNP and GDP. 
B) It would increase GNP and leave GDP unchanged. 
C) It would increase GDP and leave GNP unchanged. 
D) It would leave both GDP and GNP unchanged.

Question 10

Which of the following is GDP designed to measure?

Accepted Answer

A) the total market value of goods and services produced domestically during the year 
B) changes in the cost of purchasing the typical consumer market basket of goods from one year to another 
C) the total size of the domestic underground economy 
D) the standard of living of the average citizen 
A) the total market value of goods and services produced domestically during the year 
B) changes in the cost of purchasing the typical consumer market basket of goods from one year to another 
C) the total size of the domestic underground economy 
D) the standard of living of the average citizen

Question 11

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because the GDP deflator is

Accepted Answer

A) calculated for a more general market basket of goods than the consumer price index. 
B) always less than the consumer price index and, thus, is a more stable index. 
C) the sum of the consumer price index and the wholesale price index. 
D) the only price index adjusted annually for changes in the quality of products. 
A) calculated for a more general market basket of goods than the consumer price index. 
B) always less than the consumer price index and, thus, is a more stable index. 
C) the sum of the consumer price index and the wholesale price index. 
D) the only price index adjusted annually for changes in the quality of products.

Question 12

Gross domestic product is

Accepted Answer

A) the market value of all goods and services exchanged within a country during a time period. 
B) the market value of all domestic assets, regardless of whether they are owned by citizens or foreigners. 
C) the compensation received during a period for labor services plus interest, rents, and corporate profits. 
D) the market value of final goods and services produced within a country during a time period. 
A) the market value of all goods and services exchanged within a country during a time period. 
B) the market value of all domestic assets, regardless of whether they are owned by citizens or foreigners. 
C) the compensation received during a period for labor services plus interest, rents, and corporate profits. 
D) the market value of final goods and services produced within a country during a time period.

Question 13

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

Accepted Answer

A) The total value of GDP must have increased 11 percent during the year. 
B) The general level of prices as measured by the GDP deflator decreased by approximately 3 percent during the year. 
C) The general level of prices as measured by the GDP deflator increased by approximately 3 percent during the year. 
D) Imports must have been about 3 percent larger than exports during the year. 
A) The total value of GDP must have increased 11 percent during the year. 
B) The general level of prices as measured by the GDP deflator decreased by approximately 3 percent during the year. 
C) The general level of prices as measured by the GDP deflator increased by approximately 3 percent during the year. 
D) Imports must have been about 3 percent larger than exports during the year.

Question 14

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

Accepted Answer

A) fails to account for consumer spending on housing. 
B) accounts only for consumer spending on food, clothing, and energy. 
C) fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D) fails to account for the introduction of new goods. 
A) fails to account for consumer spending on housing. 
B) accounts only for consumer spending on food, clothing, and energy. 
C) fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D) fails to account for the introduction of new goods.

Question 15

Which of the following is a deficiency of the regular (or traditional) consumer price index (CPI) as a measure of the cost of living?

Accepted Answer

A) The CPI fails to make any adjustment for changes in the price of housing. 
B) The CPI only measures changes in the prices of food, clothing, and energy. 
C) The CPI fails to maintain the quantities of the typical bundle of goods purchased by consumers constant over a lengthy time frame. 
D) The CPI does not adjust regularly for the fact that consumers will shift their spending away from goods that become more expensive. 
A) The CPI fails to make any adjustment for changes in the price of housing. 
B) The CPI only measures changes in the prices of food, clothing, and energy. 
C) The CPI fails to maintain the quantities of the typical bundle of goods purchased by consumers constant over a lengthy time frame. 
D) The CPI does not adjust regularly for the fact that consumers will shift their spending away from goods that become more expensive.

Question 16

A price index is designed to measure

Accepted Answer

A) changes in the general level of employment across time periods. 
B) changes in the quantity of output produced across time periods. 
C) the market value of output produced during the current period with the value of output produced during an earlier time period. 
D) the cost of buying a market basket of goods at a point in time relative to the cost of buying the same market basket during an earlier time period. 
A) changes in the general level of employment across time periods. 
B) changes in the quantity of output produced across time periods. 
C) the market value of output produced during the current period with the value of output produced during an earlier time period. 
D) the cost of buying a market basket of goods at a point in time relative to the cost of buying the same market basket during an earlier time period.

Question 17

Gross domestic product is equal to the market value of all goods and services

Accepted Answer

A) exchanged during a period. 
B) produced domestically during a period. 
C) produced by the citizens of a nation during a period. 
D) produced domestically during a period minus the depreciation of productive assets. 
A) exchanged during a period. 
B) produced domestically during a period. 
C) produced by the citizens of a nation during a period. 
D) produced domestically during a period minus the depreciation of productive assets.

Question 18

Because GDP does not fully account for improvements in the quality of goods,

Accepted Answer

A) the inflation rate is understated and real GDP is overstated. 
B) the inflation rate is overstated and real GDP is understated. 
C) both the inflation rate and real GDP are overstated. 
D) both the inflation rate and real GDP are understated. 
A) the inflation rate is understated and real GDP is overstated. 
B) the inflation rate is overstated and real GDP is understated. 
C) both the inflation rate and real GDP are overstated. 
D) both the inflation rate and real GDP are understated.

Question 19

Which of the following is the major difference between the chained consumer price index and the regular consumer price index?

Accepted Answer

A) The chained index assumes that households purchase the same bundle of goods over a lengthy time period; the regular price index makes allowance for shifts away from goods that have become more expensive. 
B) The chained index makes allowance each month for shifts away from goods that have become more expensive; the regular consumer price index fails to adjust for these shifts. 
C) The chained consumer price index reflects changes in the prices of all final goods and services produced during a period, whereas the regular consumer price index reflects only changes in the prices of goods purchased by households. 
D) The chained consumer price index will generally result in a higher measured rate of inflation than the regular consumer price index. 
A) The chained index assumes that households purchase the same bundle of goods over a lengthy time period; the regular price index makes allowance for shifts away from goods that have become more expensive. 
B) The chained index makes allowance each month for shifts away from goods that have become more expensive; the regular consumer price index fails to adjust for these shifts. 
C) The chained consumer price index reflects changes in the prices of all final goods and services produced during a period, whereas the regular consumer price index reflects only changes in the prices of goods purchased by households. 
D) The chained consumer price index will generally result in a higher measured rate of inflation than the regular consumer price index.

Question 20

A firm purchases $400,000 worth of raw materials and pays wages and salaries of $300,000 and dividends of $100,000. If the firm sells its output for $1 million, the firm's value added to GDP is

Accepted Answer

A) $400,000. 
B) $600,000. 
C) $800,000. 
D) $1,000,000. 
A) $400,000. 
B) $600,000. 
C) $800,000. 
D) $1,000,000.

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of about

Gross domestic product

The primary value of data for real GDP lies in its ability to

The amount of U.S. exports purchased by the rest of the world is primarily determined by

If nominal or money GDP increases 6 percent in 2011 (compared to 2010), and real GDP increases 4 percent over the same period, which of the following must be true?

Which of the following would increase the GDP of the United States?

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI) is currently 110. This indicates the price of the market basket of goods and services is now

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Which of the following is GDP designed to measure?

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because the GDP deflator is

Gross domestic product is

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

Which of the following is a deficiency of the regular (or traditional) consumer price index (CPI) as a measure of the cost of living?

A price index is designed to measure

Gross domestic product is equal to the market value of all goods and services

Because GDP does not fully account for improvements in the quality of goods,

Which of the following is the major difference between the chained consumer price index and the regular consumer price index?

A firm purchases $400,000 worth of raw materials and pays wages and salaries of $300,000 and dividends of $100,000. If the firm sells its output for $1 million, the firm's value added to GDP is

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 7: Taking the Nations Economic Pulse

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of about

Gross domestic product

The primary value of data for real GDP lies in its ability to

The amount of U.S. exports purchased by the rest of the world is primarily determined by

If nominal or money GDP increases 6 percent in 2011 (compared to 2010), and real GDP increases 4 percent over the same period, which of the following must be true?

Which of the following would increase the GDP of the United States?

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI) is currently 110. This indicates the price of the market basket of goods and services is now

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

Which of the following is GDP designed to measure?

When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because the GDP deflator is

Gross domestic product is

If nominal GDP increases 4 percent during a year, and real GDP increases 7 percent during the same year, which of the following must by true?

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

Which of the following is a deficiency of the regular (or traditional) consumer price index (CPI) as a measure of the cost of living?

A price index is designed to measure

Gross domestic product is equal to the market value of all goods and services

Because GDP does not fully account for improvements in the quality of goods,

Which of the following is the major difference between the chained consumer price index and the regular consumer price index?

A firm purchases $400,000 worth of raw materials and pays wages and salaries of $300,000 and dividends of $100,000. If the firm sells its output for $1 million, the firm's value added to GDP is

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters