Question 1

When John buys new tires for his car it_______ , and when Ford buys tires to put on new cars it_______ .

Accepted Answer

A)  does not count toward GDP; does not count toward GDP 
B)  does not count toward GDP; counts toward investment 
C)  counts toward consumption; counts toward investment 
D)  counts toward consumption; does not count toward GDP 
E)  counts toward investment; counts toward investment 
A)  does not count toward GDP; does not count toward GDP 
B)  does not count toward GDP; counts toward investment 
C)  counts toward consumption; counts toward investment 
D)  counts toward consumption; does not count toward GDP 
E)  counts toward investment; counts toward investment

Question 2

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called

Accepted Answer

A)  business cycles. 
B)  economic contractions. 
C)  economic expansions. 
D)  economic peaks. 
E)  economic troughs. 
A)  business cycles. 
B)  economic contractions. 
C)  economic expansions. 
D)  economic peaks. 
E)  economic troughs.

Question 3

To determine living standards for the average person, we calculate

Accepted Answer

A)  GDP. 
B)  per capita GDP. 
C)  the average level of prices in the country. 
D)  the length of time the average person is unemployed. 
E)  the growth rate of GDP. 
A)  GDP. 
B)  per capita GDP. 
C)  the average level of prices in the country. 
D)  the length of time the average person is unemployed. 
E)  the growth rate of GDP.

Question 4

Gross domestic product GDP) increases if prices decrease by _______and quantities produced increase by _______.

Accepted Answer

A)  2 percent; 4 percent 
B)  2 percent; 2 percent 
C)  4 percent; 2 percent 
D)  3 percent; 1 percent 
E)  3 percent; 3 percent 
A)  2 percent; 4 percent 
B)  2 percent; 2 percent 
C)  4 percent; 2 percent 
D)  3 percent; 1 percent 
E)  3 percent; 3 percent

Question 5

If gross domestic product GDP) is increasing, is the country necessarily producing a larger quantity of goods and services? Explain.

Accepted Answer

No, the country is not necessarily produ

Question 6

Joe has a full-time construction job and also does odd jobs for people on the weekends. You have purchased the materials needed to construct a fence at your house and you pay Joe $500 to build the fence. Does the payment to Joe count toward the value of gross domestic product GDP)?

Accepted Answer

A)  Yes, the fence increases the value of your house. 
B)  Yes, all income earned counts in GDP. 
C)  No, his is a nonmarket activity. 
D)  No, this income is not likely to be reported to the government. 
E)  No, this is a leisure activity. 
A)  Yes, the fence increases the value of your house. 
B)  Yes, all income earned counts in GDP. 
C)  No, his is a nonmarket activity. 
D)  No, this income is not likely to be reported to the government. 
E)  No, this is a leisure activity.

Question 7

Explain why a country with a lower level of real gross domestic product GDP) per capita might have a higher level of well-being in comparison to a country with a higher level of real GDP per capita.

Accepted Answer

The country with the lower level of real

Question 8

Which of the following is a service?

Accepted Answer

A)  a visit to your local beach 
B)  a visit to your doctor 
C)  a trip to the store to buy a T-shirt 
D)  a delivery pizza 
E)  having to write a check to pay your taxes 
A)  a visit to your local beach 
B)  a visit to your doctor 
C)  a trip to the store to buy a T-shirt 
D)  a delivery pizza 
E)  having to write a check to pay your taxes

Question 9

Consider the following data to answer the next  questions: $$\begin{array} { l l c } 
\hline \text { Country } & \text { GDP } & \text { Population } \
\hline \text { A } & \$ 32,000 & 1,500 \
\text { B } & \$ 20,000 & 1,000 \
\text { C } & \$ 10,000 & 500 \
\text { D } & \$ 10,000 & 2,000 \
\text { E } & \$ 8,000 & 800 \
\hline
\end{array}$$
-Which country has the lowest average living standard?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Question 10

Farmer Bill grows wheat and sells it to the miller for $50,000. The miller turns it into flour and sells it to the bakery for $75,000. The bakery uses the flour in the bread that it sells to people for $90,000. The total contribution to gross domestic product GDP) is

Accepted Answer

A)  $90,000. 
B)  $75,000. 
C)  $50,000. 
D)  $25,000. 
E)  $215,000. 
A)  $90,000. 
B)  $75,000. 
C)  $50,000. 
D)  $25,000. 
E)  $215,000.

Question 11

Real gross domestic product GDP) would be a better measure of economic well-being if it included the value of

Accepted Answer

A)  stocks and bonds purchases. 
B)  intermediate goods. 
C)  used goods. 
D)  leisure time. 
E)  Social Security payments. 
A)  stocks and bonds purchases. 
B)  intermediate goods. 
C)  used goods. 
D)  leisure time. 
E)  Social Security payments.

Question 12

Explain why national output and national income are essentially the same thing. Why do exports to other nations not create a problem for this identity?

Accepted Answer

Every market transaction contributes to

Question 13

Country A has a gross domestic product GDP) of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true?

Accepted Answer

A)  The value of output is higher in country A. 
B)  The value of income is higher in country A. 
C)  The value of GDP per capita is higher in country A. 
D)  The value of GDP per capita is higher in country B. 
E)  The average living standard is higher in country B. 
A)  The value of output is higher in country A. 
B)  The value of income is higher in country A. 
C)  The value of GDP per capita is higher in country A. 
D)  The value of GDP per capita is higher in country B. 
E)  The average living standard is higher in country B.

Question 14

To evaluate the change in average living standards over time, it is best to use

Accepted Answer

A)  the inflation rate. 
B)  GDP. 
C)  the literacy rate. 
D)  real GDP per capita. 
E)  the employment rate. 
A)  the inflation rate. 
B)  GDP. 
C)  the literacy rate. 
D)  real GDP per capita. 
E)  the employment rate.

Question 15

The sale of American-grown corn to China is included in the _______ category of gross domestic product GDP).

Accepted Answer

A)  consumption 
B)  investment 
C)  government purchases 
D)  export 
E)  import 
A)  consumption 
B)  investment 
C)  government purchases 
D)  export 
E)  import

Question 16

Nominal gross domestic product GDP) increased from $15.44 trillion to $15.75 trillion, and the price level increased from 116.5 to 122.3. Which of the following is true?

Accepted Answer

A)  Output grew faster than the price level. 
B)  Output grew slower than the price level. 
C)  Real GDP grew faster than nominal GDP. 
D)  Output grew at the same rate as the price level. 
E)  Real GDP grew at the same rate as nominal GDP. 
A)  Output grew faster than the price level. 
B)  Output grew slower than the price level. 
C)  Real GDP grew faster than nominal GDP. 
D)  Output grew at the same rate as the price level. 
E)  Real GDP grew at the same rate as nominal GDP.

Question 17

Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the next  questions. Assume that the base year is 2015. $$\begin{array} { l l l l l } 
\hline \text { Good } & \text { 2015 Price } & \text { 2015 Quantity } & \text { 2016 Price } & \text { 2016 Quantity } \
\hline \text { A } & \$ 2 & 250 & \$ 3 & 200 \
\text { B } & \$ 3 & 300 & \$ 2 & 400 \
\text { C } & \$ 4 & 400 & \$ 5 & 500 \
\hline
\end{array}$$
-Real gross domestic product GDP) is GDP adjusted for changes in

Accepted Answer

A)  overall employment levels. 
B)  overall price levels. 
C)  overall output levels. 
D)  the level of the interest rate. 
E)  the level of unemployment. 
A)  overall employment levels. 
B)  overall price levels. 
C)  overall output levels. 
D)  the level of the interest rate. 
E)  the level of unemployment.

Question 18

An accurate measure of gross domestic product GDP) is derived by adding the

Accepted Answer

A)  dollar value of all goods and services produced. 
B)  value added at each stage of the production process. 
C)  value of all materials used to make the final goods and services. 
D)  profit earned from the sale of the final goods and services. 
E)  value of the intermediate goods used to produce the final goods and services. 
A)  dollar value of all goods and services produced. 
B)  value added at each stage of the production process. 
C)  value of all materials used to make the final goods and services. 
D)  profit earned from the sale of the final goods and services. 
E)  value of the intermediate goods used to produce the final goods and services.

Question 19

Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to gross domestic product GDP) is

Accepted Answer

A)  $240,000. 
B)  $180,000. 
C)  $60,000. 
D)  $120,000. 
E)  $30,000. 
A)  $240,000. 
B)  $180,000. 
C)  $60,000. 
D)  $120,000. 
E)  $30,000.

Question 20

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

Accepted Answer

A)  It is impossible to sell more than is produced. 
B)  Inventory investment must be negative. 
C)  The price of the chocolate must have gone up. 
D)  The firm must have acquired the extra 10 boxes from another company. 
E)  The firm sold the chocolate but must have given 10 people an IOU. 
A)  It is impossible to sell more than is produced. 
B)  Inventory investment must be negative. 
C)  The price of the chocolate must have gone up. 
D)  The firm must have acquired the extra 10 boxes from another company. 
E)  The firm sold the chocolate but must have given 10 people an IOU.

When John buys new tires for his car it_ , and when Ford buys tires to put on new cars it_ .

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called

To determine living standards for the average person, we calculate

Gross domestic product GDP) increases if prices decrease by _and quantities produced increase by _.

If gross domestic product GDP) is increasing, is the country necessarily producing a larger quantity of goods and services? Explain.

Joe has a full-time construction job and also does odd jobs for people on the weekends. You have purchased the materials needed to construct a fence at your house and you pay Joe $500 to build the fence. Does the payment to Joe count toward the value of gross domestic product GDP)?

Explain why a country with a lower level of real gross domestic product GDP) per capita might have a higher level of well-being in comparison to a country with a higher level of real GDP per capita.

Which of the following is a service?

Consider the following data to answer the next questions: Country GDP Population A \ 32,000 1,500 B \ 20,000 1,000 C \ 10,000 500 D \ 10,000 2,000 E \ 8,000 800 -Which country has the lowest average living standard?

Farmer Bill grows wheat and sells it to the miller for $50,000. The miller turns it into flour and sells it to the bakery for $75,000. The bakery uses the flour in the bread that it sells to people for $90,000. The total contribution to gross domestic product GDP) is

Real gross domestic product GDP) would be a better measure of economic well-being if it included the value of

Explain why national output and national income are essentially the same thing. Why do exports to other nations not create a problem for this identity?

Country A has a gross domestic product GDP) of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true?

To evaluate the change in average living standards over time, it is best to use

The sale of American-grown corn to China is included in the _______ category of gross domestic product GDP).

Nominal gross domestic product GDP) increased from $15.44 trillion to $15.75 trillion, and the price level increased from 116.5 to 122.3. Which of the following is true?

An accurate measure of gross domestic product GDP) is derived by adding the

Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to gross domestic product GDP) is

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Exam 6: Introduction to Macroeconomics and Gross Domestic Product

When John buys new tires for his car it_______ , and when Ford buys tires to put on new cars it_______ .

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called

To determine living standards for the average person, we calculate

Gross domestic product GDP) increases if prices decrease by _______and quantities produced increase by _______.

If gross domestic product GDP) is increasing, is the country necessarily producing a larger quantity of goods and services? Explain.

Joe has a full-time construction job and also does odd jobs for people on the weekends. You have purchased the materials needed to construct a fence at your house and you pay Joe $500 to build the fence. Does the payment to Joe count toward the value of gross domestic product GDP)?

Explain why a country with a lower level of real gross domestic product GDP) per capita might have a higher level of well-being in comparison to a country with a higher level of real GDP per capita.

Which of the following is a service?

Consider the following data to answer the next questions: Country GDP Population A \ 32,000 1,500 B \ 20,000 1,000 C \ 10,000 500 D \ 10,000 2,000 E \ 8,000 800 -Which country has the lowest average living standard?

Farmer Bill grows wheat and sells it to the miller for $50,000. The miller turns it into flour and sells it to the bakery for $75,000. The bakery uses the flour in the bread that it sells to people for $90,000. The total contribution to gross domestic product GDP) is

Real gross domestic product GDP) would be a better measure of economic well-being if it included the value of

Explain why national output and national income are essentially the same thing. Why do exports to other nations not create a problem for this identity?

Country A has a gross domestic product GDP) of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true?

To evaluate the change in average living standards over time, it is best to use

The sale of American-grown corn to China is included in the _______ category of gross domestic product GDP).

Nominal gross domestic product GDP) increased from $15.44 trillion to $15.75 trillion, and the price level increased from 116.5 to 122.3. Which of the following is true?

An accurate measure of gross domestic product GDP) is derived by adding the

Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to gross domestic product GDP) is

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

When John buys new tires for his car it_ , and when Ford buys tires to put on new cars it_ .

Gross domestic product GDP) increases if prices decrease by _and quantities produced increase by _.