Question 1

At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current GDP.

Accepted Answer

A) True 
 B)False

Question 2

Changes in real GDP reflect

Accepted Answer

A) only changes in prices. 
B) only changes in the amounts being produced. 
C) both changes in prices and changes in the amounts being produced. 
D) neither changes in prices nor changes in the amounts being produced. 
A) only changes in prices. 
B) only changes in the amounts being produced. 
C) both changes in prices and changes in the amounts being produced. 
D) neither changes in prices nor changes in the amounts being produced.

Question 3

Write the formula for calculating a GDP deflator using only nominal and real GDP.

Accepted Answer

GDP deflat

Question 4

An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.

Accepted Answer

A) True 
 B)False

Question 5

Table 23-6
The country of Batavia produces only chocolates and watches. Below is a table with recent information on Batavia production and prices. The base year is 2009.
Prices and Quantities
  
-Refer to Table 23-6. What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work.

Accepted Answer

Nominal GDP was $5x100 + $60x1

Question 6

Real GDP is the yearly production of final goods and services valued at

Accepted Answer

A) current prices. 
B) constant prices. 
C) expected future prices. 
D) the ratio of current prices to constant prices. 
A) current prices. 
B) constant prices. 
C) expected future prices. 
D) the ratio of current prices to constant prices.

Question 7

To encourage formation of small businesses, the government could provide subsidies; these subsidies

Accepted Answer

A) would be included in GDP because they are part of government purchases. 
B) would be included in GDP because they are part of investment expenditures. 
C) would not be included in GDP because they are transfer payments. 
D) would not be included in GDP because the government raises taxes to pay for them. 
A) would be included in GDP because they are part of government purchases. 
B) would be included in GDP because they are part of investment expenditures. 
C) would not be included in GDP because they are transfer payments. 
D) would not be included in GDP because the government raises taxes to pay for them.

Question 8

GDP is a good measure of economic well-being for all purposes.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following correctly orders U.S. income measures from largest to smallest?

Accepted Answer

A) Disposable personal income, gross national product, national income, net national product, personal income 
B) Personal income, net national product, national income, gross national product, disposable personal income 
C) Gross national product, net national product, national income, personal income, disposable personal income 
D) Disposable personal income, personal income, national income, net national product, gross national product 
A) Disposable personal income, gross national product, national income, net national product, personal income 
B) Personal income, net national product, national income, gross national product, disposable personal income 
C) Gross national product, net national product, national income, personal income, disposable personal income 
D) Disposable personal income, personal income, national income, net national product, gross national product

Question 10

Katherine, a French citizen, works only in the United States. The value of the output she produces is

Accepted Answer

A) included in both U.S.GDP and U.S.GNP. 
B) included in U.S.GDP, but it is not included in U.S.GNP. 
C) included in U.S.GNP, but it is not included in U.S.GDP. 
D) included in neither U.S.GDP nor U.S.GNP. 
A) included in both U.S.GDP and U.S.GNP. 
B) included in U.S.GDP, but it is not included in U.S.GNP. 
C) included in U.S.GNP, but it is not included in U.S.GDP. 
D) included in neither U.S.GDP nor U.S.GNP.

Question 11

Alexandria, a British citizen, owns and manages a fish and chips shop in Washington, D.C.
She buys fresh food produced by U.S. workers, pays utilities to a U.S. company, and employs only U.S. citizens. What part, if any, of the restaurant's production is included in U.S. GDP? What part, if any, of the restaurant's production is included in U.S. GNP?

Accepted Answer

All of the output is included

Question 12

You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain carefully.

Accepted Answer

Real income is nominal income adjusted f

Question 13

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

Accepted Answer

A) values of goods and services based on surveys of consumers. 
B) market prices. 
C) quantities purchased by a typical urban household. 
D) profits from producing goods and services. 
A) values of goods and services based on surveys of consumers. 
B) market prices. 
C) quantities purchased by a typical urban household. 
D) profits from producing goods and services.

Question 14

According to the circular-flow diagram, GDP can be computed as

Accepted Answer

A) either the revenue firms receive from the sales of goods and services or the payments they make to factors of production. 
B) the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. 
C) payments firms make to factors of production but not as revenues they receive from the sales of goods and services. 
D) neither the revenue firms receive nor the payments they make to factors of production. 
A) either the revenue firms receive from the sales of goods and services or the payments they make to factors of production. 
B) the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. 
C) payments firms make to factors of production but not as revenues they receive from the sales of goods and services. 
D) neither the revenue firms receive nor the payments they make to factors of production.

Question 15

The government computes measures of income other than GDP because these other measures usually tell different stories about overall economic conditions.

Accepted Answer

A) True 
 B)False

Question 16

Real GDP evaluates current production using prices that are fixed at past levels and therefore shows how the economy's overall production of goods and services changes over time.

Accepted Answer

A) True 
 B)False

Question 17

Disposable personal income is the income that households and noncorporate businesses have left after satisfying all their obligations to the government.

Accepted Answer

A) True 
 B)False

Question 18

If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300.

Accepted Answer

A) True 
 B)False

Question 19

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with

Accepted Answer

A) longer life expectancy and a lower percentage of the population that is literate. 
B) longer life expectancy and a higher percentage of the population that is literate. 
C) very nearly the same life expectancy and a lower percentage of the population that is literate. 
D) very nearly the same life expectancy and a higher percentage of the population that is literate. 
A) longer life expectancy and a lower percentage of the population that is literate. 
B) longer life expectancy and a higher percentage of the population that is literate. 
C) very nearly the same life expectancy and a lower percentage of the population that is literate. 
D) very nearly the same life expectancy and a higher percentage of the population that is literate.

Question 20

The term economists use to describe a situation in which the economy's overall price level is rising is

Accepted Answer

A) growth. 
B) inflation. 
C) recession. 
D) expansion. 
A) growth. 
B) inflation. 
C) recession. 
D) expansion.

Exam 23: Measuring a Nations Income

At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current GDP.

Changes in real GDP reflect

Write the formula for calculating a GDP deflator using only nominal and real GDP.

An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.

Table 23-6 The country of Batavia produces only chocolates and watches. Below is a table with recent information on Batavia production and prices. The base year is 2009. Prices and Quantities -Refer to Table 23-6. What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work.

Real GDP is the yearly production of final goods and services valued at

To encourage formation of small businesses, the government could provide subsidies; these subsidies

GDP is a good measure of economic well-being for all purposes.

Which of the following correctly orders U.S. income measures from largest to smallest?

Katherine, a French citizen, works only in the United States. The value of the output she produces is

You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain carefully.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

According to the circular-flow diagram, GDP can be computed as

The government computes measures of income other than GDP because these other measures usually tell different stories about overall economic conditions.

Real GDP evaluates current production using prices that are fixed at past levels and therefore shows how the economy's overall production of goods and services changes over time.

Disposable personal income is the income that households and noncorporate businesses have left after satisfying all their obligations to the government.

If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300.

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with

The term economists use to describe a situation in which the economy's overall price level is rising is

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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