Question 1

The circular flow diagram illustrates _____.

Accepted Answer

A) the growth of income inequality in the United States 
B) the growth of income inequality in the United States. 
C) the production of nondurable goods. 
D) the production of nondurable goods 
E) spending on goods and services.
F)spending on goods and services
G)the production of durable goods
H)the production of durable goods. 
A) the growth of income inequality in the United States 
B) the growth of income inequality in the United States. 
C) the production of nondurable goods. 
D) the production of nondurable goods 
E) spending on goods and services.
F)spending on goods and services
G)the production of durable goods
H)the production of durable goods.

Question 2

Below is economic data for Germany for 2016 (measured in billions of current euros). What was total spending?
$$\begin{array} { | l | r | } 
\hline \text { Consumption } & 1,649.79 \
\hline \text { Investment } & 636.42 \
\hline \text { Government spending } & 620.01 \
\hline \text { Exports } & 1,442.41 \
\hline \text { Imports } & 1,211.64 \
\hline
\end{array}$$

Accepted Answer

A) 2,675 
B) 4,348 
C) 2,906 
D) 3,137 
A) 2,675 
B) 4,348 
C) 2,906 
D) 3,137

Question 3

Real per capita GDP is:

Accepted Answer

A) real GDP divided by the population. 
B) real GDP divided by the population 
C) real GDP divided by the amount of capital available in the economy. 
D) real GDP divided by the amount of capital available in the economy 
E) not a useful measure of human welfare
F)not a useful measure of human welfare.
G)rarely used as a tool to compare countries' possible resources
H)rarely used as a tool to compare countries' possible resources. 
A) real GDP divided by the population. 
B) real GDP divided by the population 
C) real GDP divided by the amount of capital available in the economy. 
D) real GDP divided by the amount of capital available in the economy 
E) not a useful measure of human welfare
F)not a useful measure of human welfare.
G)rarely used as a tool to compare countries' possible resources
H)rarely used as a tool to compare countries' possible resources.

Question 4

(Scenario: Good A and Good B). The town of York produces two goods, good A and good B. The following is information regarding York's production of these two goods and their prices over three years. With 2017 as the base year, real GDP in 2017 was _____ GDP in _____. $$\begin{array} { | l | l | l | l | } 
\hline & \text { Year 2017 } & \text { Year 2018 } & \text { Year 2019 } \
\hline \text { Quantity of good A } & 3 & 4 & 5 \
\hline \text { Price of good A } & \$ 500 & \$ 550 & \$ 550 \
\hline \text { Quantity of good B } & 10 & 10 & 10 \
\hline \text { Price of good B } & \$ 2 & \$ 4 & \$ 5 \
\hline
\end{array}$$

Accepted Answer

A)  2017 
B)  2017. 
C)  2018 
D)  2018. 
E)  2019.
F) 2019
G) its base year
H) its base year. 
A)  2017 
B)  2017. 
C)  2018 
D)  2018. 
E)  2019.
F) 2019
G) its base year
H) its base year.

Question 5

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Assuming year 3 is the base year, the change in real output between years 3 and 4 is an increase of: $$\begin{array} { | l | l | l | } 
\hline \text { Year } & \text { Units of Output } & \text { Price per Unit } \
\hline 1 & 40 & \$ 1 \
\hline 2 & 30 & \$ 2 \
\hline 3 & 50 & \$ 2 \
\hline 4 & 70 & \$ 4 \
\hline 5 & 60 & \$ 6 \
\hline 6 & 60 & \$ 8 \
\hline
\end{array}$$

Accepted Answer

A) 40% 
B) 40%. 
C) 100%. 
D) 100% 
E) 140%
F)140%.
G)200%.
H)200% 
A) 40% 
B) 40%. 
C) 100%. 
D) 100% 
E) 140%
F)140%.
G)200%.
H)200%

Question 6

(Table: Price and Output Data) Use Table: Price and Output Data. The value of year 4's output in nominal dollars is: $$\begin{array} { | l | l | l | } 
\hline \text { Year } & \text { Output } & \text { Price per Unit } \
\hline 1 & 2 & \$ 2 \
\hline 2 & 3 & 4 \
\hline 3 = \text { base period } & 4 & 5 \
\hline 4 & 6 & 6 \
\hline 5 & 7 & 9 \
\hline
\end{array}$$

Accepted Answer

A) $6. 
B) $6 
C) $24. 
D) $24 
E) $30
F)$30.
G)$36
H)$36. 
A) $6. 
B) $6 
C) $24. 
D) $24 
E) $30
F)$30.
G)$36
H)$36.

Question 7

Suppose that, in year 1, an economy produces 200 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 210 golf balls that sell for $3.50 each and 80 pizzas that sell for $9 each. The growth rate of nominal GDP is ____.

Accepted Answer

A) 21.25%. 
B) 21.25% 
C) 17.53%. 
D) 17.53% 
E) 14.58%
F)14.58%.
G)12.73%
H)12.73%. 
A) 21.25%. 
B) 21.25% 
C) 17.53%. 
D) 17.53% 
E) 14.58%
F)14.58%.
G)12.73%
H)12.73%.

Question 8

A city experiences a rise in economic growth due to improvements in technology, but at the same time, there is increasing consumption of illegal drugs. What shortcoming of GDP measurement does this finding reflect?

Accepted Answer

A) Nonmarket activities are excluded. 
B) GDP ignores income distribution. 
C) The shadow economy is missing. 
D) Environmental degradation is counted. 
A) Nonmarket activities are excluded. 
B) GDP ignores income distribution. 
C) The shadow economy is missing. 
D) Environmental degradation is counted.

Question 9

Is nonmarket production the same as the shadow economy? Explain.

Accepted Answer

The answer of Is nonmarket production the same as the...

Question 10

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the average price level between the two years?
$$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Textbooks } \
\text { Sold }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Price }
\end{array} \
\hline \text { Last year } & 5,000 & \$ 50 \
\hline \text { This year } & 5,250 & \$ 55 \
\hline
\end{array}$$

Accepted Answer

A) $105 
B) $55 
C) $50 
D) $52.50 
A) $105 
B) $55 
C) $50 
D) $52.50

Question 11

(Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of per capita nominal GDP was: $$\begin{array} { | l | l | l | l | } 
\hline \text { Year } & \text { Nominal GDP } & \text { Price Level } & \text { Population } \
\hline \mathbf { 2 0 1 6 } & \$ 3,000 & 100 & 5 \
\hline \mathbf { 2 0 1 9 } & 8,000 & 200 & 10 \
\hline
\end{array}$$

Accepted Answer

A) 10%. 
B) 10% 
C) 20%. 
D) 20% 
E) 25%.
F)25%
G)33%.
H)33% 
A) 10%. 
B) 10% 
C) 20%. 
D) 20% 
E) 25%.
F)25%
G)33%.
H)33%

Question 12

In 1945, the United States recorded real GDP growth of -1% and nominal GDP growth of 1.6%. What was the inflation rate in 1945?

Accepted Answer

A) 0.6% 
B) -0.6% 
C) 2.6% 
D) -2.6% 
A) 0.6% 
B) -0.6% 
C) 2.6% 
D) -2.6%

Question 13

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Assuming year 3 is the base year, real output in year 3 is: $$\begin{array} { | l | l | l | } 
\hline \text { Year } & \text { Units of Output } & \text { Price per Unit } \
\hline 1 & 40 & \$ 1 \
\hline 2 & 30 & \$ 2 \
\hline 3 & 50 & \$ 2 \
\hline 4 & 70 & \$ 4 \
\hline 5 & 60 & \$ 6 \
\hline 6 & 60 & \$ 8 \
\hline
\end{array}$$

Accepted Answer

A) $100 
B) $100. 
C) $120. 
D) $120 
E) $140
F)$140.
G)$200.
H)$200 
A) $100 
B) $100. 
C) $120. 
D) $120 
E) $140
F)$140.
G)$200.
H)$200

Question 14

In the United States, consumer spending accounts for approximately _____ of GDP.

Accepted Answer

A) 1/3 
B) 1/3. 
C) 1/2 
D) 1/2. 
E) 2/3
F)2/3.
G)3/4
H)3/4. 
A) 1/3 
B) 1/3. 
C) 1/2 
D) 1/2. 
E) 2/3
F)2/3.
G)3/4
H)3/4.

Question 15

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Nominal output in year 3 is: $$\begin{array} { | l | l | l | } 
\hline \text { Year } & \text { Units of Output } & \text { Price per Unit } \
\hline 1 & 40 & \$ 1 \
\hline 2 & 30 & \$ 2 \
\hline 3 & 50 & \$ 2 \
\hline 4 & 70 & \$ 4 \
\hline 5 & 60 & \$ 6 \
\hline 6 & 60 & \$ 8 \
\hline
\end{array}$$

Accepted Answer

A) $20. 
B) $20 
C) $50. 
D) $50 
E) $100.
F)$100
G)$1,500
H)$1,500. 
A) $20. 
B) $20 
C) $50. 
D) $50 
E) $100.
F)$100
G)$1,500
H)$1,500.

Question 16

Which of the following is an example of a transfer payment?

Accepted Answer

A) the salary paid to a corporal in the marines 
B) the salary earned by a professor at a state university 
C) a social security payment 
D) a paycheck from your part-time job 
A) the salary paid to a corporal in the marines 
B) the salary earned by a professor at a state university 
C) a social security payment 
D) a paycheck from your part-time job

Question 17

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the growth rate of real GDP between the two years?
$$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Barrels of } \
\text { Oil Sold }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Price }
\end{array} \
\hline \text { Last year } & 80,000 & \$ 60 \
\hline \text { This year } & 83,000 & \$ 63 \
\hline
\end{array}$$

Accepted Answer

A) 2.25% 
B) 9% 
C) 5% 
D) 3.75% 
A) 2.25% 
B) 9% 
C) 5% 
D) 3.75%

Question 18

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and infant deaths per 1,000 live births. What can explain this relationship?

Accepted Answer

A) Infant mortality declines only when GDP per person is above $25,000 per year. 
B) As real GDP per person rises, infant mortality rises. 
C) As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition. 
D) As life expectancy increases, GDP per person increases at the same rate. 
A) Infant mortality declines only when GDP per person is above $25,000 per year. 
B) As real GDP per person rises, infant mortality rises. 
C) As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition. 
D) As life expectancy increases, GDP per person increases at the same rate.

Question 19

Table: Measuring GDP. Use Table: Measuring GDP. Total expenditures on GDP by the household sector are: $${ \text { Measuring GDP (billions of dollars) } } \
\begin{array} { | l | l | } 
\hline \text { Personal consumption expenditures } & \$ 600 \
\hline \text { Gross private domestic investment } & 200 \
\hline \text { Net exports } & - 5 \
\hline \text { State and local government purchases of goods and services } & 200 \
\hline \text { Federal government purchases of goods and services } & 100 \
\hline \text { Imports } & 15 \
\hline
\end{array}$$

Accepted Answer

A) $100 billion 
B) $100 billion. 
C) $1,085 billion 
D) $1,085 billion. 
E) $500 billion
F)$500 billion.
G)$600 billion.
H)$600 billion 
A) $100 billion 
B) $100 billion. 
C) $1,085 billion 
D) $1,085 billion. 
E) $500 billion
F)$500 billion.
G)$600 billion.
H)$600 billion

Question 20

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the real GDP for this year using last year as the base year?
$$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Barrels of } \
\text { Oil Sold }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Price }
\end{array} \
\hline \text { Last year } & 80,000 & \$ 60 \
\hline \text { This year } & 83,000 & \$ 63 \
\hline
\end{array}$$

Accepted Answer

A) $5,104,500 
B) $5,229,000 
C) $4,980,000 
D) $4,800,000 
A) $5,104,500 
B) $5,229,000 
C) $4,980,000 
D) $4,800,000

Exam 21: Sizing up the Economy Using Gdp

The circular flow diagram illustrates _____.

Below is economic data for Germany for 2016 (measured in billions of current euros). What was total spending? Consumption 1,649.79 Investment 636.42 Government spending 620.01 Exports 1,442.41 Imports 1,211.64

Real per capita GDP is:

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Assuming year 3 is the base year, the change in real output between years 3 and 4 is an increase of: Year Units of Output Price per Unit 1 40 \ 1 2 30 \ 2 3 50 \ 2 4 70 \ 4 5 60 \ 6 6 60 \ 8

(Table: Price and Output Data) Use Table: Price and Output Data. The value of year 4's output in nominal dollars is: Year Output Price per Unit 1 2 \ 2 2 3 4 3= base period 4 5 4 6 6 5 7 9

Suppose that, in year 1, an economy produces 200 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 210 golf balls that sell for $3.50 each and 80 pizzas that sell for $9 each. The growth rate of nominal GDP is ____.

A city experiences a rise in economic growth due to improvements in technology, but at the same time, there is increasing consumption of illegal drugs. What shortcoming of GDP measurement does this finding reflect?

Is nonmarket production the same as the shadow economy? Explain.

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the average price level between the two years? Textbooks Sold Actual Price Last year 5,000 \ 50 This year 5,250 \ 55

(Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of per capita nominal GDP was: Year Nominal GDP Price Level Population \ 3,000 100 5 8,000 200 10

In 1945, the United States recorded real GDP growth of -1% and nominal GDP growth of 1.6%. What was the inflation rate in 1945?

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Assuming year 3 is the base year, real output in year 3 is: Year Units of Output Price per Unit 1 40 \ 1 2 30 \ 2 3 50 \ 2 4 70 \ 4 5 60 \ 6 6 60 \ 8

In the United States, consumer spending accounts for approximately _____ of GDP.

(Table: Real and Nominal Output) Use Table: Real and Nominal Output. Nominal output in year 3 is: Year Units of Output Price per Unit 1 40 \ 1 2 30 \ 2 3 50 \ 2 4 70 \ 4 5 60 \ 6 6 60 \ 8

Which of the following is an example of a transfer payment?

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the growth rate of real GDP between the two years? Barrels of Oil Sold Actual Price Last year 80,000 \ 60 This year 83,000 \ 63

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and infant deaths per 1,000 live births. What can explain this relationship?

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the real GDP for this year using last year as the base year? Barrels of Oil Sold Actual Price Last year 80,000 \ 60 This year 83,000 \ 63

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

Elasticity: Measuring Responsiveness

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

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