Question 1

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.

Accepted Answer

A) True 
 B)False

Question 2

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,

Accepted Answer

A) real output and the price level both rose. 
B) real output rose and the price level fell. 
C) real output fell and the price level rose. 
D) real output and the price level both fell. 
A) real output and the price level both rose. 
B) real output rose and the price level fell. 
C) real output fell and the price level rose. 
D) real output and the price level both fell.

Question 3

The output of goods and services produced in the United States has grown on average 3 percent per year since 1965.

Accepted Answer

A) True 
 B)False

Question 4

GDP includes the value of paper clips but does not also count the value of the metal used to make them.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a correct statement about the growth of real GDP in the U.S. economy?

Accepted Answer

A) Real GDP in 2009 was almost four times its 1965 level. 
B) Growth was steady between 1965 and 2009. 
C) Continued growth in real GDP enables the typical American to enjoy greater economic prosperity than his or her parents and grandparents did. 
D) The output of goods and services produced grew on average about 3 percent per year between 1965 and 2009. 
A) Real GDP in 2009 was almost four times its 1965 level. 
B) Growth was steady between 1965 and 2009. 
C) Continued growth in real GDP enables the typical American to enjoy greater economic prosperity than his or her parents and grandparents did. 
D) The output of goods and services produced grew on average about 3 percent per year between 1965 and 2009.

Question 6

Table 10-7
The table below contains data for the country of Togogo. The base year is 1974. $$\begin{array} { c c c } 
\text { Year } & \begin{array} { c } 
\text { Nomintal } \
\text { GDP }
\end{array} & \begin{array} { c } 
\text { CDP } \
\text { Deflatar }
\end{array} \
\hline 1974 & \mathbf { \$ 20 0 0 } & 100 \
1975 & \$ 3000 & 120 \
1976 & \mathbf { \$37 5 0 } & 150 \
1977 & \mathbf { \$ 6 0 0 0 } & 200
\end{array}$$
-Refer to Table 10-7. From 1976 to 1977,

Accepted Answer

A) inflation was 33.3% and output grew at a rate of 20%. 
B) inflation was 33.3% and output grew at a rate of 60%. 
C) inflation was 50% and output grew at a rate of 20%. 
D) inflation was 50% and output grew at a rate of 60%. 
A) inflation was 33.3% and output grew at a rate of 20%. 
B) inflation was 33.3% and output grew at a rate of 60%. 
C) inflation was 50% and output grew at a rate of 20%. 
D) inflation was 50% and output grew at a rate of 60%.

Question 7

Suppose an economy produces only cranberries and maple syrup. In 2010, 50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit. In 2009, the base year, the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit. For 2010,

Accepted Answer

A) nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90. 
B) nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 111.1. 
C) nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 90. 
D) nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 111.1. 
A) nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90. 
B) nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 111.1. 
C) nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 90. 
D) nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 111.1.

Question 8

For the purpose of calculating GDP, investment is spending on

Accepted Answer

A) stocks, bonds, and other financial assets. 
B) real estate and financial assets such as stocks and bonds. 
C) capital equipment, inventories, and structures, including household purchases of new housing. 
D) capital equipment, inventories, and structures, excluding household purchases of new housing. 
A) stocks, bonds, and other financial assets. 
B) real estate and financial assets such as stocks and bonds. 
C) capital equipment, inventories, and structures, including household purchases of new housing. 
D) capital equipment, inventories, and structures, excluding household purchases of new housing.

Question 9

Which of the following is included in the investment component of GDP?

Accepted Answer

A) households' purchases of newly constructed homes 
B) net additions to firms' inventories 
C) firms' purchases of capital equipment 
D) All of the above are correct. 
A) households' purchases of newly constructed homes 
B) net additions to firms' inventories 
C) firms' purchases of capital equipment 
D) All of the above are correct.

Question 10

If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.

Accepted Answer

A) True 
 B)False

Question 11

When an Egyptian firm purchases a cement mixer from Slovakia,

Accepted Answer

A) Egyptian investment does not change, Egyptian net exports decrease, Egyptian GDP decreases, Slovakian net exports increase, and Slovakian GDP increases. 
B) Egyptian investment increases, Egyptian net exports decrease, Egyptian GDP is unaffected, Slovakian net exports increase, and Slovakian GDP increases. 
C) Egyptian investment decreases, Egyptian net exports increase, Egyptian GDP is unaffected, Slovakian net exports decrease, and Slovakian GDP decreases. 
D) Egyptian investment increases, Egyptian net exports do not change, Egyptian GDP increases, Slovakian net exports do not change, and Slovakian GDP is unaffected. 
A) Egyptian investment does not change, Egyptian net exports decrease, Egyptian GDP decreases, Slovakian net exports increase, and Slovakian GDP increases. 
B) Egyptian investment increases, Egyptian net exports decrease, Egyptian GDP is unaffected, Slovakian net exports increase, and Slovakian GDP increases. 
C) Egyptian investment decreases, Egyptian net exports increase, Egyptian GDP is unaffected, Slovakian net exports decrease, and Slovakian GDP decreases. 
D) Egyptian investment increases, Egyptian net exports do not change, Egyptian GDP increases, Slovakian net exports do not change, and Slovakian GDP is unaffected.

Question 12

If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm is considered to have "purchased" the good so it will count as part of that period's investment expenditures.

Accepted Answer

A) True 
 B)False

Question 13

Changes in the GDP deflator 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 14

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.

Question 15

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 16

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?

Accepted Answer

A) GDP would definitely increase, despite the fact that GDP includes environmental quality. 
B) GDP would definitely decrease because GDP includes environmental quality. 
C) GDP would definitely increase because GDP excludes environmental quality. 
D) GDP could either increase or decrease because GDP excludes environmental quality. 
A) GDP would definitely increase, despite the fact that GDP includes environmental quality. 
B) GDP would definitely decrease because GDP includes environmental quality. 
C) GDP would definitely increase because GDP excludes environmental quality. 
D) GDP could either increase or decrease because GDP excludes environmental quality.

Question 17

Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard?

Accepted Answer

A) $1 
B) $19 
C) $20 
D) $21 
A) $1 
B) $19 
C) $20 
D) $21

Question 18

If the U.S. government reports that GDP in the third quarter was $14 trillion at an annual rate, then the amount of income and expenditure during quarter three was $4 trillion.

Accepted Answer

A) True 
 B)False

Question 19

In the actual economy, goods and services are purchased by

Accepted Answer

A) households, but not firms or the government. 
B) households and firms, but not the government. 
C) households and the government, but not firms. 
D) households, firms, and the government. 
A) households, but not firms or the government. 
B) households and firms, but not the government. 
C) households and the government, but not firms. 
D) households, firms, and the government.

Question 20

If a good produced this quarter goes into inventory, then it is included in this period's GDP. If it is sold in the next quarter, it will have no effect on GDP.

Accepted Answer

A) True 
 B)False

Exam 10: Measuring a Nations Income

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,

The output of goods and services produced in the United States has grown on average 3 percent per year since 1965.

GDP includes the value of paper clips but does not also count the value of the metal used to make them.

Which of the following is not a correct statement about the growth of real GDP in the U.S. economy?

Table 10-7 The table below contains data for the country of Togogo. The base year is 1974. Year Nomintal GDP CDP Deflatar 1974 100 1975 \ 3000 120 1976 150 1977 200 -Refer to Table 10-7. From 1976 to 1977,

Suppose an economy produces only cranberries and maple syrup. In 2010, 50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit. In 2009, the base year, the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit. For 2010,

For the purpose of calculating GDP, investment is spending on

Which of the following is included in the investment component of GDP?

If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.

When an Egyptian firm purchases a cement mixer from Slovakia,

If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm is considered to have "purchased" the good so it will count as part of that period's investment expenditures.

Changes in the GDP deflator reflect

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

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.

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?

Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard?

If the U.S. government reports that GDP in the third quarter was $14 trillion at an annual rate, then the amount of income and expenditure during quarter three was $4 trillion.

In the actual economy, goods and services are purchased by

If a good produced this quarter goes into inventory, then it is included in this period's GDP. If it is sold in the next quarter, it will have no effect on GDP.

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

Application: The Costs of Taxation

Application: International Trade

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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