Question 1

How are grapes treated in GDP terms?

Accepted Answer

A) They are always counted as intermediate goods 
B) They are counted as intermediate goods only if they are used to produce another good like wine. 
C) They are counted as intermediate goods only if they are consumed. 
D) They are counted as intermediate goods whether they are used to produce other goods or consumed. 
A) They are always counted as intermediate goods 
B) They are counted as intermediate goods only if they are used to produce another good like wine. 
C) They are counted as intermediate goods only if they are consumed. 
D) They are counted as intermediate goods whether they are used to produce other goods or consumed.

Question 2

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are NOT measured as part of GDP According to most economists, why is GDP a useful measure of society's well-being?

Accepted Answer

A) GDP is not a useful measure of society's well-being because it does not measure many things that society values. 
B) GDP is a useful measure of society's well-being because providing these other attributes is the responsibility of government. 
C) GDP is a useful measure of society's well-being because it measures a nation's ability to produce the things that contribute to well-being. 
D) GDP is an excellent measure of society's well-being because these other values cannot actually be measured. 
A) GDP is not a useful measure of society's well-being because it does not measure many things that society values. 
B) GDP is a useful measure of society's well-being because providing these other attributes is the responsibility of government. 
C) GDP is a useful measure of society's well-being because it measures a nation's ability to produce the things that contribute to well-being. 
D) GDP is an excellent measure of society's well-being because these other values cannot actually be measured.

Question 3

-Suppose GDP consists of wheat and rice. In 2006, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in 2001, the base year, what can we conclude?

Accepted Answer

A) Nominal 2006 GDP is $100, real 2006 GDP is $50, and the GDP deflator is 50. 
B) Nominal 2006 GDP is $100, real 2006 GDP is $50, and the GDP deflator is 200. 
C) Nominal 2006 GDP is $50, real 2006 GDP is $100, and the GDP deflator is 200. 
D) Nominal 2006 GDP is $40, real 2006 GDP is $100, and the GDP deflator is 50. 
A) Nominal 2006 GDP is $100, real 2006 GDP is $50, and the GDP deflator is 50. 
B) Nominal 2006 GDP is $100, real 2006 GDP is $50, and the GDP deflator is 200. 
C) Nominal 2006 GDP is $50, real 2006 GDP is $100, and the GDP deflator is 200. 
D) Nominal 2006 GDP is $40, real 2006 GDP is $100, and the GDP deflator is 50.

Question 4

Table 5-1
  
-Refer to Table 5-1. What is the national income for this economy?

Accepted Answer

A) $170 
B) $185 
C) $192 
D) $215 
A) $170 
B) $185 
C) $192 
D) $215

Question 5

With respect to GDP, how are welfare payments treated?

Accepted Answer

A) They are included in GDP because they represent payment for work performed in the past. 
B) They are included in GDP because they represent potential consumption. 
C) They are excluded from GDP because they do not represent current government purchases of goods and services. 
D) They are excluded from GDP because they are not private pensions. 
A) They are included in GDP because they represent payment for work performed in the past. 
B) They are included in GDP because they represent potential consumption. 
C) They are excluded from GDP because they do not represent current government purchases of goods and services. 
D) They are excluded from GDP because they are not private pensions.

Question 6

A movie company makes 500 000 DVDs in the second quarter. It sells 300 000 of them before the end of the second quarter, and holds the others in its warehouse. How is the second quarter GDP affected?

Accepted Answer

A) The DVDs are included in second-quarter GDP. 
B) The DVDs that are not purchased in the second quarter are not counted in the second-quarter GDP. 
C) Since all the 500 000 DVDs will eventually be bought by consumers, they are included as consumption in the third quarter. 
D) The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise GDP. 
A) The DVDs are included in second-quarter GDP. 
B) The DVDs that are not purchased in the second quarter are not counted in the second-quarter GDP. 
C) Since all the 500 000 DVDs will eventually be bought by consumers, they are included as consumption in the third quarter. 
D) The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise GDP.

Question 7

Which of the following best defines the GDP deflator?

Accepted Answer

A) the ratio of real GDP to nominal GDP 
B) the ratio of real GDP to nominal GDP multiplied by 100 
C) the ratio of nominal GDP to real GDP 
D) the ratio of nominal GDP to real GDP multiplied by 100 
A) the ratio of real GDP to nominal GDP 
B) the ratio of real GDP to nominal GDP multiplied by 100 
C) the ratio of nominal GDP to real GDP 
D) the ratio of nominal GDP to real GDP multiplied by 100

Question 8

The local Chevrolet dealership has an increase in inventory of 25 cars in 2009. How will the sale of all 25 cars, in 2010, affect the GDP?

Accepted Answer

A) The value of the cars will be counted as part of GDP in 2009, but not in 2010. 
B) The value of the cars will not affect the 2009 GDP, but will be included in 2010 GDP. 
C) The value of the cars will be included both in 2009 and 2010 GDP. 
D) The value of the cars will not be included in GDP in 2009 or 2010. 
A) The value of the cars will be counted as part of GDP in 2009, but not in 2010. 
B) The value of the cars will not affect the 2009 GDP, but will be included in 2010 GDP. 
C) The value of the cars will be included both in 2009 and 2010 GDP. 
D) The value of the cars will not be included in GDP in 2009 or 2010.

Question 9

In a given year, an economy has consumption of $4000, investment of $2000, government purchases of $1500, exports of $500, imports of $600, taxes of $1200, transfer payments of $400, and depreciation of $300. What is the GDP?

Accepted Answer

A) $6400 
B) $7400 
C) $7600 
D) $8900 
A) $6400 
B) $7400 
C) $7600 
D) $8900

Question 10

David lives in Canada. He operates a pizza business in his native town. Robert is Canadian, but he works in the United States. On a typical day, David makes $275 in sales, of which he pays to the government $25 in sales taxes. Robert makes $150 in wages, of which he pays the US government $15 in income taxes. There are no other costs or taxes. Based on this information, compute David and Robert's contribution to the following measures of income:
a.Canadian GDP
b.Canadian GNP
c.US GDP
d.US GNP

Accepted Answer

We can use the income-based definition o

Question 11

If Robert works as a lawyer, how should his contributions to GDP be calculated?

Accepted Answer

A) using his income from providing legal services, not his expenditure on goods and services 
B) using his expenditure, not his income 
C) using both his income and his expenditure 
D) using either his income or his expenditure, not both 
A) using his income from providing legal services, not his expenditure on goods and services 
B) using his expenditure, not his income 
C) using both his income and his expenditure 
D) using either his income or his expenditure, not both

Question 12

In a simple circular-flow diagram, how are total income and total expenditures in an economy interrelated?

Accepted Answer

A) They are equal because firms re-invest their revenue. 
B) They are equal only if there is no saving. 
C) They never equal because some people's income does not come from production activities. 
D) They are equal because every transaction has a buyer and a seller. 
A) They are equal because firms re-invest their revenue. 
B) They are equal only if there is no saving. 
C) They never equal because some people's income does not come from production activities. 
D) They are equal because every transaction has a buyer and a seller.

Question 13

Which of the following is included in GDP?

Accepted Answer

A) the sale of stocks and bonds 
B) the sale of used goods 
C) the sale of services such as visits to a doctor 
D) interest income from a savings account 
A) the sale of stocks and bonds 
B) the sale of used goods 
C) the sale of services such as visits to a doctor 
D) interest income from a savings account

Question 14

According to international studies, larger GDP per person is associated with which other measures of well-being?

Accepted Answer

A) longer life expectancy and a higher rate of population growth 
B) longer life expectancy and a higher percentage of the population that is literate 
C) very nearly the same life expectancy and a higher quality of the environment 
D) very nearly the same life expectancy and a higher percentage of the population that is literate 
A) longer life expectancy and a higher rate of population growth 
B) longer life expectancy and a higher percentage of the population that is literate 
C) very nearly the same life expectancy and a higher quality of the environment 
D) very nearly the same life expectancy and a higher percentage of the population that is literate

Question 15

If a Canadian citizen buys a television made in Korea made by a Korean firm, what is the impact on net exports and GDP?

Accepted Answer

A) Canadian net exports decrease, and Canadian GDP decreases. 
B) Canadian net exports are unaffected, and Canadian GDP decreases. 
C) Canadian net exports are unaffected, and Canadian GDP is unaffected. 
D) Canadian net exports decrease but Canadian GDP is unaffected. 
A) Canadian net exports decrease, and Canadian GDP decreases. 
B) Canadian net exports are unaffected, and Canadian GDP decreases. 
C) Canadian net exports are unaffected, and Canadian GDP is unaffected. 
D) Canadian net exports decrease but Canadian GDP is unaffected.

Question 16

Which of the following best defines a transfer payment?

Accepted Answer

A) government spending on imported goods 
B) money that Canadian citizens working abroad send back to their families in Canada 
C) payments to governments, other than taxes 
D) a form of government spending that is not made in exchange for a currently produced good or service 
A) government spending on imported goods 
B) money that Canadian citizens working abroad send back to their families in Canada 
C) payments to governments, other than taxes 
D) a form of government spending that is not made in exchange for a currently produced good or service

Question 17

Suppose that over the past 25 years a country's nominal GDP grew to three times its former size. In the meantime, population grew 50 percent and prices rose 100 percent. What happened to real GDP per person?

Accepted Answer

A) It more than doubled. 
B) It rose, but less than doubled. 
C) It has not changed. 
D) It fell. 
A) It more than doubled. 
B) It rose, but less than doubled. 
C) It has not changed. 
D) It fell.

Question 18

Darla, a U.S. citizen, only works in Canada. How does the value added to production from her employment impact GDP and GNP?

Accepted Answer

A) It is included in both Canadian GDP and Canadian GNP. 
B) It is included only in Canadian GDP. 
C) It is included only in Canadian GNP. 
D) It is not included in either Canadian GDP or Canadian GNP. 
A) It is included in both Canadian GDP and Canadian GNP. 
B) It is included only in Canadian GDP. 
C) It is included only in Canadian GNP. 
D) It is not included in either Canadian GDP or Canadian GNP.

Question 19

The following table shows GDP data of a hypothetical economy that produces only two items: maple syrup and trips to a local touristic attraction.
  
-Calculate nominal GDP, real GDP, and GDP deflator and fill in the corresponding columns.

Accepted Answer

a.Nominal GDP = Sum of current

Question 20

With respect to GDP, how are transfer payments treated?

Accepted Answer

A) They are included in GDP because they represent income to individuals. 
B) They are not included in GDP because they are not payments for currently produced goods or services 
C) They are included in GDP because the income will be spent for consumption. 
D) They are not included in GDP because taxes will have to be raised to pay for them. 
A) They are included in GDP because they represent income to individuals. 
B) They are not included in GDP because they are not payments for currently produced goods or services 
C) They are included in GDP because the income will be spent for consumption. 
D) They are not included in GDP because taxes will have to be raised to pay for them.

How are grapes treated in GDP terms?

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are NOT measured as part of GDP According to most economists, why is GDP a useful measure of society's well-being?

-Suppose GDP consists of wheat and rice. In 2006, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in 2001, the base year, what can we conclude?

Table 5-1 -Refer to Table 5-1. What is the national income for this economy?

With respect to GDP, how are welfare payments treated?

A movie company makes 500 000 DVDs in the second quarter. It sells 300 000 of them before the end of the second quarter, and holds the others in its warehouse. How is the second quarter GDP affected?

Which of the following best defines the GDP deflator?

The local Chevrolet dealership has an increase in inventory of 25 cars in 2009. How will the sale of all 25 cars, in 2010, affect the GDP?

In a given year, an economy has consumption of $4000, investment of $2000, government purchases of $1500, exports of $500, imports of $600, taxes of $1200, transfer payments of $400, and depreciation of $300. What is the GDP?

If Robert works as a lawyer, how should his contributions to GDP be calculated?

In a simple circular-flow diagram, how are total income and total expenditures in an economy interrelated?

Which of the following is included in GDP?

According to international studies, larger GDP per person is associated with which other measures of well-being?

If a Canadian citizen buys a television made in Korea made by a Korean firm, what is the impact on net exports and GDP?

Which of the following best defines a transfer payment?

Suppose that over the past 25 years a country's nominal GDP grew to three times its former size. In the meantime, population grew 50 percent and prices rose 100 percent. What happened to real GDP per person?

Darla, a U.S. citizen, only works in Canada. How does the value added to production from her employment impact GDP and GNP?

The following table shows GDP data of a hypothetical economy that produces only two items: maple syrup and trips to a local touristic attraction. -Calculate nominal GDP, real GDP, and GDP deflator and fill in the corresponding columns.

With respect to GDP, how are transfer payments treated?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

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

Five Debates Over Macroeconomic Policy

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Exam 5: Measuring a Nations Income

How are grapes treated in GDP terms?

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are NOT measured as part of GDP According to most economists, why is GDP a useful measure of society's well-being?

-Suppose GDP consists of wheat and rice. In 2006, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in 2001, the base year, what can we conclude?

Table 5-1 -Refer to Table 5-1. What is the national income for this economy?

With respect to GDP, how are welfare payments treated?

A movie company makes 500 000 DVDs in the second quarter. It sells 300 000 of them before the end of the second quarter, and holds the others in its warehouse. How is the second quarter GDP affected?

Which of the following best defines the GDP deflator?

The local Chevrolet dealership has an increase in inventory of 25 cars in 2009. How will the sale of all 25 cars, in 2010, affect the GDP?

In a given year, an economy has consumption of $4000, investment of $2000, government purchases of $1500, exports of $500, imports of $600, taxes of $1200, transfer payments of $400, and depreciation of $300. What is the GDP?

If Robert works as a lawyer, how should his contributions to GDP be calculated?

In a simple circular-flow diagram, how are total income and total expenditures in an economy interrelated?

Which of the following is included in GDP?

According to international studies, larger GDP per person is associated with which other measures of well-being?

If a Canadian citizen buys a television made in Korea made by a Korean firm, what is the impact on net exports and GDP?

Which of the following best defines a transfer payment?

Suppose that over the past 25 years a country's nominal GDP grew to three times its former size. In the meantime, population grew 50 percent and prices rose 100 percent. What happened to real GDP per person?

Darla, a U.S. citizen, only works in Canada. How does the value added to production from her employment impact GDP and GNP?

The following table shows GDP data of a hypothetical economy that produces only two items: maple syrup and trips to a local touristic attraction. -Calculate nominal GDP, real GDP, and GDP deflator and fill in the corresponding columns.

With respect to GDP, how are transfer payments treated?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

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

Five Debates Over Macroeconomic Policy

Filters