Question 1

An imputed payment

Accepted Answer

A)  is a payment that is due but not made 
B)  is a payment not made through the market and therefore not counted in GDP 
C)  refers to nonmarket goods and services being valued as if they were sold on a market 
D)  refers to governmental services being valued at the cost of production 
E)  refers to consumers imputing a value to the payment 
A)  is a payment that is due but not made 
B)  is a payment not made through the market and therefore not counted in GDP 
C)  refers to nonmarket goods and services being valued as if they were sold on a market 
D)  refers to governmental services being valued at the cost of production 
E)  refers to consumers imputing a value to the payment

Question 2

Which of the following would not be included in GDP as a form of consumption spending?

Accepted Answer

A)  Ann takes Tim out to a restaurant for dinner. 
B)  Ann and Tim buy a microwave oven. 
C)  Ann and Tim buy vegetables to prepare soup at home. 
D)  Ann prepares Tim's income tax return. 
E)  Tim buys Ann flowers. 
A)  Ann takes Tim out to a restaurant for dinner. 
B)  Ann and Tim buy a microwave oven. 
C)  Ann and Tim buy vegetables to prepare soup at home. 
D)  Ann prepares Tim's income tax return. 
E)  Tim buys Ann flowers.

Question 3

If real GDP for the base year is $3 trillion,then nominal GDP for that year is

Accepted Answer

A)  $.03 trillion 
B)  $0.3 trillion 
C)  $3 trillion 
D)  $30 trillion 
E)  $300 trillion 
A)  $.03 trillion 
B)  $0.3 trillion 
C)  $3 trillion 
D)  $30 trillion 
E)  $300 trillion

Question 4

Which of the following would increase GDP?

Accepted Answer

A)  More people walk to work rather than drive cars. 
B)  Consumers in rural areas switch from buying home heating oil to burning wood they collect on their own land. 
C)  Farm families grow more for themselves than for the market. 
D)  Neither the price nor the quantity of television sets changes,but the quality of sets improves. 
E)  The amount spent on vacuum cleaners does not change,but quality decreases so much that more is spent on their repair. 
A)  More people walk to work rather than drive cars. 
B)  Consumers in rural areas switch from buying home heating oil to burning wood they collect on their own land. 
C)  Farm families grow more for themselves than for the market. 
D)  Neither the price nor the quantity of television sets changes,but the quality of sets improves. 
E)  The amount spent on vacuum cleaners does not change,but quality decreases so much that more is spent on their repair.

Question 5

Rhonda sells a house she has owned for 15 years.To make it more marketable,she buys carpeting and has it professionally installed,and buys wallpaper that her daughter hangs.Which items would be included in this year's GDP?

Accepted Answer

A)  the sale price of the house 
B)  the sale price of the house,carpeting,and wallpaper and the installation fee for the carpet 
C)  the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's daughter's time 
D)  the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's time 
E)  the sale price of the wallpaper and carpeting and the installation fee for the carpet 
A)  the sale price of the house 
B)  the sale price of the house,carpeting,and wallpaper and the installation fee for the carpet 
C)  the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's daughter's time 
D)  the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's time 
E)  the sale price of the wallpaper and carpeting and the installation fee for the carpet

Question 6

A panel of economists concluded that the current Consumer Price Index overstates increases in the "cost of living" by about

Accepted Answer

A)  9 percent per year 
B)  3 percent per year 
C)  5 percent per year 
D)  7 percent per year 
E)  1 percent per year 
A)  9 percent per year 
B)  3 percent per year 
C)  5 percent per year 
D)  7 percent per year 
E)  1 percent per year

Question 7

A firm run by a rational entrepreneur would want to hold inventories.

Accepted Answer

A) True 
 B)False

Question 8

Gross Domestic Product equals the

Accepted Answer

A)  total output of all goods and services produced by resources located in the U.S. 
B)  market value of all goods and services produced by resources located in the U.S. 
C)  market value of all final goods and services produced by resources located in the U.S. 
D)  value added to the economy by intermediate goods and services minus original cost 
E)  value of total sales of goods and services produced in the U.S. 
A)  total output of all goods and services produced by resources located in the U.S. 
B)  market value of all goods and services produced by resources located in the U.S. 
C)  market value of all final goods and services produced by resources located in the U.S. 
D)  value added to the economy by intermediate goods and services minus original cost 
E)  value of total sales of goods and services produced in the U.S.

Question 9

Which of the following is the best example of an intermediate good or service?

Accepted Answer

A)  any good bought by a household,rather than a firm 
B)  pizzas bought at a restaurant 
C)  legal services hired by a public accounting firm 
D)  sunglasses worn on a summer vacation in Florida 
E)  a professional performance of "The Phantom of the Opera" 
A)  any good bought by a household,rather than a firm 
B)  pizzas bought at a restaurant 
C)  legal services hired by a public accounting firm 
D)  sunglasses worn on a summer vacation in Florida 
E)  a professional performance of "The Phantom of the Opera"

Question 10

Which of the following would not be included in the measurement of GDP?

Accepted Answer

A)  federal government purchases of automobiles 
B)  a purchase of California wine by a Canadian firm 
C)  employers' payments for employees' medical insurance 
D)  a state government's purchase of personal computers 
E)  transactions in the underground economy 
A)  federal government purchases of automobiles 
B)  a purchase of California wine by a Canadian firm 
C)  employers' payments for employees' medical insurance 
D)  a state government's purchase of personal computers 
E)  transactions in the underground economy

Question 11

To determine the CPI,you would need to know the

Accepted Answer

A)  current market basket at current- and base-year prices 
B)  base-year market basket at current- and base-year prices 
C)  current market basket at current prices and base-year market basket at base-year prices 
D)  current market basket at base-year prices only 
E)  current market basket at current prices only 
A)  current market basket at current- and base-year prices 
B)  base-year market basket at current- and base-year prices 
C)  current market basket at current prices and base-year market basket at base-year prices 
D)  current market basket at base-year prices only 
E)  current market basket at current prices only

Question 12

Which of the following is true about the consumer price index (CPI)and the GDP price index?

Accepted Answer

A)  Both measures weigh prices by the quantities consumed in some base year. 
B)  Both yield identical numbers for price level changes for any two years. 
C)  A price level change indicated by the CPI is usually smaller because it includes only prices for a limited number of goods. 
D)  The CPI measures changes in relative prices of goods; the GDP price index measures changes in the price level. 
E)  A price level change indicated by the GDP price index is usually smaller because people tend to find substitutes for goods whose prices rise sharply. 
A)  Both measures weigh prices by the quantities consumed in some base year. 
B)  Both yield identical numbers for price level changes for any two years. 
C)  A price level change indicated by the CPI is usually smaller because it includes only prices for a limited number of goods. 
D)  The CPI measures changes in relative prices of goods; the GDP price index measures changes in the price level. 
E)  A price level change indicated by the GDP price index is usually smaller because people tend to find substitutes for goods whose prices rise sharply.

Question 13

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment.According to the circular flow model,the government's budget

Accepted Answer

A)  must be in deficit 
B)  must be in surplus 
C)  must be balanced 
D)  could be in a surplus or a deficit 
E)  could be in balance or a surplus 
A)  must be in deficit 
B)  must be in surplus 
C)  must be balanced 
D)  could be in a surplus or a deficit 
E)  could be in balance or a surplus

Question 14

The CPI overstates the true inflation rate because it ignores changes in consumers' purchasing patterns as relative prices change.

Accepted Answer

A) True 
 B)False

Question 15

The final market value of a good is

Accepted Answer

A)  the sum of values added at all stages of production 
B)  the value added at one stage of production 
C)  greater than the sum of all the values added at all stages of production 
D)  less than the sum of all the values added at all stages of production 
E)  less than the price for which it is sold 
A)  the sum of values added at all stages of production 
B)  the value added at one stage of production 
C)  greater than the sum of all the values added at all stages of production 
D)  less than the sum of all the values added at all stages of production 
E)  less than the price for which it is sold

Question 16

GDP does not include the

Accepted Answer

A)  increase in business inventories in the period 
B)  expenditures by government for newly produced goods and services in a given period 
C)  value of all transactions in the economy during a given period 
D)  value of final output during a given period 
E)  household spending on electricity 
A)  increase in business inventories in the period 
B)  expenditures by government for newly produced goods and services in a given period 
C)  value of all transactions in the economy during a given period 
D)  value of final output during a given period 
E)  household spending on electricity

Question 17

Which of the following actions would not increase GDP?

Accepted Answer

A)  Tom's alarm clock breaks,so he buys a new one. 
B)  Tom buys a new alarm clock because he routinely sleeps through the first alarm. 
C)  Tom's alarm clock breaks; now he oversleeps long enough that he buys a cup of coffee on the way to work instead of making it for himself at home. 
D)  Tom gets fired for being late so often after his alarm clock breaks,so he moves off to the wilderness. 
E)  Tom sells his broken alarm clock and uses the revenue to buy some French fries. 
A)  Tom's alarm clock breaks,so he buys a new one. 
B)  Tom buys a new alarm clock because he routinely sleeps through the first alarm. 
C)  Tom's alarm clock breaks; now he oversleeps long enough that he buys a cup of coffee on the way to work instead of making it for himself at home. 
D)  Tom gets fired for being late so often after his alarm clock breaks,so he moves off to the wilderness. 
E)  Tom sells his broken alarm clock and uses the revenue to buy some French fries.

Question 18

If the GDP deflator is 100 this year,

Accepted Answer

A)  there has been no inflation during the year 
B)  the price level is the same as it was in the base year 
C)  the price level is one hundred times what it was in the base year 
D)  the price level is double what it was in the base year 
E)  the inflation rate has been 100 percent per year since the base year 
A)  there has been no inflation during the year 
B)  the price level is the same as it was in the base year 
C)  the price level is one hundred times what it was in the base year 
D)  the price level is double what it was in the base year 
E)  the inflation rate has been 100 percent per year since the base year

Question 19

An increase in household production will show up in GDP.

Accepted Answer

A) True 
 B)False

Question 20

If real GDP equals $200 billion this year and nominal GDP equals $300 billion,the price level since the base year has increased

Accepted Answer

A)  $100 billion 
B)  $200 billion 
C)  50 percent 
D)  100 percent 
E)  33 percent 
A)  $100 billion 
B)  $200 billion 
C)  50 percent 
D)  100 percent 
E)  33 percent

Exam 7: Tracking the US Economy

An imputed payment

Which of the following would not be included in GDP as a form of consumption spending?

If real GDP for the base year is $3 trillion,then nominal GDP for that year is

Which of the following would increase GDP?

Rhonda sells a house she has owned for 15 years.To make it more marketable,she buys carpeting and has it professionally installed,and buys wallpaper that her daughter hangs.Which items would be included in this year's GDP?

A panel of economists concluded that the current Consumer Price Index overstates increases in the "cost of living" by about

A firm run by a rational entrepreneur would want to hold inventories.

Gross Domestic Product equals the

Which of the following is the best example of an intermediate good or service?

Which of the following would not be included in the measurement of GDP?

To determine the CPI,you would need to know the

Which of the following is true about the consumer price index (CPI)and the GDP price index?

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment.According to the circular flow model,the government's budget

The CPI overstates the true inflation rate because it ignores changes in consumers' purchasing patterns as relative prices change.

The final market value of a good is

GDP does not include the

Which of the following actions would not increase GDP?

If the GDP deflator is 100 this year,

An increase in household production will show up in GDP.

If real GDP equals $200 billion this year and nominal GDP equals $300 billion,the price level since the base year has increased

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Productivity and Growth

Unemployment and Inflation

Aggregate Expenditure

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Developing and Transitional Economies

Understanding Graphs

National Income Accounts

Variable Net Exports

Variable Net Exports Revisited

The Algebra of Income and Expenditure

The Algebra of Demand-Side Equilibrium

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