Question 1

If the real GDP equals $100 billion this year and nominal GDP is $200 billion,the price level since the base year has increased

Accepted Answer

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

Question 2

If nominal GDP increases by 4 percent,then

Accepted Answer

A)  real output has increased by 4 percent 
B)  the price level has increased by 4 percent 
C)  consumer spending must have increased by 4 percent 
D)  it is possible that all of the increase was caused by an increase in the price level 
E)  net exports increased by 4 percent 
A)  real output has increased by 4 percent 
B)  the price level has increased by 4 percent 
C)  consumer spending must have increased by 4 percent 
D)  it is possible that all of the increase was caused by an increase in the price level 
E)  net exports increased by 4 percent

Question 3

Which of the following expenditures are not included in the consumption component of GDP?

Accepted Answer

A)  maid service 
B)  purchase of a new home 
C)  a new videocassette recorder 
D)  a restaurant meal 
E)  tax preparation service 
A)  maid service 
B)  purchase of a new home 
C)  a new videocassette recorder 
D)  a restaurant meal 
E)  tax preparation service

Question 4

Consumption in the expenditures approach to calculating GDP includes

Accepted Answer

A)  spending by businesses on plant and equipment 
B)  spending by government on office buildings 
C)  spending by households on new single-family houses 
D)  changes in business inventories 
E)  purchases of medical services at the local clinic 
A)  spending by businesses on plant and equipment 
B)  spending by government on office buildings 
C)  spending by households on new single-family houses 
D)  changes in business inventories 
E)  purchases of medical services at the local clinic

Question 5

The price index in the base year always equals

Accepted Answer

A)  0 
B)  1 
C)  100 
D)  infinity 
E)  0.01 
A)  0 
B)  1 
C)  100 
D)  infinity 
E)  0.01

Question 6

The ultimate goal of studying the circular flow model is to understand the flow of

Accepted Answer

A)  money through the market system 
B)  consumer spending through the economy 
C)  goods and services through the product market 
D)  resources,goods,and money through the economy 
E)  resources through the resource markets and their allocation in production 
A)  money through the market system 
B)  consumer spending through the economy 
C)  goods and services through the product market 
D)  resources,goods,and money through the economy 
E)  resources through the resource markets and their allocation in production

Question 7

Suppose that 1986 is our base year (price index equals 100)and that the 2000 price index was 200.If nominal GDP was $6.2 trillion in 2000,what was real GDP that year (measured in 1986 dollars)?

Accepted Answer

A)  $3.1 trillion 
B)  $6.2 trillion 
C)  $12.4 trillion 
D)  $18.6 trillion 
E)  $24.3 trillion 
A)  $3.1 trillion 
B)  $6.2 trillion 
C)  $12.4 trillion 
D)  $18.6 trillion 
E)  $24.3 trillion

Question 8

Katrina pays $40 for a meal at a fancy restaurant.The ingredients used in it probably cost the restaurant $10.The value added to GDP by the purchase of this meal is

Accepted Answer

A)  $30 
B)  $40 
C)  $70 
D)  $40 plus the wages paid the chef and waiters 
E)  $40 plus the profit earned by the restaurant's owner 
A)  $30 
B)  $40 
C)  $70 
D)  $40 plus the wages paid the chef and waiters 
E)  $40 plus the profit earned by the restaurant's owner

Question 9

A decrease in GDP necessarily means that consumer welfare has decreased.

Accepted Answer

A) True 
 B)False

Question 10

The Consumer Price Index is a measure of the

Accepted Answer

A)  cost of a market basket of consumer goods and services relative to its cost in some base year 
B)  change in the average price of a market basket of "necessary" goods and services 
C)  annual inflation rate in the producers' goods market 
D)  change in the average price level of all final goods and services 
E)  average price of all goods and services relative to their price last year 
A)  cost of a market basket of consumer goods and services relative to its cost in some base year 
B)  change in the average price of a market basket of "necessary" goods and services 
C)  annual inflation rate in the producers' goods market 
D)  change in the average price level of all final goods and services 
E)  average price of all goods and services relative to their price last year

Question 11

Exhibit 7-3
  
-Refer to Exhibit 7-3.Between 2004 and 2005,real GDP for this nation

Accepted Answer

A)  increased by about $5 billion 
B)  decreased by about $5 billion 
C)  remained almost constant 
D)  increased by about $2 billion 
E)  cannot be determined from the information given 
A)  increased by about $5 billion 
B)  decreased by about $5 billion 
C)  remained almost constant 
D)  increased by about $2 billion 
E)  cannot be determined from the information given

Question 12

The CPI tends to understate the true rate of inflation.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the best example of an investment as defined by economists?

Accepted Answer

A)  a household's purchase of 100 shares of Apple computer stock 
B)  a firm's purchase of 100 shares of General Electric stock 
C)  a firm's purchase of a bond issued by General Mills 
D)  a firm's purchase of a U.S.savings bond 
E)  a firm buying personal computers for its secretarial staff 
A)  a household's purchase of 100 shares of Apple computer stock 
B)  a firm's purchase of 100 shares of General Electric stock 
C)  a firm's purchase of a bond issued by General Mills 
D)  a firm's purchase of a U.S.savings bond 
E)  a firm buying personal computers for its secretarial staff

Question 14

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

Accepted Answer

A)  GDP = $2,720 
B)  GDP = $3,060 
C)  GDP = $3,140 
D)  GDP = $3,400 
E)  GDP cannot be determined due to insufficient data 
A)  GDP = $2,720 
B)  GDP = $3,060 
C)  GDP = $3,140 
D)  GDP = $3,400 
E)  GDP cannot be determined due to insufficient data

Question 15

A problem inherent in using value added to measure GDP is that the method does not avoid double counting.

Accepted Answer

A) True 
 B)False

Question 16

In order to convert nominal GDP to real GDP,we must divide

Accepted Answer

A)  real GDP by the price index 
B)  nominal GDP by the price index 
C)  the price index by nominal GDP 
D)  the price index by real GDP 
E)  nominal GDP by real GDP 
A)  real GDP by the price index 
B)  nominal GDP by the price index 
C)  the price index by nominal GDP 
D)  the price index by real GDP 
E)  nominal GDP by real GDP

Question 17

The U.S.Department of Commerce has been developing so called "green accounting" to

Accepted Answer

A)  focus attention to the money side of GDP 
B)  reflect the impact of pollution and natural resource depletion 
C)  properly value the output of very new firms 
D)  illustrate the difference between GDP and real GDP 
E)  measure the value of the output produced by inexperienced workers 
A)  focus attention to the money side of GDP 
B)  reflect the impact of pollution and natural resource depletion 
C)  properly value the output of very new firms 
D)  illustrate the difference between GDP and real GDP 
E)  measure the value of the output produced by inexperienced workers

Question 18

GDP is a good measure of social welfare since it includes the value of leisure time.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would not be included in an economist's definition of investment spending?

Accepted Answer

A)  the purchase of robots by Motor Magic Manufacturing 
B)  the construction of a new office building by the Mountain City Real Estate Company 
C)  the purchase of General Motors stock by Donald Trump 
D)  the purchase of a new pizza oven by H and R Pizza 
E)  an unexpected rise in inventories at Randle Manufacturing 
A)  the purchase of robots by Motor Magic Manufacturing 
B)  the construction of a new office building by the Mountain City Real Estate Company 
C)  the purchase of General Motors stock by Donald Trump 
D)  the purchase of a new pizza oven by H and R Pizza 
E)  an unexpected rise in inventories at Randle Manufacturing

Question 20

Imports are a leakage from the circular flow.

Accepted Answer

A) True 
 B)False

Exam 7: Tracking the US Economy

If the real GDP equals $100 billion this year and nominal GDP is $200 billion,the price level since the base year has increased

If nominal GDP increases by 4 percent,then

Which of the following expenditures are not included in the consumption component of GDP?

Consumption in the expenditures approach to calculating GDP includes

The price index in the base year always equals

The ultimate goal of studying the circular flow model is to understand the flow of

Suppose that 1986 is our base year (price index equals 100)and that the 2000 price index was 200.If nominal GDP was $6.2 trillion in 2000,what was real GDP that year (measured in 1986 dollars)?

Katrina pays $40 for a meal at a fancy restaurant.The ingredients used in it probably cost the restaurant $10.The value added to GDP by the purchase of this meal is

A decrease in GDP necessarily means that consumer welfare has decreased.

The Consumer Price Index is a measure of the

Exhibit 7-3 -Refer to Exhibit 7-3.Between 2004 and 2005,real GDP for this nation

The CPI tends to understate the true rate of inflation.

Which of the following is the best example of an investment as defined by economists?

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

A problem inherent in using value added to measure GDP is that the method does not avoid double counting.

In order to convert nominal GDP to real GDP,we must divide

The U.S.Department of Commerce has been developing so called "green accounting" to

GDP is a good measure of social welfare since it includes the value of leisure time.

Which of the following would not be included in an economist's definition of investment spending?

Imports are a leakage from the circular flow.

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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