Question 1

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is

Accepted Answer

A)  80, and this indicates that the price level has decreased by 20 percent since the base year. 
B)  80, and this indicates that the price level has increased by 80 percent since the base year. 
C)  125, and this indicates that the price level has increased by 25 percent since the base year. 
D)  125, and this indicates that the price level has increased by 125 percent since the base year. 
A)  80, and this indicates that the price level has decreased by 20 percent since the base year. 
B)  80, and this indicates that the price level has increased by 80 percent since the base year. 
C)  125, and this indicates that the price level has increased by 25 percent since the base year. 
D)  125, and this indicates that the price level has increased by 125 percent since the base year.

Question 2

If total spending rises from one year to the next, then which of the following could not be true?

Accepted Answer

A)  the economy is producing a smaller output of goods and services, and goods and services are selling at higher prices 
B)  the economy is producing a larger output of goods and services, and goods and services are selling at lower prices 
C)  the economy is producing a larger output of goods and services, and goods and services are selling at higher prices 
D)  the economy is producing a smaller output of goods and services, and goods and services are selling at lower prices 
A)  the economy is producing a smaller output of goods and services, and goods and services are selling at higher prices 
B)  the economy is producing a larger output of goods and services, and goods and services are selling at lower prices 
C)  the economy is producing a larger output of goods and services, and goods and services are selling at higher prices 
D)  the economy is producing a smaller output of goods and services, and goods and services are selling at lower prices

Question 3

In a simple circular-flow diagram,

Accepted Answer

A)  households spend all of their income. 
B)  all goods and services are bought by households. 
C)  expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production. 
D)  All of the above are correct. 
A)  households spend all of their income. 
B)  all goods and services are bought by households. 
C)  expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production. 
D)  All of the above are correct.

Question 4

New home construction is included in the consumption component of GDP.

Accepted Answer

A) True 
 B)False

Question 5

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.

Accepted Answer

A) True 
 B)False

Question 6

An American retailer purchased 100 pairs of shoes from a company in Denmark in the second quarter of 2010 but does not sell them to a consumer until the third quarter of 2010. Which of the following components of U.S. GDP is affected by this transaction in the third quarter of 2010?

Accepted Answer

A)  consumption, investment and imports 
B)  only consumption and investment 
C)  only consumption and imports 
D)  only investment and imports 
A)  consumption, investment and imports 
B)  only consumption and investment 
C)  only consumption and imports 
D)  only investment and imports

Question 7

If an economy's GDP falls, then it must be the case that the economy's

Accepted Answer

A)  income falls and saving rises. 
B)  income and saving both fall. 
C)  income falls and expenditure rises. 
D)  income and expenditure both fall. 
A)  income falls and saving rises. 
B)  income and saving both fall. 
C)  income falls and expenditure rises. 
D)  income and expenditure both fall.

Question 8

Which of the following examples of production of goods and services would be included in U.S. GDP?

Accepted Answer

A)  Samantha, a Canadian citizen, grows sweet corn in Minnesota and sells it to a grocery store in Canada. 
B)  Ian, an American citizen, grows peaches for his family in the back yard of their Atlanta home. 
C)  Leo, an American citizen, grows marijuana in his Seattle home and sells it to his friends and neighbors. 
D)  None of the above examples of production would be included in U.S. GDP. 
A)  Samantha, a Canadian citizen, grows sweet corn in Minnesota and sells it to a grocery store in Canada. 
B)  Ian, an American citizen, grows peaches for his family in the back yard of their Atlanta home. 
C)  Leo, an American citizen, grows marijuana in his Seattle home and sells it to his friends and neighbors. 
D)  None of the above examples of production would be included in U.S. GDP.

Question 9

Which of the following is included in GDP?

Accepted Answer

A)  the market value of rental housing services, but not the market value of owner-occupied housing services. 
B)  the market value of owner-occupied housing services, but not the market value of rental housing services 
C)  both the market value of rental housing services and the market value of owner-occupied housing services 
D)  neither the market value of owner-occupied housing services nor the market value of rental housing services. 
A)  the market value of rental housing services, but not the market value of owner-occupied housing services. 
B)  the market value of owner-occupied housing services, but not the market value of rental housing services 
C)  both the market value of rental housing services and the market value of owner-occupied housing services 
D)  neither the market value of owner-occupied housing services nor the market value of rental housing services.

Question 10

An economy's income is the same as its expenditure because every transaction has a buyer and a seller.

Accepted Answer

A) True 
 B)False

Question 11

The value of the housing services provided by the economy's owner-occupied houses is

Accepted Answer

A)  included in GDP, and the estimated rental values of the houses are used to place a value on these housing services. 
B)  included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services. 
C)  excluded from GDP since these services are not sold in any market. 
D)  excluded from GDP since the value of these housing services cannot be estimated with any degree of precision. 
A)  included in GDP, and the estimated rental values of the houses are used to place a value on these housing services. 
B)  included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services. 
C)  excluded from GDP since these services are not sold in any market. 
D)  excluded from GDP since the value of these housing services cannot be estimated with any degree of precision.

Question 12

The percentage change in the price level from one period to another is called

Accepted Answer

A)  the growth rate. 
B)  the inflation rate. 
C)  the GDP deflator. 
D)  the unemployment rate. 
A)  the growth rate. 
B)  the inflation rate. 
C)  the GDP deflator. 
D)  the unemployment rate.

Question 13

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?

Accepted Answer

A)  both real GDP and nominal GDP 
B)  real GDP but not nominal GDP 
C)  nominal GDP but not real GDP 
D)  neither nominal GDP nor real GDP 
A)  both real GDP and nominal GDP 
B)  real GDP but not nominal GDP 
C)  nominal GDP but not real GDP 
D)  neither nominal GDP nor real GDP

Question 14

Table 5-6
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009.
Prices and Quantities
  
-Refer to Table 5-6. This country's inflation rate from 2010 to 2011 was

Accepted Answer

A)  15.2%. 
B)  25.4%. 
C)  34.1%. 
D)  43.9%. 
A)  15.2%. 
B)  25.4%. 
C)  34.1%. 
D)  43.9%.

Question 15

Most goods and services produced at home

Accepted Answer

A)  and most goods and services produced illegally are included in GDP. 
B)  are included in GDP while most goods and services produced illegally are excluded from GDP. 
C)  are excluded from GDP while most goods and services produced illegally are included in GDP 
D)  and most goods and services produced illegally are excluded from GDP. 
A)  and most goods and services produced illegally are included in GDP. 
B)  are included in GDP while most goods and services produced illegally are excluded from GDP. 
C)  are excluded from GDP while most goods and services produced illegally are included in GDP 
D)  and most goods and services produced illegally are excluded from GDP.

Question 16

Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,

Accepted Answer

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

Question 17

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between

Accepted Answer

A)  personal income and personal disposable income. 
B)  estimates of GDP and actual GDP. 
C)  the income and expenditure approaches to the calculation of GDP. 
D)  the quarterly and annual approaches to the calculation of GDP. 
A)  personal income and personal disposable income. 
B)  estimates of GDP and actual GDP. 
C)  the income and expenditure approaches to the calculation of GDP. 
D)  the quarterly and annual approaches to the calculation of GDP.

Question 18

A Texas household receives a Social Security check for $500, which it uses to purchase a $460 television made in Korea by a Korean firm and a $40 dinner at a local restaurant. As a result, U.S. GDP

Accepted Answer

A)  does not change. 
B)  increases by $40. 
C)  increases by $540. 
D)  increases by $1000. 
A)  does not change. 
B)  increases by $40. 
C)  increases by $540. 
D)  increases by $1000.

Question 19

If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then

Accepted Answer

A)  U.S. consumption increases, U.S. net exports decrease, and U.S. GDP decreases. 
B)  U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected. 
C)  U.S. consumption decreases, U.S. net exports increase, and U.S. GDP increases. 
D)  U.S. consumption decreases, U.S. net exports increase, and U.S. GDP is unaffected. 
A)  U.S. consumption increases, U.S. net exports decrease, and U.S. GDP decreases. 
B)  U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected. 
C)  U.S. consumption decreases, U.S. net exports increase, and U.S. GDP increases. 
D)  U.S. consumption decreases, U.S. net exports increase, and U.S. GDP is unaffected.

Question 20

In 2009, Corny Company grows and sells $2 million worth of corn to Tasty Cereal Company, which makes corn flakes. Tasty Cereal Company produces $6 million worth of corn flakes in 2009, with sales to households during the year of $4.5 million. The unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company's inventory at the end of 2009. The transactions just described contribute how much to GDP for 2009?

Accepted Answer

A)  $4.5 million 
B)  $6 million 
C)  $6.5 million 
D)  $8 million 
A)  $4.5 million 
B)  $6 million 
C)  $6.5 million 
D)  $8 million

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is

If total spending rises from one year to the next, then which of the following could not be true?

In a simple circular-flow diagram,

New home construction is included in the consumption component of GDP.

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.

An American retailer purchased 100 pairs of shoes from a company in Denmark in the second quarter of 2010 but does not sell them to a consumer until the third quarter of 2010. Which of the following components of U.S. GDP is affected by this transaction in the third quarter of 2010?

If an economy's GDP falls, then it must be the case that the economy's

Which of the following examples of production of goods and services would be included in U.S. GDP?

Which of the following is included in GDP?

An economy's income is the same as its expenditure because every transaction has a buyer and a seller.

The value of the housing services provided by the economy's owner-occupied houses is

The percentage change in the price level from one period to another is called

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?

Table 5-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009. Prices and Quantities -Refer to Table 5-6. This country's inflation rate from 2010 to 2011 was

Most goods and services produced at home

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between

A Texas household receives a Social Security check for $500, which it uses to purchase a $460 television made in Korea by a Korean firm and a $40 dinner at a local restaurant. As a result, U.S. GDP

If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then

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

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

Filters

Exam 5: Measuring a Nations Income

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is

If total spending rises from one year to the next, then which of the following could not be true?

In a simple circular-flow diagram,

New home construction is included in the consumption component of GDP.

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.

An American retailer purchased 100 pairs of shoes from a company in Denmark in the second quarter of 2010 but does not sell them to a consumer until the third quarter of 2010. Which of the following components of U.S. GDP is affected by this transaction in the third quarter of 2010?

If an economy's GDP falls, then it must be the case that the economy's

Which of the following examples of production of goods and services would be included in U.S. GDP?

Which of the following is included in GDP?

An economy's income is the same as its expenditure because every transaction has a buyer and a seller.

The value of the housing services provided by the economy's owner-occupied houses is

The percentage change in the price level from one period to another is called

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?

Table 5-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009. Prices and Quantities -Refer to Table 5-6. This country's inflation rate from 2010 to 2011 was

Most goods and services produced at home

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between

A Texas household receives a Social Security check for $500, which it uses to purchase a $460 television made in Korea by a Korean firm and a $40 dinner at a local restaurant. As a result, U.S. GDP

If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then

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

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

Filters