Question 1

Using "chain-weighted" prices to calculate real GDP remedies the distortions causes by changes in relative prices over time.

Accepted Answer

A) True 
 B)False

Question 2

Caroline is an artist.She purchases canvas,paints,brushes,and accessories for $75.She sells one of her original paintings to an art gallery for $1,500,which,in turn,sells it to an art lover for $4,500.How much value does the gallery add?

Accepted Answer

A) $1,425 
B) $1,500 
C) $3,000 
D) $4,500 
A) $1,425 
B) $1,500 
C) $3,000 
D) $4,500

Question 3

Nominal GDP measures the value of all final goods and services at base-year prices.

Accepted Answer

A) True 
 B)False

Question 4

National income is defined as

Accepted Answer

A) gross national product plus transfer payments. 
B) gross national product less retained earnings plus transfer payments. 
C) gross domestic product less retained earnings plus transfer payments. 
D) gross domestic product less the consumption of fixed capital. 
A) gross national product plus transfer payments. 
B) gross national product less retained earnings plus transfer payments. 
C) gross domestic product less retained earnings plus transfer payments. 
D) gross domestic product less the consumption of fixed capital.

Question 5

Table 19-17
 $$\begin{array} { | l | c | c | c | c | } 
\hline & \mathbf { 2 0 1 1 } & & \mathbf { 2 0 1 6 } & \
\hline \text { Product } & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline \text { Movies } & 20 & \$ 6.00 & 30 & \$ 7.00 \
\hline \text { Burgers } & 100 & 2.00 & 90 & 2.50 \
\hline \text { Bikes } & 3 & 1,000.00 & 6 & 1,100.00 \
\hline
\end{array}$$ A very simple economy produces three goods: movies,burgers,and bikes.The quantities produced and their corresponding prices for 2011 and 2016 are shown in the table above.
-Refer to Table 19-17.What is real GDP in 2016,using 2011 as the base year?

Accepted Answer

A) $3,320 
B) $3,690 
C) $6,360 
D) $7,035 
A) $3,320 
B) $3,690 
C) $6,360 
D) $7,035

Question 6

The measure of production that values output using base-year prices is called

Accepted Answer

A) real GDP. 
B) nominal GDP. 
C) value-added GDP. 
D) underground GDP. 
A) real GDP. 
B) nominal GDP. 
C) value-added GDP. 
D) underground GDP.

Question 7

The GDP deflator is equal to

Accepted Answer

A) real GDP divided by nominal GDP. 
B) nominal GDP divided by real GDP,multiplied by 100. 
C) nominal GDP divided by real GDP. 
D) real GDP divided by nominal GDP,multiplied by 100. 
A) real GDP divided by nominal GDP. 
B) nominal GDP divided by real GDP,multiplied by 100. 
C) nominal GDP divided by real GDP. 
D) real GDP divided by nominal GDP,multiplied by 100.

Question 8

Which of the following would increase gross private domestic investment in an economy?

Accepted Answer

A) an increase in the shares of Apple stock households own 
B) an increase in the number of workers Apple hires 
C) an increase in the level of Apple's inventory 
D) an increase in the number of highway construction projects the government is funding 
A) an increase in the shares of Apple stock households own 
B) an increase in the number of workers Apple hires 
C) an increase in the level of Apple's inventory 
D) an increase in the number of highway construction projects the government is funding

Question 9

If Gladys sells her 1998 Jeep Cherokee for $3,500 in 2016,the sale of her car contributes $3,500 to 2016 GDP.

Accepted Answer

A) True 
 B)False

Question 10

Use the formula for the GDP deflator to explain how it is affected by an increase in prices in the economy.If the value of the deflator equals 100,what does that tell you about that year with respect to the base year?

Accepted Answer

The formula for the GDP deflator is give

Question 11

________ is/are the payment for the factor of production ________.

Accepted Answer

A) Wages;capital 
B) Interest;labor 
C) Profit;entrepreneurship 
D) Rent;capital 
A) Wages;capital 
B) Interest;labor 
C) Profit;entrepreneurship 
D) Rent;capital

Question 12

In the United States in 2013,the Bureau of Economic Analysis began counting spending on research and development as ________,which counts as a part of GDP.

Accepted Answer

A) investment 
B) consumption 
C) depreciation 
D) intermediate goods 
A) investment 
B) consumption 
C) depreciation 
D) intermediate goods

Question 13

In an "underground economy," the production of goods and services

Accepted Answer

A) is not measured or included in GDP. 
B) is not measured but is included in GDP. 
C) is measured and included in GDP. 
D) is usually too insignificant to be included in GDP. 
A) is not measured or included in GDP. 
B) is not measured but is included in GDP. 
C) is measured and included in GDP. 
D) is usually too insignificant to be included in GDP.

Question 14

Suppose Bob works for Mary as a proofreader.Mary and Bob fall deeply in love,marry,and have eight children.Bob stops working for Mary in order to care for the children.What will be the effect on GDP?

Accepted Answer

A) GDP will decrease. 
B) GDP will increase. 
C) GDP will not change. 
D) GDP may increase or may decrease depending on inflation. 
A) GDP will decrease. 
B) GDP will increase. 
C) GDP will not change. 
D) GDP may increase or may decrease depending on inflation.

Question 15

Which of the following could cause nominal GDP to decrease,but real GDP to increase?

Accepted Answer

A) The price level rises and the quantity of final goods and services produced rises. 
B) The price level falls and the quantity of final goods and services produced rises. 
C) The price level rises and the quantity of final goods and services produced falls. 
D) The price level falls and the quantity of final goods and services produced falls. 
A) The price level rises and the quantity of final goods and services produced rises. 
B) The price level falls and the quantity of final goods and services produced rises. 
C) The price level rises and the quantity of final goods and services produced falls. 
D) The price level falls and the quantity of final goods and services produced falls.

Question 16

Table 19-18
 $$\begin{array} { | l | c | c | c | c | } 
\hline & \mathbf { 2 0 1 1 } & & \mathbf { 2 0 1 6 } & \
\hline \text { Product } & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline \text { Camera } & 100 & \$ 10 & 120 & \$ 12 \
\hline \text { Legal services } & 50 & 15 & 45 & 20 \
\hline \text { Books } & 200 & 40 & 210 & 45 \
\hline
\end{array}$$ A very simple economy produces three goods: cameras,legal services,and books.The quantities produced and their corresponding prices for 2011 and 2016 are shown in the table above.
-Refer to Table 19-18.What is the GDP deflator in 2016 if 2016 is the base year?

Accepted Answer

A) 120 
B) 118 
C) 100 
D) 87 
A) 120 
B) 118 
C) 100 
D) 87

Question 17

In 2016,Kendall Ford,an automobile dealership,spent $20,000 on a new car lift for its repair shop,$2,000 on a new copy machine for its sales division,and $600,000 on Ford Motor company stock.Unsold cars and trucks were valued at $400,000 on January 1,2016 and unsold cars and trucks were valued at $900,000 on December 31,2016.What is Kendall Ford's total investment spending in 2016?

Accepted Answer

A) $22,000 
B) $322,000 
C) $522,000 
D) $1,022,000 
A) $22,000 
B) $322,000 
C) $522,000 
D) $1,022,000

Question 18

The size of the underground economy would tend to increase if the government of a country

Accepted Answer

A) decreased government regulations on businesses. 
B) increased income tax rates. 
C) legalized prostitution. 
D) legalized marijuana. 
A) decreased government regulations on businesses. 
B) increased income tax rates. 
C) legalized prostitution. 
D) legalized marijuana.

Question 19

In calculating gross domestic product,the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced.This means that the BEA

Accepted Answer

A) simply counts the total number of goods produced in the market place and then adds them up. 
B) values goods at their market prices,multiplies them by the quantity produced,and then adds them up. 
C) simply counts the total number of goods and services produced in the marketplace and then adds them up. 
D) values goods and services at their market prices,multiplies them by the quantity produced,and then adds them up. 
A) simply counts the total number of goods produced in the market place and then adds them up. 
B) values goods at their market prices,multiplies them by the quantity produced,and then adds them up. 
C) simply counts the total number of goods and services produced in the marketplace and then adds them up. 
D) values goods and services at their market prices,multiplies them by the quantity produced,and then adds them up.

Question 20

The drawback to calculating real GDP using base-year prices is that

Accepted Answer

A) real GDP in one year is not comparable to real GDP in another year. 
B) relative prices change over time and these are not reflected in base-year prices,and this distorts GDP. 
C) relative prices change over time and these changes are reflected in base-year prices. 
D) quality changes are reflected in base-year prices. 
A) real GDP in one year is not comparable to real GDP in another year. 
B) relative prices change over time and these are not reflected in base-year prices,and this distorts GDP. 
C) relative prices change over time and these changes are reflected in base-year prices. 
D) quality changes are reflected in base-year prices.

Exam 19: Gdp: Measuring Total Production and Income

Using "chain-weighted" prices to calculate real GDP remedies the distortions causes by changes in relative prices over time.

Caroline is an artist.She purchases canvas,paints,brushes,and accessories for $75.She sells one of her original paintings to an art gallery for $1,500,which,in turn,sells it to an art lover for $4,500.How much value does the gallery add?

Nominal GDP measures the value of all final goods and services at base-year prices.

National income is defined as

The measure of production that values output using base-year prices is called

The GDP deflator is equal to

Which of the following would increase gross private domestic investment in an economy?

If Gladys sells her 1998 Jeep Cherokee for $3,500 in 2016,the sale of her car contributes $3,500 to 2016 GDP.

Use the formula for the GDP deflator to explain how it is affected by an increase in prices in the economy.If the value of the deflator equals 100,what does that tell you about that year with respect to the base year?

________ is/are the payment for the factor of production ________.

In the United States in 2013,the Bureau of Economic Analysis began counting spending on research and development as ________,which counts as a part of GDP.

In an "underground economy," the production of goods and services

Suppose Bob works for Mary as a proofreader.Mary and Bob fall deeply in love,marry,and have eight children.Bob stops working for Mary in order to care for the children.What will be the effect on GDP?

Which of the following could cause nominal GDP to decrease,but real GDP to increase?

The size of the underground economy would tend to increase if the government of a country

In calculating gross domestic product,the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced.This means that the BEA

The drawback to calculating real GDP using base-year prices is that

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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is/are the payment for the factor of production .