Deck 2: Measurement

Question 1

We learn the following about a ski resort: ticket sales $100M,snow making expenses $70M,wages $20M,interest on business loans $5M,and profits $5M. What is the contribution to GDP using the product approach?

A) $70M
B) $80M
C) $95M
D) $100M

Answer 1

$70M

Question 2

Jim's Nursery produces and sells $1100 worth of flowers. Jim uses no intermediate inputs. He pays his workers $700 in wages,pays $100 in taxes and pays $200 in interest on a loan. Jim's profit is

A) $100.
B) $200.
C) $400.
D) $800.

Answer 2

$100.

Question 3

You are a baker. You paid $150K in wages,$50K for dough,$20K for power,$5K in interest for a business loan,$25K in taxes,and made a profit of $10K. How much did you contribution to GDP using the product approach?

A) $80K
B) $85K
C) $190K
D) $260K

Answer 3

$190K

Question 4

Suppose we have the following information about a shoe manufacturer: wages $100,000,sales $500,000,taxes $50,000,loan interest $10,000,leather purchases $170,000,rubber purchases $130,000. What is the contribution of this manufacturer to GDP using the income approach?

A) $500,000.
B) $300,000.
C) $200,000.
D) $40,000.

Question 5

Acme Steel Co. produces 1000 tons of steel. Steel sells for $30 per ton. Acme pays wages of $10,000. Acme buys $15,000 worth of coal,which is needed to produce the steel. Acme pays $2,000 in taxes. Acme's profit is

A) $0.
B) $2,000.
C) $3,000.
D) $15,000.

Question 6

An intermediate good is a good that is

A) neither normal nor inferior.
B) used as an input.
C) a stand-in for all goods.
D) is tangible good that includes substantial services.

Question 7

We know the following about a tie manufacturer: tie sales $1,300,cotton purchases $750,wages $400,interest on business loans $100,and profits $50. What is the contribution to GDP of this producer using the income approach?

A) $550
B) $500
C) $450
D) $400

Question 8

Here is what we know about a household: wages $25,000,unemployment insurance benefits $3,000,dividend income $4,000,income tax $5,000. What is the contribution to GDP of this household following the expenditure approach?

A) $24,000
B) $25,000
C) $28,000
D) $29,000

Question 9

Approaches to measuring GDP include all of the following except the

A) cost approach.
B) product approach.
C) income approach.
D) expenditure approach.

Question 10

Suppose we have the following information about a car manufacturer: car sales $1000M,steal purchases $600M,wages $300M,interest on business loans $50M,and profits $50M. What is its contribution to GDP using the product approach?

A) $1000M
B) $600M
C) $400M
D) $350M

Question 11

Jim's Nursery produces and sells $1100 worth of flowers. Jim uses no intermediate inputs. He pays his workers $700 in wages,pays $100 in taxes and pays $200 in interest on a loan. Jim's contribution to GDP is

A) $900.
B) $1000.
C) $1100.
D) $1800.

Question 12

The three approaches to measuring GDP are called the

A) accounting approach, the income approach, and the expenditure approach.
B) product approach, the cost approach, and the expenditure approach.
C) product approach, the income approach, and the expenditure approach.
D) accounting approach, the statistical approach, and the income approach.

Question 13

Suppose we know the following about a lawn repair business: wages $15,000,profits $4,000,tax $ 3,000,parts $ 9,000. What is the contribution to GDP of this business using the product approach?

A) $31,000.
B) $27,000.
C) $26,000.
D) $22,000.

Question 14

Acme Steel Co. produces 1000 tons of steel. Steel sells for $30 per ton. Acme pays wages of $10,000. Acme buys $15,000 worth of coal,which is needed to produce the steel. Acme pays $2,000 in taxes. Acme's contribution to GDP is

A) $15,000.
B) $20,000.
C) $30,000.
D) $45,000.

Question 15

Gelato ice cream maker shows the following on its balance sheet: revenue $200M,wages $100M,milk expenses $50M,strawberry purchases $5M,and taxes $25M. What is Gelato's contribution to GDP using the income approach?

A) $100M
B) $125M
C) $145M
D) $200M

Question 16

NIPA means

A) New Income and Price Accounting.
B) National Investment and Productivity Approach.
C) Neutral Increase of Production Allocation.
D) National Income and Product Accounts.

Question 17

Pamela's bakery produces 500 loaves of bread in a given year. Pamela pays $100 for flour and yeast,pays $600 in wages,pays $50 in interest on an existing loan,and pays $100 in taxes to the government. One of Pamela's bread slicing machines,which cost $75 each,wears out over the course of the year and must be scrapped. Pamela's profit for the year equals $75. Pamela's bread,therefore,sells for

A) $0.50 per loaf.
B) $1.00 per loaf.
C) $2.00 per loaf.
D) cannot tell, insufficient information

Question 18

Suppose we have the following information about a plumber: wages $30,000,repair sales $200,000,taxes $5,000,loan interest $15,000,plumbing materials $20,000. What is the contribution to GDP of this plumber using the product approach?

A) $200,000.
B) $180,000.
C) $50,000.
D) $30,000.

Question 19

Suppose we have the following information about a furniture maker: furniture sales $100M,wood purchases $60M,wages $25M,tax on profits $5M,profits $10M. What is the contribution to GDP of this company using the product approach?

A) $100M.
B) $60M.
C) $40M.
D) $15M.

Question 20

When a firm produces output,

A) The value of the output produced is included in GDP
B) The firm's output contributes to GDP only to the extent that there is value-added.
C) The firm's output will not count as GDP if it is stored as inventory.
D) The firm's output will not count as GDP if it is exported.

Question 21

A furniture maker used to buy its wood,but has now bought the lumber company. How does this impact GDP?

A) It reduces it.
B) It does not change.
C) It increases it.
D) We cannot tell.

Question 22

Recently,consumption has comprised approximately

A) one-half of GDP.
B) two-thirds of GDP.
C) three-fourths of GDP.
D) four-fifths of GDP.

Question 23

GDP and GNP may differ

A) because some income generated by domestic production may be received as income by foreign residents.
B) because some intermediate good inputs are imported.
C) because some workers are illegal aliens.
D) whenever tariff rates become excessively high.

Question 24

Suppose that the BMW plant in Spartanburg,SC,produces $10 million worth of vehicles in a given year. Of this total amount,$1 million in profits are returned to the owners of the company in Germany. The $1 million in profits

A) contributes to both U.S. GDP and U.S. GNP.
B) contributes to U.S. GNP, but not U.S. GDP.
C) contributes to U.S. GDP, but not U.S. GNP.
D) contributes to neither U.S. GDP, nor U.S. GNP.

Question 25

Additions to inventory are

A) not counted as an expenditure in GDP accounting.
B) counted as an intermediate input.
C) counted as a component of investment spending.
D) subtracted from sales revenue in calculating profit income.

Question 26

The value of a producer's output minus the value of all intermediate goods used in the production of that output is called the producer's

A) net output.
B) accounting profit.
C) value added.
D) profit margin.

Question 27

Value added is equal to the value of a firm's production minus

A) all of its costs of production.
B) labor costs.
C) investment expenditures.
D) intermediate goods used in production.

Question 28

The large quantity of currency held per person in the United States reflects

A) The high level of GDP per person in the United States.
B) The income-expenditure identity.
C) The importance of the underground economy.
D) The distrust of banks in the United States.

Question 29

To calculate value added,we need to subtract

A) only the cost of domestically-produced intermediate inputs.
B) only the cost of foreign-produced intermediate inputs.
C) the cost of domestic- and foreign-produced intermediate inputs.
D) total imports.

Question 30

The components of consumption expenditures include all of the following except

A) nondurable goods consumption.
B) durable goods consumption.
C) government consumption.
D) services.

Question 31

Even when measured accurately,GDP may be a misleading measure of economic welfare because it cannot account for

A) the value of government spending and how efficiently we produce goods and services.
B) how efficiently we produce goods and services and the value of non-market production.
C) the value of non-market production and the consequences of an unequal distribution of income.
D) the consequences of an unequal distribution of income and the value of government spending.

Question 32

GDP may inaccurately measure the value of aggregate output because it may not properly account for

A) production in the underground economy and the true value of government production.
B) the true value of government production and the proper value of purchases and sales of used goods.
C) the proper value of purchases and sales of used goods and depreciation of consumer durables.
D) the depreciation of consumer durables and production in the underground economy.

Question 33

Suppose that the government collects $3 million in taxes,pays $2 million in social security benefits,pays $0.5 million in interest on the national debt,and pays workers $1 million to sit at their desks and work as little as possible. The government's contribution to GDP is

A) $0.
B) $1 million.
C) $3 million.
D) $3.5 million.

Question 34

The income-expenditure identity is best paraphrased as

A) all spending generates income.
B) all profits are used for investment spending.
C) on average, consumers cannot save.
D) on average, government can spend no more than what it collects in income taxes.

Question 35

Inventory investment consists of

A) construction expenditures, raw materials, and inventories of finished goods.
B) goods in process, raw materials, and purchases of office machinery.
C) raw materials, goods in process, and construction expenditures.
D) inventories of finished goods, goods in process, and raw materials.

Question 36

The product approach to measuring GDP values government production at

A) market prices.
B) its cost of production.
C) its estimated value to society.
D) the total amount of taxes it collects.

Question 37

The income components of GDP include all of the following except

A) wage income.
B) foreign income.
C) net interest income.
D) after-tax profits.

Question 38

The expenditure components of GDP include all of the following except

A) consumption.
B) investment.
C) net exports.
D) net factor payments.

Question 39

In recent U.S. history

A) GDP has been much higher than GNP.
B) GNP has been much higher than GDP.
C) the difference between GNP and GDP has been very volatile.
D) there has been little practical difference between GNP and GDP.

Question 40

The expenditure components of GDP include all of the following except

A) consumption.
B) investment.
C) government spending on goods and services.
D) the sum of government spending on goods and services, transfer payments, and interest on the national debt.

Question 41

In recent years,which of the following has comprised less than 5% of GDP?

A) imports
B) exports
C) net exports
D) none of the above

Question 42

A price index can be computed by

A) dividing a nominal variable by its real counterpart.
B) dividing a real variable by its real counterpart.
C) subtracting the nominal variable from its real counterpart.
D) subtracting the real variable from its nominal counterpart.

Question 43

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Suppose that Year 1 is the base year. Year 2 real GDP is

A) $200.
B) $270.
C) $310.
D) $390.

Question 44

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Suppose that Year 2 is the base year. Year 1 real GDP is

A) $200.
B) $270.
C) $310.
D) $390.

Question 45

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Year 2 nominal GDP is

A) $200.
B) $270.
C) $310.
D) $390.

Question 46

Government expenditures includes all of the following except

A) federal defense spending.
B) federal nondefense spending.
C) state and local spending.
D) transfers.

Question 47

To study a macroeconomy,we calculate aggregate quantities in real terms because

A) we want to get rid of the illusion of price effects.
B) we want to concentrate on the production of real goods, as opposed to services.
C) it is then easier to take logarithms.
D) it is the only way to reconcile the three approaches to measuring GDP.

Question 48

If real GDP grows faster than nominal GDP,it is a sign that

A) inflation is negative.
B) there is no inflation.
C) there is inflation, but little.
D) there is galloping inflation.

Question 49

When there is positive inflation,

A) growth in nominal GDP exceeds growth in real GDP.
B) growth in real GDP exceeds growth in nominal GDP.
C) growth in real GDP and nominal GDP are roughly equal.
D) there can never be any growth in nominal GDP.

Question 50

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


What is the real GDP in year 1 using base year 2?

A) $418.
B) $300.
C) $360.
D) $338.

Question 51

Real GDP values current production at

A) current year prices.
B) the best estimate of next year's prices.
C) the average of price levels over the entire sample period.
D) base year prices.

Question 52

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Suppose that Year 2 is the base year. What is the growth rate of GDP?

A) 44.4%
B) 58%
C) 67.5%
D) 120%

Question 53

To compute a monthly consumer price index,we need

A) data about consumption habits in every month.
B) data about item prices every month.
C) fixed exchange rates.
D) the GDP or GNP deflator.

Question 54

The components of investment expenditures include all of the following except

A) financial investment.
B) residential investment.
C) non-residential investment.
D) inventory investment.

Question 55

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Suppose that Year 1 is the base year. The CPI for Year 2 is approximately

A) 100.0.
B) 135.0.
C) 170.0.
D) 240.0.

Question 56

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


For the following questions,suppose an economy produces only pens and pencils,and that the quantity and price data is given by this table
What is the real GDP in year 2 using base year 1?

A) $418
B) $300.
C) $360.
D) $338.

Question 57

The calculation of real GDP allows us to

A) separate consumption and investment spending.
B) adjust for underground economic activity.
C) adjust for the change in the quality of output over time.
D) compare national output across periods of time.

Question 58

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Year 1 nominal GDP is

A) $200.
B) $270.
C) $310.
D) $390.

Question 59

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Suppose that Year 2 is the base year. The CPI for Year 1 is approximately

A) 80.0.
B) 90.0.
C) 100.0.
D) 120.0.

Question 60

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Suppose that Year 1 is the base year. What is the growth rate of GDP?

A) 35%
B) 55%
C) 70%
D) 110%

Question 61

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


What is the real GDP in year 1 using base year 1?

A) $418.
B) $300.
C) $360.
D) $338.

Question 62

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


If Year 1 is the base year,the CPI for Year 2 is approximately

A) 100.0.
B) 126.3.
C) 131.3.
D) 181.0.

Question 63

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


Construction of chain-weighted real GDP employs the technique of a

A) Hilfindahl index.
B) Fisher index.
C) Gini index.
D) Body mass index.

Question 64

Suppose that g1 represents the ratio of year 2 GDP to year 1 GDP,both valued at year 1 prices. Suppose that g2 represents the ratio of year 2 GDP to year 1 GDP,both valued at year 2 prices. The ratio of chain-weighted year 2 GDP to chain-weighted year 1 GDP equals

A) (g? + g?)/2.
B) (g? x g?)/2.
C)( + )/2.
D)

Question 65

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


If Year 1 is the base year,the GDP price deflator for Year 2 is approximately

A) 100.0.
B) 126.3.
C) 131.3.
D) 181.0.

Question 66

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


What is approximately the growth rate of real GDP using base year 1?

A) 13%
B) 20%
C) 33%
D) 39%

Question 67

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


What is the inflation rate using base year 1?

A) 10%.
B) 15%.
C) 20%.
D) 25%.

Question 68

The GDP deflator is a broader measure of the price level than the CPI because

A) it covers sales tax.
B) it covers rents.
C) it covers investment.
D) it factors out fluctuations in seasonal items.

Question 69

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


The base year matters for the computation of real GDP because

A) otherwise we cannot compute growth rates.
B) relative prices can change over time.
C) it allows an international comparison of GDP.
D) it establishes a target for macroeconomic policy.

Question 70

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


What is the real GDP in year 2 using base year 2?

A) $418.
B) $300.
C) $360.
D) $338.

Question 71

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


If Year 1 is the base year,the real GDP of Year 2 is

A) $800.
B) $1050.
C) $1900.
D) $2400.

Question 72

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


If Year 2 is the base year,the real GDP of Year 1 is

A) $800.
B) $1050.
C) $1900.
D) $2400.

Question 73

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


The nominal GDP of Year 2 is

A) $800.
B) $1050.
C) 1900.
D) $2400.

Question 74

If a particular measure of real GDP consistently underestimates growth in real GDP,then the rate of inflation as measured by the GDP deflator

A) will be biased upward.
B) will be biased downward.
C) will be unbiased.
D) cannot be calculated.

Question 75

In the period 1950-2011,the inflation rate in the U.S. CPI has

A) varied very little.
B) been less variable than the inflation rate in the GDP price deflator.
C) been more variable than the inflation rate in the GDP price deflator.
D) been substantially equal to the inflation rate in the GDP price deflator every year.

Question 76

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


If Year 1 is the base year,the growth of real GDP is approximately

A) 100%.
B) 109.5%.
C) 137.5%.
D) 148%.

Question 77

For the following questions, suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.


In the United States,real GDP is currently calculated using

A) a variable-weighting scheme.
B) a chain-weighting scheme.
C) a fixed-weighting scheme.
D) an autoregressive scheme.

Question 78

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


If Year 1 is the base year,the growth of real GDP is approximately

A) 100%.
B) 109.5%.
C) 137.5%.
D) 148%.

Question 79

For the following question(s), suppose an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.


The nominal GDP of Year 1 is

A) $800.
B) $1050.
C) $1900.
D) $2400.

Question 80

When we try to measure real GDP and the price level,if we underestimate the growth in real GDP,we will

A) always underestimate the rate of inflation.
B) sometimes underestimate the rate of inflation.
C) always overestimate the rate of inflation.
D) sometimes overestimate the rate of inflation.