Deck 2: The Data of Microeconomics

Question 1

GDP is the market value of all _____ goods and services produced within an economy in a given period of time.

A)used
B)intermediate
C)consumer
D)final

Answer 1

final

Question 2

An economy's _____ equals its _____.

A)consumption; income
B)consumption; expenditure on goods and services
C)expenditure on goods; expenditures on services
D)total income; total expenditure on goods and services

Answer 2

total income; total expenditure on goods and services

Question 3

All of the following are flows variables except:

A)the number of new automobile purchases.
B)the number of people losing their jobs.
C)business expenditures on plant and equipment.
D)the government debt.

Answer 3

the government debt.

Question 4

Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of GDP is:

A)10 pieces of fruit.
B)$7.
C)$8.
D)$10.

Question 5

The economic statistic used to measure the level of prices is:

A)GDP.
B)CPI.
C)GNP.
D)real GDP.

Question 6

GDP is all of the following except:

A)the total expenditure of everyone in the economy.
B)the total income of everyone in the economy.
C)the overall expenditure on the economy's output of goods and services.
D)the total output of the economy.

Question 7

When bread is baked but put away for later sale, this is called:

A)waste.
B)saving.
C)fixed investment.
D)investment in inventory.

Question 8

The amount of capital in an economy is a(n) _____, and the amount of investment is a(n) _____.

A)flow; stock
B)stock; flow
C)final good; intermediate good
D)intermediate good; final good

Question 9

Assume that a bakery hires more workers and pays them wages and that the workers produce more bread. GDP increases in all of the following cases except when the bread:

A)is sold to households.
B)is stored away for later sale.
C)grows stale and is thrown away.
D)is sold to other firms.

Question 10

When a firm sells a product out of inventory, GDP:

A)increases.
B)decreases.
C)is not changed.
D)increases or decreases, depending on the year the product was produced.

Question 11

Two equivalent ways to view GDP are as the:

A)total payments made to all workers in the economy or the total profits of all firms and businesses in the economy.
B)total expenditures on all goods produced in the economy or the total income earned from producing all services in the economy.
C)total profits of all firms and businesses in the economy or the total consumption of goods and services by all households in the economy.
D)total income of everyone in the economy or the total expenditure on the economy's output of goods and services.

Question 12

When a firm sells a product out of inventory, investment expenditures _____, and consumption expenditures _____.

A)increase; decrease
B)decrease; increase
C)decrease; remain unchanged
D)remain unchanged; increase

Question 13

Which of the following is a stock variable?

A)wealth
B)consumption
C)investment
D)income

Question 14

All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of a:

A)book titled The Year 3000 that was printed in 2009.
B)2001 Jeep Cherokee.
C)year 2010 calendar printed in 2009.
D)ticket to see the movie 2001.

Question 15

The statistic economists use to measure the value of economic output is:

A)the CPI.
B)GDP.
C)the GDP deflator.
D)the unemployment rate.

Question 16

Which of the following is a flow variable?

A)wealth
B)the number unemployed
C)government debt
D)income

Question 17

The total income of everyone in the economy is exactly equal to the total:

A)expenditure on the economy's output of goods and services.
B)consumption expenditures of everyone in the economy.
C)expenditures of all businesses in the economy.
D)government expenditures.

Question 18

The market value of all final goods and services produced within an economy in a given period of time is called:

A)industrial production.
B)gross domestic product.
C)the GDP deflator.
D)general durable purchases.

Question 19

All of the following are stocks variables except:

A)a consumer's wealth.
B)the government budget deficit.
C)the number of unemployed people.
D)the amount of capital in the economy.

Question 20

In the circular flow model, the flow of dollars from firms to households is paid _____, and the flow of dollars from households to firms is paid _____.

A)as wages, capital income, and profits; for goods and services
B)for value added; as imputed values
C)in current dollars; in constant dollars
D)as interest and dividends; for depreciation and taxes

Question 21

Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is:

A)$10,000.
B)$12,000.
C)$20,000.
D)$22,000.

Question 22

Assume that a rancher sells McDonald's a quarter-pound of meat for $1 and that McDonald's sells you a hamburger made from that meat for $2. In this case, GDP increases by:

A)$0.50.
B)$1.
C)$2.
D)$3.

Question 23

Real GDP is a better measure of economic well-being than nominal GDP because real GDP:

A)excludes the value of goods and services exported aboard.
B)includes the value of government transfer payments.
C)measures changes in the quantity of goods and services produced by holding prices constant.
D)adjusts the value of goods and services produced for changes in the foreign exchange rate.

Question 24

In principle, the GDP accounts shouldóbut do notóhave an imputation for:

A)housing services enjoyed by homeowners.
B)rental services of automobiles driven by owners.
C)meals cooked in restaurants.
D)housing services enjoyed by renters.

Question 25

Assume that apples cost $0.50 in 2012 and $1 in 2019, whereas oranges cost $1 in 2012 and $1.50 in 2019. If 4 apples were produced in 2012 and 5 in 2019, whereas 3 oranges were produced in 2012 and 5 in 2019, then the GDP deflator in 2019, using a base year of 2012, was approximately:

A)1.5.
B)1.7.
C)1.9.
D)2.0.

Question 26

The GDP deflator is equal to:

A)the ratio of nominal GDP to real GDP.
B)the ratio of real GDP to nominal GDP.
C)real GDP minus national GDP.
D)nominal GDP minus real GDP.

Question 27

If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP _____ by _____ percent.

A)increased; 2
B)decreased; 2
C)increased; 8
D)decreased; 8

Question 28

Chain-weighted measures of real GDP make use of prices from:

A)an unchanging base year.
B)a continuously changing base year.
C)a base year that is changed approximately every five years.
D)a base year that is changed approximately every 10 years.

Question 29

An example of an imputed value in the GDP is the:

A)value added of meals cooked at home.
B)housing services enjoyed by homeowners.
C)rental services of automobiles to their owners.
D)value of illegal drugs sold.

Question 30

Assume that apples cost $0.50 in 2012 and $1 in 2019, whereas oranges cost $1 in 2012 and $1.50 in 2019. If 4 apples were produced in 2012 and 5 in 2019, whereas 3 oranges were produced in 2012 and 4 in 2019, then real GDP (in 2012 prices) in 2019 was:

A)$5.
B)$6.50.
C)$9.50.
D)$11.

Question 31

To avoid double counting in the computation of GDP, GDP includes only the value of _____ goods.

A)final
B)used
C)intermediate
D)investment

Question 32

If the GDP deflator in 2019 equals 1.25 and nominal GDP in 2019 equals $15 trillion, what is the value of real GDP in 2019?

A)$12 trillion
B)$12.5 trillion
C)$15 trillion
D)$18.75 trillion

Question 33

Assume that a tire company sells four tires to an automobile company for $400, another company sells a Blu-ray player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is:

A)$20,000.
B)$20,000 less the automobile company's profit on the car.
C)$20,900.
D)$20,900 less the profits of all three companies on the items that they sold.

Question 34

Statistics Canada defines the underground economy as consisting of:

A)activities related to drugs and prostitution.
B)only illegal activities.
C)market-based economic activities that escape measurement because of their hidden, illegal, or informal nature.
D)all trades involving the exchange of money.

Question 35

Real GDP means the value of goods and services is measured in _____ prices.

A)current
B)actual
C)constant
D)average

Question 36

The value added of an item produced refers to:

A)a firm's profits on the item sold.
B)the value of the labour inputs in the production of an item.
C)the value of a firm's output less the value of its costs.
D)the value of a firm's output less the value of the intermediate goods that the firm purchases.

Question 37

In computing GDP:

A)expenditures on used goods are included.
B)production added to inventories is excluded.
C)the amount of production in the underground economy is imputed.
D)the value of intermediate goods is included in the market price of the final goods.

Question 38

Nominal GDP means the value of goods and services is measured in _____ prices.

A)current
B)real
C)constant
D)average

Question 39

If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately _____ percent.

A)2
B)3
C)5
D)8

Question 40

If nominal GDP in 2019 equals $14 trillion and real GDP in 2019 equals $11 trillion, what is the value of the GDP deflator?

A)0.79
B)1.03
C)1.27
D)3.2

Question 41

Disposable personal income:

A)is computed by subtracting personal tax from personal income.
B)is generally greater than personal income.
C)includes corporate profits but not dividends.
D)does not include government transfers to individuals.

Question 42

In the national income accounts, net exports equal:

A)exported goods minus imported goods.
B)exported goods and services minus imported goods and services.
C)exported goods minus imported services.
D)exported goods and services plus imported goods and services.

Question 43

In the national income accounts, goods bought for future use are classified as which type of expenditure?

A)services
B)investment
C)government purchases
D)net exports

Question 44

The national income accounts identity for an open economy is:

A)Y = C + I + G - NX.
B)Y = C + I + G + NX.
C)Y = C + I + G.
D)Y = C + I - G.

Question 45

If GDP measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are:

A)$131.
B)-$131.
C)$31.
D)-$31.

Question 46

According to the usual seasonal pattern of the Canadian economy, GDP is highest in the quarter of the year that includes:

A)January, February, and March.
B)April, May, and June.
C)July, August, and September.
D)October, November, and December.

Question 47

If total investment measured in billions of current dollars equals $741, business fixed investment is $524, and residential fixed investment is $222, then inventory investment is:

A)$5.
B)-$5.
C)$15.
D)-$15.

Question 48

In the national income accounts, the purchases of durables, nondurables, and services by households are classified as:

A)consumption.
B)investment.
C)government purchases.
D)net exports.

Question 49

GNP equals GDP _____ income earned domestically by foreigners _____ income that nationals earn abroad.

A)plus; plus
B)minus; minus
C)minus; plus
D)plus; minus

Question 50

National income differs from net national product by an amount called:

A)depreciation.
B)indirect business taxes.
C)statistical discrepancy.
D)net foreign factor income payments.

Question 51

In the national income accounts, all of the following are classified as government purchases except:

A)transfer payments made to recipients.
B)services provided by police officers.
C)purchases of military hardware.
D)services provided by members of parliament.

Question 52

Net national product equals GNP:

A)plus net investment.
B)minus net investment.
C)plus depreciation.
D)minus depreciation.

Question 53

In 2017, the real GDP of Canada totalled about:

A)$2.1 billion.
B)$211 billion.
C)$2,011 billion.
D)$21 billion.

Question 54

If GDP measured in billions of current dollars is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are:

A)$673.
B)-$673.
C)$704.
D)-$704.

Question 55

In the national income accounts, government purchases are goods and services purchased by:

A)the federal government.
B)the federal and provincial governments.
C)the provincial and municipal governments.
D)the federal, provincial, and municipal governments.

Question 56

All of the following actions are investments in the sense of the term used by macroeconomists except:

A)Apple's building a new factory.
B)a corner candy store's buying a new computer.
C)John Smith's buying a newly constructed home.
D)Sandra Santiago's buying 100 shares of Apple stock.

Question 57

If real GDP grew by 6 percent and population grew by 2 percent, then real GDP per person grew by approximately _____ percent.

A)2
B)3
C)4
D)8

Question 58

If GDP measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then government purchases are:

A)$2,977.
B)$1,910.
C)-$843.
D)$1,067.

Question 59

The largest component of national income is:

A)corporate profits.
B)compensation of employees.
C)nonincorporated business.
D)net interest.

Question 60

In the national income accounts, consumption expenditures include all of the following except household purchases of:

A)durable goods.
B)nondurable goods.
C)new residential housing.
D)services.

Question 61

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is:

A)the Laspeyres index.
B)the CPI.
C)the GDP deflator.
D)a Paasche index.

Question 62

The CPI is a:

A)Laspeyres price index.
B)Paasche price index.
C)Laspeyres quantity index.
D)Paasche quantity index.

Question 63

The core inflation rate:

A)measures the change in producer prices.
B)is measured using a Paasche index.
C)excludes some volatile components of the CPI .
D)includes the price of exports and includes the price of imports.

Question 64

Economists from the Bank of Canada estimated that the CPI _____ inflation by approximately _____ percentage point(s) per year.

A)overestimates; one-half of one percentage point to one
B)overestimates; one to two
C)underestimates; one-half of one percentage point to one
D)underestimates; one to two

Question 65

If the adult population equals 25 million, of which 13 million are employed and 2 million are unemployed, the labour-force participation rate equals _____ percent.

A)50
B)58
C)60
D)67

Question 66

If 2 million workers are unemployed, 18 million workers are employed, and the adult population equals 25 million, then the unemployment rate equals _____ percent.

A)17
B)10
C)20
D)5

Question 67

Assume that the market basket of goods and services purchased in 2014 by the average family in Canada costs $14,000 in 2014 prices, whereas the same basket costs $21,000 in 2019 prices. However, the basket of goods and services actually purchased by the average family in 2019 costs $20,000 in 2019 prices, whereas this same basket would have cost $15,000 in 2014 prices. Given these data, a Laspeyres price index of 2019 prices using 2014 as the base year would be:

A)1.05.
B)approximately 1.07.
C)approximately 1.33.
D)1.50.

Question 68

Measuring the rate of inflation using a market basket that excludes some volatile components of the CPI such as food and energy prices is preferred by some analysts because this measure, called core inflation,

A)provides a real, rather than a nominal, rate of inflation.
B)gives a better measure of ongoing, sustained price changes.
C)is more consistent with measures of inflation used in other countries.
D)fluctuates more than measures of inflation that include food and energy prices.

Question 69

An increase in the price of goods bought by firms and the government will show up in:

A)the CPI but not in the GDP deflator.
B)the GDP deflator but not in the CPI.
C)both the CPI and the GDP deflator.
D)neither the CPI nor the GDP deflator.

Question 70

An increase in the price of imported goods will show up in:

A)the CPI but not in the GDP deflator.
B)the GDP deflator but not in the CPI.
C)both the CPI and the GDP deflator.
D)neither the CPI nor the GDP deflator.

Question 71

According to the definition used by Statistics Canada, people are considered to be unemployed if they:

A)are out of a job but not looking for work.
B)retired from the labour force before age 65.
C)do not have a job but have looked for work in the past four weeks.
D)are absent from work because of bad weather or illness.

Question 72

The labour force equals the:

A)adult population.
B)number of employed individuals.
C)number of unemployed individuals.
D)number of employed and unemployed individuals.

Question 73

If the unemployment rate is 10 percent and the number of employed is 20 million, then the labour force equals _____ million.

A)20.2
B)30.4
C)18.8
D)22.2

Question 74

According to the definition used by Statistics Canada, a person is not in the labour force if that person:

A)is going to school full time.
B)is temporarily absent from a job because of illness.
C)has been temporarily laid off.
D)is out of a job and was looking for work during the previous four weeks.

Question 75

If an increasing proportion of the adult population is retired, then the labour-force participation rate:

A)will increase.
B)will decrease.
C)will remain constant.
D)may increase, decrease, or remain constant.

Question 76

The labour-force participation rate is the percentage of the:

A)adult population that is employed.
B)adult population that is in the labour force.
C)labour force that is employed.
D)labour force that is unemployed.

Question 77

Prices of items included in the CPI are:

A)averaged, with the price of every item weighted equally.
B)weighted according to the amount of the item produced in GDP.
C)weighted according to the quantity of the item purchased by the typical household.
D)chained to the base year by the year-to-year growth rate of the item.

Question 78

The GDP deflator is a:

A)Laspeyres price index.
B)Paasche price index.
C)Laspeyres quantity index.
D)Paasche quantity index.

Question 79

The CPI is determined by computing:

A)an average of prices of all goods and services.
B)the price of a basket of goods and services that changes every year, relative to the same basket in a base year.
C)the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.
D)nominal GDP relative to real GDP.

Question 80

Assume that the market basket of goods and services purchased in 2014 by the average family in Canada costs $14,000 in 2014 prices, whereas the same basket costs $21,000 in 2019 prices. However, the basket of goods and services actually purchased by the average family in 2019 costs $20,000 in 2019 prices, whereas this same basket would have cost $15,000 in 2014 prices. Given these data, a Paasche index for 2019 using 2014 prices would be:

A)1.05.
B)approximately 1.07.
C)approximately 1.33.
D)1.50.