Deck 7: Macroeconomic Measurements, part II: GDP and Real GDP

Question 1

To macroeconomists,investment is mainly the purchases of goods and services

A)by businesses.
B)to hold as wealth,such as gold coins or art.
C)to hold as wealth,such as stocks and bonds.
D)by the government.
E)​b and c

Answer 1

A

Question 2

The best reason economists take only final goods and services into account when calculating GDP is that

A)this is the way things have always been done,but there is no particular reason why.
B)they want to avoid the problem of final counting.
C)they want to avoid the problem of double counting.
D)this is the only way it can be done.

Answer 2

C

Question 3

Gross Domestic Product (GDP)is the total market value of all

A)final goods and services produced annually within a country's borders.
B)final and intermediate goods and services produced annually within a country's borders.
C)intermediate goods and services produced annually within a country's borders.
D)final goods produced every month within a country's borders.

Answer 3

A

Question 4

In the definition of GDP,the words "total market value" refer to total

A)dollar value at base prices.
B)dollar value at current prices.
C)subjective value.
D)objective value.
E)a and d

Question 5

Macroeconomists define consumption as

A)purchases by the business sector.
B)wearing away and breakdown of capital goods.
C)the difference between imports and exports.
D)purchases by the household sector.

Question 6

Which of the following items is a final good?

A)mustard in a deli
B)tin purchased by a tin can company
C)a sweater purchased by someone in a department store
D)a and b
E)a,b,and c

Question 7

Net exports equals

A)exports divided by imports.
B)the sum of exports and imports.
C)exports minus imports.
D)exports during the year.
E)none of the above

Question 8

Which of the following would definitely not be included in the measurement of GDP?

A)value of the services of a painter who paints your garage
B)value of the services of a person who mows his or her own lawn
C)value of the services of a maid who cleans your house
D)value of the services of a plumber who fixes your kitchen sink

Question 9

Underground activities are not counted in GDP because

A)some underground activities are illegal and the government doesn't want to place,for instance,drug dealers on an equal footing with small businesses.
B)there are no written records of underground activities.
C)of a decision made in the 1930s and no one has gotten around to changing it yet.
D)although it is possible to accurately measure underground activities,it is harder than measuring above-ground activities because with the latter,one doesn't have to dig as deep.

Question 10

The two ways of measuring Gross Domestic Product are the __________ approach and the __________ approach.

A)expenditure;income
B)expenditure;national product
C)national product;income
D)net national product;personal income

Question 11

Gross Domestic Product is computed by using

A)base-year prices.
B)wholesale prices.
C)previous-year prices.
D)current-year prices.

Question 12

Investment is equal to all purchases of newly produced capital goods

A)minus changes in business inventories.
B)plus fixed investment minus inventory investment.
C)plus changes in business inventories.
D)plus changes in business inventories plus purchases of new residential housing.

Question 13

Which of the following illustrates double counting?

A)The total market value of the steel used to produce a car and the total market value of the car itself are summed.
B)The total market value of tennis rackets and the total market value of tennis balls are summed.
C)The total market value of picture frames and the total market value of camera film are summed.
D)The total market value of eyeglasses and the total market value of carpet are summed.
E)b and c

Question 14

The expenditure approach to measuring GDP sums

A)consumption,investment,government purchases,and net exports.
B)sales,revenues,income,and wages.
C)profits,compensation of employees,consumption,and investment.
D)net exports,consumption,wages,and salaries.
E)consumption,interest,net exports,and federal government purchases

Question 15

Which of the following would not be included in the measurement of GDP?

A)a bill from a car mechanic
B)wages of a card dealer working in a Las Vegas casino
C)commissions of a stockbroker
D)the increased value of shares of stock
E)c and d

Question 16

Which of the following is a nonmarket good?

A)the corn you grow in your home garden and consume
B)the clothes you sew and sell to a neighbor who pays you by writing you a check
C)the self-portrait hanging in your den
D)a and c
E)a,b,and c

Question 17

Which of the following is counted in GDP?

A)the trading of 100 shares of Microsoft stock
B)the services of a real estate broker
C)government transfer payments
D)the sale of a used car
E)none of the above

Question 18

Suppose the total market value of all final goods and services produced in economy X this year is $4 million.Of the $4 million worth of goods and services,$3 million is sold and $1 million is held in inventory.For this year,the GDP for economy X is

A)$4 million.
B)$3 million.
C)$1 million.
D)$7 million.
E)none of the above

Question 19

Which of the following statements is false?

A)The market value of all nonmarket goods is omitted from GDP.
B)The sale of used goods is omitted from GDP.
C)The market value of a person mowing his or her own lawn is omitted from GDP.
D)If a good is produced but not sold,it is included in GDP.

Question 20

Government purchases consist of the total dollar amount(s)spent on goods and services by the

A)federal government only.
B)state governments only.
C)local governments only.
D)state and local governments,but not the federal government.
E)federal,state,and local governments.

Question 21

Depreciation refers to a decrease in the value of a good caused by

A)an increase in the price level.
B)a decrease in the price level.
C)"wear and tear" of capital goods over time.
D)the depreciation allowance.
E)a decrease in purchasing power.

Question 22

Which of the following statements is true?

A)Indirect business taxes are a component of national income because when added to the other components of national income,the sum must equal GDP.
B)Indirect business taxes must be subtracted from national income to yield a figure equal to GDP.
C)Indirect business taxes are a part of national income because they are considered a payment to a factor of production.
D)Indirect business taxes are not part of national income because they are not considered a payment to a factor of production.

Question 23

National income equals

A)wages + salaries + corporate profits + net income.
B)compensation of employees + proprietors' income + corporate profits + rental income + net interest.
C)compensation of employees + proprietors' income + indirect business taxes + rental income + net interest.
D)the monetary value of fringe benefits + tips + wages + profits + salaries.
E)none of the above

Question 24

Disposable income is

A)equal to GDP minus the capital consumption allowance.
B)that portion of personal income that can be used for consumption and saving.
C)the sum of all payments to suppliers of the factors of production.
D)equal to national income.
E)another term for personal income.

Question 25

Net domestic product is the total value of

A)all final goods and services produced within a country's borders in a year.
B)only intermediate goods produced within a country's borders in a year.
C)all final goods and services produced within a country's borders in a year minus gross private domestic investment.
D)only intermediate goods produced within a country's borders in a year plus gross private domestic investment.
E)all final goods and services produced within a country's borders in a year minus capital consumption allowance.

Question 26

Which of the following statements is true?

A)The main items that comprise indirect business taxes include excise taxes,income taxes,and property taxes.
B)Capital consumption allowance is also known as depreciation.
C)A sales tax is an example of an indirect business tax.
D)b and c
E)a,b,and c

Question 27

Which of the following would not be included in the calculation of this year's GDP?

A)a headlight bulb purchased at Joe's Auto Supply by Olivia to replace a burnt out bulb in her car
B)a headlight bulb purchased by Ford Motor Co.from a supplier
C)a headlight bulb produced but not sold this year and thus ending up as inventory
D)none of the above,i.e. ,all would be included

Question 28

Personal income is

A)equal to GDP.
B)that portion of national income that can be used for consumption and saving.
C)the sum of all payments to suppliers of the factors of production.
D)the amount of income that individuals actually receive.
E)another term for disposable income.

Question 29

In the United States,the largest expenditure component in GDP is

A)gross private domestic investment.
B)government purchases of goods and services.
C)consumption expenditures.
D)net exports.
E)none of the above

Question 30

An example of income earned but not received is

A)welfare payments.
B)Social Security payments.
C)undistributed profits.
D)a and b
E)a,b,and c

Question 31

Capital consumption allowance refers to

A)capital goods being used up in production through natural wear,obsolescence,and accidental destruction.
B)people sending money between countries.
C)the purchase of used factories.
D)the purchase of goods that allow households to consume more services.

Question 32

The largest component of national income in the United States is

A)rental income.
B)proprietors' income.
C)compensation of employees.
D)corporate profits.
E)net interest.

Question 33

If in the process of calculating GDP,the market value of all intermediate goods is added to the market value of all final goods,this would

A)overstate the actual value of GDP.
B)produce the correct value of GDP.
C)understate the actual value of GDP.
D)avoid the possible error of double counting.

Question 34

Real GDP is GDP

A)in current-year prices.
B)in base-year prices.
C)in GDP-prices.
D)in that year's prices.

Question 35

To derive net domestic product (NDP)from gross domestic product (GDP),we must subtract ________________ from GDP.

A)the capital consumption allowance
B)gross private domestic investment
C)imports
D)inventory investment
E)the statistical discrepancy

Question 36

An example of income received but not earned is

A)government transfer payments.
B)undistributed profits.
C)compensation of employees.
D)rental income.
E)a and c

Question 37

Sophia just bought shares of IBM stock for $20,000 and paid a $300 commission to her broker.How did this impact GDP?

A)GDP increased by $20,300
B)GDP increased by $300
C)GDP increased by $20,000
D)GDP increased by $19,700
E)it had no impact on GDP

Question 38

In the United States,which is the largest dollar figure?

A)disposable personal income
B)gross domestic product
C)per-capita GDP
D)personal income

Question 39

In the calculation of national income,dividends paid to stockholders are part of

A)compensation of employees.
B)proprietors' income.
C)rental income.
D)net interest.
E)corporate profits.

Question 40

In 2013,the U.S.GDP was approximately

A)$16.79 trillion.
B)$5.15 trillion.
C)$10.67 trillion.
D)​$890.22 billion.
E)​$25.30 trillion.

Question 41

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?

A)Per-capita GDP is necessarily higher in year 2 than year 1.
B)People are "better off" in year 2 than in year 1 because there are more goods and services in year 2 than year 1.
C)Government transfer payments were higher in year 2 than in year 1.
D)a and b
E)none of the above

Question 42

Which of the following is a macroeconomic measurement used to gauge macroeconomic activity?

A)Net domestic product
B)National income
C)Personal income
D)Disposable income
E)all of the above

Question 43

If GDP in year 1 is the same dollar amount as the GDP in year 2,does it follow that Real GDP in year 1 is the same as Real GDP in year 2?

A)Yes,since prices must necessarily be the same in the two years.
B)No,since equal GDP figures do not account for population.
C)No,since prices may not be the same in the two years.
D)Yes,since equal GDP figures do account for a change in the quality of goods produced in the two years.
E)none of the above

Question 44

Look at the following data: durable goods = $200 billion;nondurable goods = $350 billion;services = $600 billion;fixed investment + inventory investment = $200 billion;government purchases = $400 billion;exports = $30 billion;imports = $79 billion.GDP is equal to

A)$1,701 billion.
B)$1,201 billion.
C)$1,859 billion.
D)$1,010 billion.
E)There is not enough information to answer the question.

Question 45

In which phase of the business cycle does a recession occur?

A)contraction
B)peak
C)recovery
D)expansion

Question 46

Which of the following goods is an intermediate good?

A)lettuce that a restaurant buys to put on sandwiches
B)tires that a car company buys to put on the cars it produces
C)a television set that Chi-Mai buys to put in her college dorm room
D)a and b
E)b and c

Question 47

The sale of __________ goods is omitted from current GDP because __________.

A)intermediate goods;these goods do not constitute production
B)used goods;these goods were counted in an earlier year
C)illegal;these goods do not constitute economic value
D)b and c
E)a,b,and c

Question 48

Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.

A)intermediate;that year's
B)intermediate;base-year
C)final;that year's
D)final;base-year

Question 49

Look at the following data: GDP = $11,920 billion;investment = $2,100 billion;exports = $500 billion;government purchases = $1,450 billion;consumption = $8,500 billion.What does import spending equal?

A)$630 billion
B)$370 billion
C)$1,320 billion
D)$430 billion
E)$474 billion

Question 50

Suppose you have data on durable goods,nondurable goods,fixed investment,government purchases,exports,and imports.Can you compute GDP?

A)No,since data on services and profits are missing.
B)No,since data on inventory investment and profits are missing.
C)No,since data on inventory investment and services are missing.
D)No,since data on services and dividends are missing.
E)Yes,all of the necessary components of GDP are given.

Question 51

The standard definition of "recession" is

A)a period of a positive frictional unemployment rate.
B)two consecutive quarters of falling Real GDP.
C)the lowest point in a business cycle.
D)a period of negative inflation.

Question 52

The base year is the year

A)in which prices are unstable.
B)in which prices are lowest.
C)in which prices are highest.
D)that serves as a reference point or benchmark.
E)in which nominal output is largest.

Question 53

Increases in import spending _____________________,ceteris paribus.

A)raise GDP
B)lower GDP
C)are always equal to decreases in exports
D)may raise or lower GDP

Question 54

Real GDP is always measured in

A)cheaper dollars.
B)quality of goods produced.
C)base-year dollars.
D)nominal dollars.
E)current dollars.

Question 55

Which of the following statements is true?

A)Government purchases is the largest component of GDP.
B)Net exports are equal to exports plus imports.
C)U.S.imports refer to the physical quantity of foreign-produced goods that are purchased by residents of the United States.
D)Government purchases includes the spending on goods and services by all levels of government (federal,state,and local).
E)c and d

Question 56

Look at the following data: consumption = $915 billion;exports = $40 billion;imports = $33 billion;inventory investment = $123 billion;fixed investment = $500 billion;government purchases = $300 billion.GDP is equal to

A)$1,632 billion.
B)$1,466 billion.
C)$1,911 billion.
D)$1,845 billion.
E)none of the above

Question 57

The typical U.S.business cycle,measured peak to peak,lasts approximately

A)4 to 5 years.
B)8 to 10 years.
C)1 to 3 years.
D)6 months to 2 years.

Question 58

"Economic growth" has occurred if

A)inflation rate between this year and last year is zero or less.
B)GDP this year exceeds the Real GDP this year.
C)unemployment rate this year is above the natural rate of unemployment.
D)Real GDP this year is greater than Real GDP last year.

Question 59

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?

A)Yes,since the country with a relatively large GDP could also have a relatively large population.
B)No,since countries with a relatively large GDP (such as the United States and Japan)also have a relatively high per-capita GDP.
C)Yes,but only under the condition that the country "produces" relatively more "bads" than other countries.
D)Yes,since government transfer payments may be exorbitantly high in the country with the relatively high GDP.
E)There is not enough information to answer this question.

Question 60

Which of the following does GDP omit?

A)Jack purchases $2,300 worth of stock in company X.
B)Bob mows his lawn and washes and irons his shirts.
C)Helen receives $4,000 a year in Social Security payments.
D)a and b
E)a,b,and c

Question 61

Consumption expenditures in the U.S.usually account for approximately __________ percent of GDP.

A)40
B)50
C)60
D)70
E)80

Question 62

Which of the following is the correct equation for computing personal income?

A)Personal income = National income + undistributed profits - social insurance taxes - corporate profits taxes + transfer payments.
B)Personal income = National income - undistributed profits - social insurance taxes + corporate profits taxes + transfer payments
C)Personal income = National income - taxes
D)Personal income = National income - undistributed corporate profits - social insurance taxes - corporate profits taxes + transfer payments
E)none of the above

Question 63

Suppose that consumption spending is $4,200 billion,spending on durable goods is $1,200 billion,and spending on services is $2,000 billion.What does spending on nondurable goods equal?

A)$7,200 billion
B)$1,000 billion
C)$2,200 billion
D)$3,200 billion
E)There is not enough information to answer this question.

Question 64

You have data for compensation of employees,proprietors' income,rental income,and net interest.Can you compute national income?

A)Yes,all of the components of national income are given.
B)No,since data on indirect business taxes are missing.
C)No,since data on corporate profits is missing.
D)No,since data on the capital consumption allowance is missing.
E)No,since net interest has not been adjusted for profits.

Question 65

A business cycle refers to the

A)continued expansion in Real GDP.
B)recurrent swings (up and down)in Real GDP.
C)continued decline in Real GDP.
D)period when Real GDP grows at unusually high rates.
E)none of the above

Question 66

If Real GDP was $8,742 billion in year 2 and it had been $8,509 billion in year 1,what was the approximate economic growth rate during this time period?

A)9.73 percent
B)2.67 percent
C)3.58 percent
D)2.74 percent

Question 67

An economy produces 10X,20Y,and 30Z in a year.Base-year prices for these goods are $1,$2,and $3,respectively.Current-year prices for these goods are $2,$3,and $4,respectively.What is Real GDP?

A)$180
B)$200
C)$140
D)$240
E)none of the above

Question 68

Which of the following statements is false?

A)For purposes of computing GDP,the purchases of new residential housing are considered investment although it is undertaken by the household sector.
B)Consumption includes spending on durable goods but not spending on services.
C)Investment includes fixed investment but not inventory investment.
D)b and c

Question 69

Which of the following statements is true?

A)National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received.
B)Net domestic product (NDP)is a smaller dollar amount than GDP.
C)Personal income includes transfer payments.
D)b and c
E)a,b,and c

Question 70

Investment equals inventory investment added to

A)business purchases of new capital goods.
B)purchases of new residential housing.
C)fixed investment.
D)business purchases of new capital goods and purchases of new residential housing.
E)either c or d

Question 71

Which of the following statements is true?

A)Another name for capital consumption allowance is depreciation.
B)When there are two consecutive quarterly declines in Real GDP the economy is said to be in recession (based on the standard definition).
C)In the expansion phase of a business cycle,Real GDP rises beyond the recovery.
D)a and b
E)a,b,and c

Question 72

What does annual economic growth refer to?

A)annual increases in GDP
B)annual increases in consumption spending
C)annual increases in investment spending
D)annual increases in Real GDP
E)none of the above

Question 73

Suppose that net exports are -$300 billion and exports are $500 billion.Imports must be equal to

A)$800 billion.
B)$400 billion.
C)$200 billion.
D)-$200 billion.
E)There is not enough information to answer this question.

Question 74

Look at the following data: personal income = $4,900 billion;personal taxes = $900 billion;transfer payments = $980 billion.What is disposable income?

A)$3,200 billion
B)$4,000 billion
C)$4,980 billion
D)$1,880 billion
E)There is not enough information to answer the question.

Question 75

Why do economists prefer to compare Real GDP figures for various years instead of GDP figures?

A)Because when GDP in one year is higher than in another year,there is no way to tell why it is higher.Is it because output is higher,prices are higher,etc.? This is not the case with Real GDP.If Real GDP is higher in one year than in another year,it is because output is higher.
B)Because when GDP in one year is higher than in another year,there is no way of knowing if the quality of goods produced is higher in one year than the other.This is not the case with Real GDP.If Real GDP is higher in one year than in another year,it is because the quality of the goods produced is higher.
C)Actually the question is incorrect.Economists prefer to compare GDP figures instead of Real GDP figures.
D)Because Real GDP is easier to compute than GDP.
E)Because when GDP in one year is higher than in another year,there is no way to tell if the quality of life is higher in one year than the other.This is not the case with Real GDP.If Real GDP is higher in one year than in another year,it is because the quality of life is higher.

Question 76

What is the proper sequence of the phases of a business cycle?

A)peak,contraction,trough,expansion,recovery
B)peak,contraction,recovery,trough,expansion
C)peak,contraction,trough,recovery,expansion
D)contraction,peak,trough,recovery,expansion
E)recovery,trough,peak,expansion,contraction

Question 77

The sum of durable goods,nondurable goods,and services equals

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

Question 78

Which of the following statements is false?

A)Domestic income is the total income earned by the people and businesses within a country's borders.
B)National income is the total income earned by U.S.citizens and businesses,no matter where they reside or are located.
C)Corporate profits is the largest component of national income.
D)National income = compensation of employees + proprietors' income + corporate profits + rental income + net interest.

Question 79

Suppose that inventory investment is $20 billion and (total)investment is $680 billion.What does purchases of newly produced capital goods equal?

A)$715 billion
B)$785 billion
C)$750 billion
D)$35 billion
E)There is not enough information to answer this question.

Question 80

Suppose that nondurable goods spending is $200 billion,durable goods spending is $400 billion,new residential housing spending is $500 billion,and spending on services is $700 billion.What does consumption equal?

A)$600 billion
B)$1,100 billion
C)$1,800 billion
D)$1,300 billion
E)There is not enough information to answer this question.