Deck 6: Up Around the Circular Flow: Gdp, Economic Growth, and Business Cycles

Question 1

Real GDP uses

A) constant prices to value the quantities of product and services.
B) constant quantities to value the prices of product and services.
C) prices for several years to value the quantities of product and services.
D) quantities for several years to value the prices of product and services.
E) quantities but does not use prices.

Answer 1

constant prices to value the quantities of product and services.

Question 2

Angela pays Jordan $800 to build a fence for her house. He spends $600 for wood and nails at Home Depot and builds the fence. These events cause nominal GDP to increase by

A) $400.
B) $1,400.
C) $200.
D) $600.
E) $800.

Answer 2

$800.

Question 3

When nominal GDP is less than real GDP it means

A) prices have risen since the year we use as a standard for constant prices.
B) the population has increased.
C) prices have fallen since the base year.
D) the population has decreased.
E) there is a mistake because nominal GDP can never be less than real GDP.

Answer 3

prices have fallen since the base year.

Question 4

When real GDP decreases, what could not have happened?

A) rising prices
B) increasing population
C) falling prices
D) decreasing population
E) increasing quantities produced

Question 5

Alex paid her brother Andy $50 to buy a bottle of Cherry Whiskey liquor. Andy spends $40 on the liquor and keeps the remaining $10 for himself. These events cause nominal GDP to increase by

A) $60.
B) $50.
C) $10.
D) $40.
E) $0.

Question 6

In 2015, the country of Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruit were used only for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $5 while a kilo of bananas sold for $10. Adanac's nominal GDP in 2015 was

A) $65.
B) $50.
C) $15.
D) $400.
E) $350.

Question 7

Which statement about nominal and real GDP is incorrect?

A) Real GDP per person is a better measure of standard of living than nominal GDP per person.
B) Nominal GDP includes products and services produced within a country's borders, no matter what the nationality of the business doing the producing.
C) Real GDP is measured as a flow.
D) Nominal GDP is measured as a flow.
E) If nominal GDP is higher this year than last year, there must be positive economic growth.

Question 8

When nominal GDP is greater than real GDP it means

A) prices have risen since the year we use as a standard for constant prices.
B) the population has increased.
C) prices have fallen since the year we use as a standard for constant prices.
D) the population has decreased.
E) there is a mistake because nominal GDP can never be greater than real GDP.

Question 9

Which statement about nominal and real GDP is incorrect?

A) Real GDP per person is a better measure of standard of living than nominal GDP per person.
B) Canadian real GDP includes products and services produced by Canadian-owned businesses, no matter where in the world they are located.
C) Real GDP is measured as a flow.
D) Nominal GDP is measured as a flow.
E) If real GDP is higher this year than last year, this indicates positive economic growth.

Question 10

In 2015, the country of Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruit were used only for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $10 while a kilo of bananas sold for $5. Adanac's nominal GDP in 2015 was

A) $65.
B) $50.
C) $15.
D) $400.
E) $350.

Question 11

Which statement about nominal and real GDP is incorrect?

A) Real GDP per person is a better measure of standard of living than nominal GDP per person.
B) Canadian real GDP includes products and services produced within Canada's borders, but only for Canadian-owned businesses.
C) Real GDP is measured as a flow.
D) Nominal GDP is measured as a flow.
E) If real GDP is higher this year than last year, this indicates positive economic growth.

Question 12

Real GDP per person is calculated as

A) real GDP divided by the number of people in the country.
B) the number of people in the country divided by real GDP.
C) nominal GDP per person divided by real GDP.
D) real GDP per person divided by nominal GDP.
E) real GDP multiplied by the number of people in the country.

Question 13

The best measure of a country's ability to meet the material needs of its citizens is

A) nominal GDP per person minus real GDP per person.
B) nominal GDP.
C) nominal GDP per person.
D) real GDP.
E) real GDP per person.

Question 14

Nominal GDP in Canada includes

A) illegally purchased products and services.
B) purchases by Japanese tourists in Canada of product and services made in Canada.
C) purchases by Canadian tourists in the U.S. of products and services made in New York.
D) purchases of products and services produced in an earlier year.
E) purchases of intermediate products such as wheat or flour.

Question 15

Matthew bought an new iPod Touch from a Canadian retailer for $240. It broke later that year. When he complained, the store gave him a new one but charged him a service fee of $60. These two events caused nominal GDP to increase by

A) $240.
B) $300.
C) $180.
D) $60.
E) $0.

Question 16

When real GDP increases, what could not have happened?

A) rising prices
B) increasing population
C) falling prices
D) decreasing population
E) decreasing quantities produced

Question 17

The gross domestic product of a country measures the final value of all products and services produced

A) in a year.
B) since the country began producing.
C) per hour.
D) since January 1, 2000.
E) since January 1, 2002.

Question 18

The currency in Tinyland is called the Oscar. In 2015, nominal GDP was 600 Oscars. Real GDP was 500 constant Oscars. The population was 10 persons. The best measure of material well-being for 2015 is

A) 5,000 constant Oscars per person.
B) 60 constant Oscars per person.
C) 50 constant Oscars per person.
D) 600 Oscars.
E) 500 constant Oscars.

Question 19

Which statement about nominal and real GDP is incorrect?

A) Real GDP per person is a better measure of standard of living than nominal GDP per person.
B) Nominal GDP includes products and services produced within a country's borders, no matter what the nationality of the business doing the producing.
C) Real GDP is measured as a stock.
D) Nominal GDP is measured as a flow.
E) If real GDP is higher this year than last year, this indicates positive economic growth.

Question 20

Which event increases Canada's nominal GDP?

A) Andreas steals $200 worth of cosmetics from Shopper's Drug Mart.
B) The Middletons sell a Nova Scotia cottage that has been in the family for six generations.
C) Brad buys $240 of crack cocaine from Smokie Joe.
D) Ian buys a 2009 Honda Civic for $3,000.
E) A millionaire from Michigan buys $400 of fresh Ontario blueberries while on vacation in Canada.

Question 21

Differences in real GDP between years can be due to either price changes or quantity changes.

Question 22

Nominal GDP is measured as a flow.

Question 23

Nominal GDP is measured as a flow, but real GDP, in constant dollars, is measured as a stock.

Question 24

Real GDP per person is the best measure of a country's material standard of living.

Question 25

Increases in real GDP per person might be due to decreases in the population.

Question 26

If real GDP stays constant while the population increases, real GDP per person decreases.

Question 27

Real GDP is measured as a stock.

Question 28

Increases in real GDP per person might be due to increases in the population.

Question 29

Because Toyota is a Japanese corporation, Toyota cars produced in Ontario count as part of Japan's GDP.

Question 30

Real GDP can never be less than nominal GDP.

Question 31

Because Tim Horton's is a Canadian corporation, sales from Tim Horton's stores in the U.S. count as part of Canadian GDP.

Question 32

Although Tim Horton's is a Canadian corporation, sales from Tim Horton's stores in the U.S. count as part of U.S. GDP.

Question 33

If real GDP stays constant while the population increases, real GDP per person also increases.

Question 34

Nominal GDP per person is the best measure of a country's material standard of living.

Question 35

Real GDP is calculated by using the current year quantity and constant year price for each product and service.

Question 36

Nominal GDP can never be less than real GDP.

Question 37

Although Toyota is a Japanese corporation, Toyota cars produced in Ontario count as part of Canada's GDP.

Question 38

Differences in nominal GDP between years can be due to either price changes or quantity changes.

Question 39

Which statement about nominal and real GDP is incorrect?

A) Real GDP per person is a better measure of standard of living than nominal GDP per person.
B) Real GDP includes products and services produced within a country's borders, no matter what the nationality of the business doing the producing.
C) Nominal GDP per person is measured as a flow.
D) If real GDP is higher this year than last year, the standard of living must have risen.
E) If real GDP is higher this year than last year, there is economic growth.

Question 40

Measured in constant U.S. dollars, country A's real GDP is much higher than country B's real GDP. Therefore, country A must be better off than country B.

Question 41

Andrea pays Ted $900 to build a fence at her home. Ted spends $500 at Home Depot for wood and nails, pays his assistant $100 and keeps the remaining money. Ted's value added is

A) $300.
B) $400.
C) $900.
D) $500.
E) $100.

Question 42

Net taxes are defined as taxes

A) plus transfers.
B) minus disposable income.
C) plus disposable income.
D) plus consumer spending.
E) minus transfers.

Question 43

In 2015, the country of Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruits were used only for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $5 and a kilo of bananas sold for $10. Adanac's nominal GDP in 2015 was $350.

Question 44

Gerry grows marijuana plants from his own seeds in the forest behind his house. He sells 20 kilograms of plants to Smokey Joe for $4,000. Joe spends $200 on baggies for packaging, and resells the marijuana on the street for $6,000. Joe's value added is

A) $2,000.
B) $5,800.
C) $6,000.
D) $1,800.
E) $10,200.

Question 45

The government of Tinyland spends $25 on domestic products and services. Tax revenue is $60. Transfers payments are $20. Net taxes are

A) $55.
B) $15.
C) $20.
D) $25.
E) $40.

Question 46

In 2015, the country of Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruits were used only for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $5 and a kilo of bananas sold for $10. Adanac's nominal GDP in 2015 was $400.

Question 47

In 2015, the country of Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruits were used only for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $10 and a kilo of bananas sold for $5. Adanac's nominal GDP in 2015 was $350.

Question 48

Say's Law states

A) spending on final products and services equals payments to input owners.
B) net taxes equal government spending.
C) supply creates its own demand.
D) aggregate spending equals aggregate income.
E) savings equals investment.

Question 49

Business investment (I) spending does not include Ford Motor Company

A) building a new assembly factory.
B) replacing worn-out production robots.
C) buying new production robots.
D) buying new assembly line motors.
E) buying Canadian government bonds.

Question 50

Angela pays her contractor $900 to build a fence at her house. The contractor spends $600 on wood and nails at the local Home Depot. These two sales increase nominal GDP by $900.

Question 51

Reginald Rothchild buys $200 of blueberries while on vacation in Canada. Although Reginald is from England, this amount will be included in nominal GDP for Canada, not for England.

Question 52

Aggregate spending equals

A) C + I + G - X - IM
B) C - I + G + X - IM
C) C + I - G + X - IM
D) C + I + G + X - IM
E) C + I + G + X + IM

Question 53

Angela pays her contractor $900 to build a fence at her house. The contractor spends $600 on wood and nails at the local Home Depot. These two sales increase nominal GDP by $1,500.

Question 54

Which is business investment (I) spending?

A) The government builds a new office tower.
B) The Hong household buys a new computer.
C) The Rigid Steel Company sells pipe to Alaska.
D) The Rigid Steel Company buys a pipe-cutting machine.
E) Peter's Pizza Parlour sells an old oven to Betty's Bakery.

Question 55

In 2015, the country of Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruits were used only for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $10 and a kilo of bananas sold for $5. Adanac's nominal GDP in 2015 was $400.

Question 56

Smokie Joe, a known drug-dealer, buys a taco salad at Wendy's. This amount is not included in nominal GDP because everyone knows that Joe got his money illegally.

Question 57

Which is consumption (C) spending?

A) The Singh household buys a new car.
B) The Rigid Steel Company buys a new car.
C) The Rigid Steel Company buys a new computer.
D) Welfare payments to single mothers.
E) The CBC spends money on children's programs.

Question 58

Consumer income is $200. If net taxes are $70 and consumers spend $80 on products and services, consumer savings is

A) - $10.
B) $10.
C) $50.
D) $120.
E) $190.

Question 59

Gerry grows marijuana plants from his own seeds in the forest behind his house. He sells 20 kilograms of plants to Smokey Joe for $4,000. Joe spends $200 on baggies for packaging, and resells the marijuana on the street for $6,000. Gerry's value added is

A) $4,000.
B) $5,800.
C) $6,000.
D) $1,800.
E) $10,200.

Question 60

Reginald Rothchild buys $200 of blueberries while on vacation in Canada. Because Reginald is from England, this amount will be included in nominal GDP for England, but not for Canada.

Question 61

The value of all final products and services produced equals the sum of all inputs' incomes, except for profits.

Question 62

The government of Tinyland spends $30 on domestic products and services. Tax revenue is $60 and transfer payments are $20. Net taxes equal $40.

Question 63

The government of Tinyland spends $30 on domestic products and services. Tax revenue is $60 and transfer payments are $20. Net taxes equal $10.

Question 64

In calculating Canadian GDP, imports are subtracted from aggregate spending because

A) some consumption spending is on imports.
B) some business investment spending is on imports.
C) some government spending is on imports.
D) all of the above are true.
E) none of the above are true.

Question 65

The sum of all value added equals the value of all intermediate products and services.

Question 66

How much does the production of a kayak add to GDP if the shell costs $250, the paint costs $20, the finisher costs $35, the manufacturer sells it to the dealer for $500, and the dealer sells it to her customer for $800?

A) $1,605
B) $1,300
C) $500
D) $305
E) $800

Question 67

The sum of all value added equals the sum of all incomes.

Question 68

Value added equals the value of output minus the value of intermediate products and services bought from other businesses.

Question 69

Which is a real flow from consumers to businesses?

A) products and services
B) inputs
C) payments for products and services
D) payments for inputs
E) loans

Question 70

The sum of all value added equals the value of all final products and services.

Question 71

Aggregate expenditure is $200. Consumers pay $70 in net taxes and spend $80 on products and services. Consumer savings is $50.

Question 72

Disposable income is

A) income minus transfers minus taxes.
B) income plus transfers minus taxes.
C) income minus spending.
D) spending plus transfers.
E) taxes minus transfers.

Question 73

A business sells its output for $2,000. It pays $1,100 in wages, $500 for material bought from other businesses, and has profits of $400. Its value added is

A) is $400.
B) is $1,100.
C) is $1,500.
D) is $1,600.
E) depends on whether it produces intermediate products.

Question 74

Say's Law states that supply creates its own demand.

Question 75

In Slugvia the domestic currency is the Drab. Aggregate income is 400 Drab. Consumer, business, and government spending on products and services are 300, 100, and 200 Drab respectively. Slugvia exports 500 Drab of products and services. Imports of products and services must be ________ Drab.

A) 300
B) 400
C) 500
D) 600
E) 700

Question 76

The sum of all value added equals the sum of all final products and services produced.

Question 77

The difference between the value of a business's output and the value of intermediate products and services bought from other businesses equals

A) net exports.
B) net profits.
C) net taxes.
D) investment in inventories.
E) inputs' incomes.

Question 78

When The Olympic Bakery buys flour from a local miller, the amount is included in nominal GDP but is not included in real GDP.

Question 79

Intermediate products and services are not counted in GDP because they

A) reduce economic well-being.
B) are not consumed in the current year.
C) are only sold in input markets.
D) would be double counted and overstate the value of GDP.
E) are part of the underground economy.

Question 80

Savings by consumers equals

A) income plus net taxes minus consumer spending.
B) income minus net taxes minus consumer spending.
C) income minus net taxes plus consumer spending.
D) government spending minus net taxes.
E) government spending plus net taxes.