Question 1

The following table provides data for an economy in a certain year. $$\begin{array} { l l } 
\text { Consumption expenditures } & 50 \
\text { Imports } & 40 \
\text { Government purchases of goods and services } & 20 \
\text { Construction of new homes and apartments } & 30 \
\text { Sales of existing homes and apartments } & 40 \
\text { Exports } & 50 \
\text { Government payments to retirees } & 10 \
\text { Household purchases of durable goods } & 20 \
\text { Beginning-of-year inventory } & 10 \
\text { End-of-year inventory } & 20 \
\text { Business fixed investment } & 30
\end{array}$$ Given the data in the table, compute the government purchases component of GDP.

Accepted Answer

A)  10 
B)  20 
C)  30 
D)  40

Question 2

The value of unpaid work by a homemaker ______ included in GDP and the value of housekeeping services sold in the market ______ included in GDP.

Accepted Answer

A)  is; is not 
B)  is; is 
C)  is not; is not 
D)  is not; is

Question 3

If two countries are identical except that citizens in one country have more leisure time, then the level of GDP:

Accepted Answer

A)  will be higher in the country with more leisure time. 
B)  will be higher in the country with less leisure time. 
C)  will be the same in both countries. 
D)  will be greater than the level of economic well being in each country.

Question 4

Nominal GDP measures the ______ of production.

Accepted Answer

A)  change in the volume 
B)  physical volume 
C)  current dollar value 
D)  base year value

Question 5

Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. Which expression of the output of this economy is most consistent with the concept of GDP?

Accepted Answer

A)  This economy produces two-thirds oranges and one-third candy bars. 
B)  This economy produces food valued at $1.20. 
C)  This economy produces 15 food items. 
D)  This economy produces $7.00 worth of food.

Question 6

Total spending on final goods and services in an economy must equal total:

Accepted Answer

A)  profits. 
B)  production. 
C)  revenues from all transactions. 
D)  investment.

Question 7

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: $$\begin{array} { l c c } 
{ \text { Name of Company } } & \text { Revenues } & \text { Cost of Purchased Inputs } \
\text { Citrus Growers Inc. } & \$ 0.75 & 0 \
\text { Florida Jam Company } & \$ 2.00 & \$ .75 \
\text { The Corner Store } & \$ 2.50 & \$ 2.00
\end{array}$$ What is the sum of the value added of all the firms?

Accepted Answer

A)  $2.50 
B)  $2.75 
C)  $4.50 
D)  $5.25

Question 8

Countries with high real GDP tend to have ______ infant mortality rates and ______ literacy rates than countries with low real GDP.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 9

The value of final goods and services equals:

Accepted Answer

A)  total business profits. 
B)  the sum of the value added by all firms. 
C)  total business spending. 
D)  the sum of revenues from all sales.

Question 10

Bob's Barber Shop cut 3,000 heads of hair in 2009 and 3,100 in 2010. The price of a haircut was $7 in 2009 and $8 in 2010. If 2009 is the base year, what was Bob's contribution to real GDP in the year 2010?

Accepted Answer

A)  $21,000 
B)  $21,700 
C)  $24,000 
D)  $24,800

Question 11

Real GDP is not a perfect measure of economic well being because it excludes the value of all of the following EXCEPT:

Accepted Answer

A)  leisure time. 
B)  goods and services available in the market economy. 
C)  nonmarket economic activity. 
D)  goods and services produced in the underground economy.

Question 12

The total market value of production in an economy must equal total:

Accepted Answer

A)  profits. 
B)  revenues from all transactions. 
C)  consumption. 
D)  spending on final goods and services.

Question 13

One way to avoid counting the prices of intermediate goods multiple times in computing the value of GDP is to:

Accepted Answer

A)  sum the value added of only producers of final goods and services. 
B)  sum the value added of only producers of intermediate goods and services. 
C)  sum the value added of producers of both intermediate and final goods and services. 
D)  subtract the value added of producers of intermediate goods and services from the value added of producers of final goods and services.

Question 14

The following table provides data for an economy in a certain year. $$\begin{array} { l r } 
\text { Consumption expenditures } & 1,000 \
\text { Imports } & 600 \
\text { Government purchases of goods and services } & 700 \
\text { Construction of new homes and apartments } & 500 \
\text { Sales of existing homes and apartments } & 600 \
\text { Exports } & 500 \
\text { Government payments to retirees } & 200 \
\text { Household purchases of durable goods } & 300 \
\text { Beginning-of-year inventory } & 500 \
\text { End-of-year inventory } & 600 \
\text { Business fixed investment } & 300
\end{array}$$ Given the data in the table, compute the investment component of GDP.

Accepted Answer

A)  300 
B)  400 
C)  800 
D)  900

Question 15

An economy produces only 1,000,000 computers valued at $2,000 each. Of these, 200,000 are sold to consumers, 300,000 are sold to businesses, 300,000 are sold to the government, and 100,000 are sold abroad. No computers are imported. The unsold computers at the end of the year are held in inventory by the computer manufacturers. What is the value of GDP?

Accepted Answer

A)  $0.9 billion 
B)  $1.0 billion 
C)  $1.8 billion 
D)  $2.0 billion

Question 16

Which of the following is an example of an intermediate good?

Accepted Answer

A)  A new car sold to a family 
B)  A metal-stamping machine used to produce cars sold to an automaker 
C)  A new CD player sold to an automaker for installation in a car 
D)  A new CD player sold to a teenager

Question 17

Profits, rents, interest, and royalties are examples of:

Accepted Answer

A)  consumption. 
B)  labor income. 
C)  capital income. 
D)  investment.

Question 18

Net exports equal:

Accepted Answer

A)  the value added of exports. 
B)  exports plus imports. 
C)  exports minus imports. 
D)  exports minus depreciation.

Question 19

An economy produces only 500,000 tables valued at $100 each. Of these, 100,000 are sold to consumers, 200,000 are sold to businesses, 100,000 are sold to the government, and 50,000 are sold abroad. No tables are imported. The unsold tables at the end of the year are held in inventory by the table manufacturers. What is the value of the investment component of GDP?

Accepted Answer

A)  $2 billion 
B)  $10 million 
C)  $20 million 
D)  $25 million

Question 20

Peg's Manicure Manor did 4,000 sets of nails in 2010 and 4,500 sets of nails in 2011. The price of a set of nails was $20 in 2010 and $22 in 2011. If 2010 is the base year, Peg's contribution to nominal GDP in 2010 was ______ and in 2011 was _______.

Accepted Answer

A)  $80,000; $88,000 
B)  $80,000; $90,000 
C)  $80,000; $99,000 
D)  $88,000; $90,000

Exam 4: Macroeconomics: the Birds-Eye View of the Economy

The value of unpaid work by a homemaker included in GDP and the value of housekeeping services sold in the market included in GDP.