Question 1

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:

Accepted Answer

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

Question 2

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

Accepted Answer

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

Question 3

A worker with two jobs is counted:

Accepted Answer

A)  once in both the household and the establishment surveys. 
B)  once in the household survey, but twice in the establishment survey. 
C)  once in the establishment survey, but twice in the household survey. 
D)  twice in both the household and the establishment surveys.

Question 4

Net national product equals GNP:

Accepted Answer

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

Question 5

It is a national income accounting rule that all expenditure on purchases of products in the economy is necessarily equal to:

Accepted Answer

A)  profits of firms. 
B)  wages of employees. 
C)  income of the producers of the products in the economy. 
D)  income of employees.

Question 6

The GDP deflator is a:

Accepted Answer

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

Question 7

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

Accepted Answer

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

Question 8

Real GDP per capita is an imperfect measure of economic well-being because it does not value home production or production in the underground economy, among other factors. Give at least two examples that show why the omission of these types of items will make a difference in evaluating economic well-being. One example should explain how the omissions distort comparisons of economic well-being across countries and the other example should explain how the omission distorts comparisons of economic well-being in the same country over time.

Accepted Answer

The answer of Real GDP per capita is an imperfect...

Question 9

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:

Accepted Answer

A)  are out of a job, but not looking for work. 
B)  retired from the labor force before age 65. 
C)  do not have a job, but have looked for work in the past 4 weeks. 
D)  are absent from work because of bad weather or illness.

Question 10

Imputed values included in GDP are the:

Accepted Answer

A)  market prices of goods and services. 
B)  estimated value of goods and services that are not sold in the marketplace. 
C)  price of goods and services measured in constant prices. 
D)  price of goods and services measured in current prices.

Question 11

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

Accepted Answer

A)  IBM's building a new factory. 
B)  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 IBM stock.

Question 12

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

Accepted Answer

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

Question 13

A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is:

Accepted Answer

A)  $1. 
B)  $2. 
C)  $3. 
D)  $6.

Question 14

Which of the following is a flow variable?

Accepted Answer

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

Question 15

Cass was paid $500 in social security from the government. Though it was expenditure made by the government, it is not included in the G component of GDP. Explain why.

Accepted Answer

The answer of Cass was paid $500 in social security...

Question 16

All of the following are measures of GDP except the total:

Accepted Answer

A)  expenditures of all businesses in the economy. 
B)  income from all production in the economy. 
C)  expenditures on all final goods and services produced. 
D)  value of all final production.

Question 17

A fixed-weight price index like the CPI ______ the change in the cost of living because it ______ take into account that people can substitute less expensive goods for ones that have become more expensive.

Accepted Answer

A)  underestimates; does not 
B)  overestimates; does 
C)  accurately estimates; does 
D)  overestimates; does not

Question 18

Is real GDP a better measure of economic well being of a country than nominal GDP? Give an explanation for your answer.

Accepted Answer

The answer of Is real GDP a better measure of...

Question 19

Bob bought $5000 worth of Adobe Systems stock. This transaction was brokered by John, who received $50 for his help. I think the $5000 should be included in GDP, and the $50 should not be included in GDP. State whether I am right or wrong with an explanation for your answer.

Accepted Answer

The answer of Bob bought $5000 worth of Adobe Systems...

Question 20

Economic statistics are not perfect. Explain at least one way in which each of the following statistics as currently calculated in the United States fails to completely or accurately measure the corresponding economic concept (in parentheses): a. real GDP per person (economic well-being);
b. CPI (cost of living);
c. unemployment rate (involuntary unemployment).

Accepted Answer

The answer of Economic statistics are not perfect. Explain at...

Exam 2: The Data of Macroeconomics