Eco review 3

A country reported nominal GDP of $100 billion in 2006 and $75 billion in 2005; it reported a GDP deflator of 125 in 2006 and 120 in 2005. Between 2005 and 2006, a. real output and the price level both rose. b. real output rose and the price level fell. c. real output fell and the price level rose. d. real output and the price level both fell.

A

If the GDP deflator is 200 and nominal GDP is $10,000 billion, then real GDP is a. $5,000 billion. b. $2,000 billion. c. $50 billion. d. None of the above is correct.

A

In a certain economy in 2005, households spent $1,000 on goods and services; purchases of capital equipment, inventories, and structures amounted to $350; government spent $450 on goods and services; and the value of imports exceeded the value of exports by $50. It follows that 2005 GDP for this economy was a. $1,750. b. $1,850. c. $1,950. d. $2,100.

A

In a given year an economy has consumption of $3,000, investment of $2,000, government purchases of $1,500, exports of $500, imports of $600, taxes of $1200, transfer payments of $400, and depreciation of $300. This economy's GDP is a. $6,400. b. $7,000. c. $7,600. d. $8,900.

A

In the country of Mainia, only cranberries and maple syrup are produced. In 2006, 50 units of cranberries are sold at $20 per unit, and 100 units of maple syrup are sold at $10 per unit. The price of cranberries was $10 per unit and the price of maple syrup was $15 per unit in 2005, which is the base year. For 2006, a. nominal GDP is $2,000, real GDP is $2,000, and the GDP deflator is 100. b. nominal GDP is $2,000, real GDP is $2,500, and the GDP deflator is 125. c. nominal GDP is $2,500, real GDP is $2,000, and the GDP deflator is 83.3. d. None of the above is correct.

A

Refer to Table 10-2. The inflation rate in Ophir was a. 5 percent between 2004 and 2005, and 4.76 percent between 2005 and 2006. b. 5 percent between 2004 and 2005, and 5 percent between 2005 and 2006. c. 50 percent between 2004 and 2005, and 50 percent between 2005 and 2006. d. 100 percent between 2004 and 2005, and 105 percent between 2005 and 2006.

A

Refer to Table 10-2. Which of the following statements do we know to be correct? a. Total spending in Ophir increased throughout the period. b. Household spending in Ophir increased throughout the period. c. The production of goods and services increased in Ophir throughout the period. d. All of the above are correct.

A

(see chart) 35. The information below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest? a. Japan, Switzerland, United States b. Japan, United States, Switzerland c. United States, Switzerland, Japan d. United States, Japan, Switzerland

B

A country reported a nominal GDP of $115 billion in 2006 and $125 billion in 2005; it reported a GDP deflator of 85 in 2006 and a deflator of 100 in 2005. Between 2005 and 2006, a. real output and the price level both rose. b. real output rose and the price level fell. c. real output fell and the price level rose. d. real output and the price level both fell.

B

A steel company sells some steel to a bicycle company for $100. The bicycle company uses the steel to produce a bicycle, which it sells for $200. Taken together, these two transactions contribute a. $100 to GDP. b. $200 to GDP. c. between $200 and $300 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. d. $300 to GDP

B

During a presidential campaign, the incumbent argues that he should be reelected because GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period, and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person a. grew by more than 12 percent. b. grew, but by less than 12 percent. c. was unchanged. d. decreased.

B

If a small country has current nominal GDP of $20 billion and a GDP deflator of 50, what is its real GDP? a. $100 billion b. $40 billion c. $10 billion d. $4 billion

B

In a certain economy in 2005, GDP amounted to $5,000; consumption amounted to $3,000; government purchases were equal to investment; and the value of imports exceeded the value of exports by $200. It follows that government purchases amounted to a. $900. b. $1,100. c. $1,250. d. $1,325.

B

Refer to Table 10-1. GNP for Simplia is a. $96. b. $100. c. $105. d. $110

B

Refer to Table 10-1. NNP for this economy is a. $100. b. $96. c. $90. d. $88.

B

Refer to Table 10-1. National income for this economy is a. $96. b. $92. c. $90. d. $88.

B

Refer to Table 10-3. Nominal GDP for 2007 is a. $900. b. $1,100. c. $1,250. d. $1,350.

B

Refer to Table 10-3. Using 2006 as the base year, for 2007, a. real GDP is $880 and the GDP deflator is 80. b. real GDP is $880 and the GDP deflator is 125. c. real GDP is $950 and the GDP deflator is 95. d. real GDP is $950 and the GDP deflator is 116.

B

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person? a. It more than doubled. b. It increased, but it less than doubled. c. It was unchanged. d. It decreased.

B

Suppose that the country of Samiam produces only eggs and ham. In 2005 it produced 100 dozen eggs at $3 per dozen and 50 pounds of ham at $4 per pound. In 2004, the base year, eggs sold for $1.50 per dozen and ham sold for $5 per pound. For 2005, a. nominal GDP is $500, real GDP is $400, and the GDP deflator is 80. b. nominal GDP is $500, real GDP is $400, and the GDP deflator is 125. c. nominal GDP is $400, real GDP is $400, and the GDP deflator is 100. d. nominal GDP is $400, real GDP is $500, and the GDP deflator is 125.

B

(see chart) 36. The information below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest? a. Kenya, Tanzania, Zimbabwe b. Kenya, Zimbabwe, Tanzania c. Zimbabwe, Kenya, Tanzania d. Zimbabwe, Tanzania, Kenya

C

A country reported nominal GDP of $200 billion in 2006 and $180 billion in 2005; it reported a GDP deflator of 125 in 2006 and 105 in 2005. Between 2005 and 2006, a. real output and the price level both rose. b. real output rose and the price level fell. c. real output fell and the price level rose. d. real output and the price level both fell.

C

For a certain economy in 2005, GDP was $2,000; investment was $400; government purchases were $300; and net exports were $70. It follows that consumption was a. $1,370. b. $1,330. c. $1,230. d. 60 percent of GDP.

C

If nominal GDP is $10 trillion and real GDP is $8 trillion, the GDP deflator is a. 80, and this indicates that the price level has decreased by 20 percent since the base year. b. 80, and this indicates that the price level has increased by 80 percent since the base year. c. 125, and this indicates that the price level has increased by 25 percent since the base year. d. 125, and this indicates that the price level has increased by 125 percent since the base year.

C

In a certain economy in 2005, government purchases exceeded investment by $2,000; investment amounted to 1/6 of GDP; consumption amounted to 1/2 of GDP; and the economy's imports exceeded its exports by $500. It follows that GDP amounted to a. $4,500. b. $7,500. c. $9,000. d. $10,500.

C

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP? a. GDP increases by $1.50. b. GDP increases by $3.50. c. GDP increases by $6.00. d. GDP increases by $7.50.

C

Real GDP in the United States is five times as great as it was 50 years ago, yet GDP weighs almost the same as it did a half century ago and the population has less than doubled. These facts suggest that a. consumers are having to settle for lower quality goods. b. we are no longer in danger of running out of raw materials. c. each U.S. worker is more productive, and international trade is less expensive to conduct. d. Americans are actually consuming fewer goods per person than they did 50 years ago.

C

Refer to Table 10-2. From this information we can conclude that a. real GDP was higher in 2006 than in 2005, and real GDP was higher in 2005 than in 2004. b. real GDP was higher in 2005 than in 2004, and real GDP was higher in 2005 than in 2006. c. real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in 2006. d. real GDP was higher in 2004 than in 2006, and real GDP was higher in 2005 than in 2004.

C

Refer to Table 10-3. Nominal GDP is a. $680 for 2006, $880 for 2007, and $1,200 for 2008. b. $760 for 2006, $880 for 2007, and $1,000 for 2008. c. $760 for 2006, $1,100 for 2007, and $1,600 for 2008. d. $960 for 2006, $1,280 for 2007, and $1,300 for 2008.

C

Refer to Table 10-3. Using the GDP deflator to measure the average level of prices and using 2006 as the base year, the economy's inflation rate is a. 20 percent for 2007 and 12.5 percent for 2008. b. 20 percent for 2007 and 30 percent for 2008. c. 25 percent for 2007 and 28 percent for 2008. d. 44.7 percent for 2007 and 45.5 percent for 2008.

C

Suppose GDP consists of wheat and rice. In 2005, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of rice are sold at $2 per bushel. In 2004, the price of wheat was $2 per bushel and the price of rice was $1 per bushel. Using 2004 as the base year, it follows that, for 2005, a. nominal GDP is $100, real GDP is $50, and the GDP deflator is 50. b. nominal GDP is $50, real GDP is $100, and the GDP deflator is 200. c. nominal GDP is $100, real GDP is $50, and the GDP deflator is 200. d. nominal GDP is $40, real GDP is $100, and the GDP deflator is 50.

C

Suppose a small economy produces only cheese and fish. In 2005, 20 units of cheese are sold at $5 each, and 8 units of fish are sold at $50 each. In 2004, the base year, the price of cheese was $10 per unit, and the price of fish was $75 per unit. For 2005, a. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160. b. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160. c. nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5. d. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5.

C

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person? a. It more than doubled. b. It increased, but it less than doubled. c. It was unchanged. d. It decreased.

C

A country reported a nominal GDP of $85 billion in 2005 and $100 billion in 2004; it reported a GDP deflator of 100 in 2005 and 105 in 2004. Between 2004 and 2005, a. real output and the price level both rose. b. real output rose and the price level fell. c. real output fell and the price level rose. d. real output and the price level both fell.

D

A farmer produces the same output in 2004 as in 2003. His input prices increase by 50 percent, but so does his product price. We can conclude that a. the farmer is better off in 2004. b. the farmer was better off in 2004. c. the farmer is equally well off in 2004 as in 2003. d. we cannot tell whether the farmer is better off in 2004 or in 2003 without additional information.

D

If a small country has current nominal GDP of $25 billion and the GDP deflator is 125, what is real GDP? a. $312.5 billion b. $207.5 billion c. $31.25 billion d. None of the above is correct.

D

If real GDP doubles and the GDP deflator doubles, then nominal GDP a. remains constant. b. doubles. c. triples. d. quadruples.

D

In a certain economy in 2005, the value of imports amounted to 80 percent of the value of exports. Consumption, investment, and government purchases added up to $5,000. The market value of all final goods and services produced within the economy was $5,500. It follows that the economy exported a. $500 worth of goods and services. b. $1,000 worth of goods and services. c. $1,500 worth of goods and services. d. $2,500 worth of goods and services.

D

Refer to Table 10-1. The market value of all final goods and services produced within Simplia in 2006 is a. $96. b. $100. c. $105. d. $110.

D

Refer to Table 10-3. Using 2007 as the base year, for 2006, a. real GDP is $760 and the GDP deflator is 100. b. real GDP is $760 and the GDP deflator is 125. c. real GDP is $880 and the GDP deflator is 80. d. real GDP is $950 and the GDP deflator is 80.

D

Between 1929 and 1933, NNP measured in current prices fell from $96 billion to $48 billion. Over the same period, the relevant price index fell from 100 to 75. a. What was the percentage decline in nominal NNP from 1929 to1933? b. What was the percentage decline in real NNP from 1929 to 1933? Show your work.

a. NNP measured in current prices is nominal NNP. Nominal NNP fell from $96 billion to $48 billion, a decline of 50 percent. b. Real NNP is nominal NNP divided by the price index and multiplied by 100. Real NNP in 1929 was ($96 b/100) × 100 = $96 b. Real NNP in 1933 was ($48 b/75) 100 = $64 b. Real NNP fell from $96 billion to $64 billion, a decline of 33 percent.