Macro Exam 2 (HW 5)

1) During a business cycle expansion, total production ________ and total employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

A

14) The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is A) 5% higher in year 2 than in year 1. B) 105% higher in year 2 than in year 1. C) 5% higher in year 1 than in year 2. D) 105% higher in year 1 than in year 2.

A

7) In the United States since the mid-1980s, consumption as a percentage of GDP has A) increased. B) slowly decreased. C) remained the same. D) dropped by more than half.

A

19) If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

T

10) A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will A) increase GDP and increase well being in the economy. B) increase GDP and decrease well being in the economy. C) decrease GDP and increase well being in the economy. D) decrease GDP and decrease well being in the economy.

B

13) Suppose that nominal GDP in 2011 was less than real GDP in 2011. Given this information, we know for certain that A) the price level in 2011 was greater than the price level in the base year. B) the price level in 2011 was less than the price level in the base year. C) real GDP in 2011 was less than real GDP in the base year. D) real GDP in 2011 was greater than real GDP in the base year.

B

17) The output of Mexican citizens who work in Texas would be included in the A) gross domestic product of Mexico. B) gross national product of Mexico. C) gross national product of the United States. D) net national product of the United States.

B

6) An example of business fixed investment spending is A) a purchase of a home by a household. B) a purchase of a computer by an accounting firm. C) a purchase of a bond by General Electric Corporation. D) $200 million of unsold cars at a car dealership.

B

Product Quantity Price Shoes 40 $60.00 DVDs 100 18.00 Tomatoes 2,000 1.00 Ketchup 300 4.00 4) Refer to Table above. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals A) $7,400. B) $6,400. C) $5,800. D) 2,440 units.

B

Year Nominal GDP Real GDP 2008 $7,400 $7,537 2009 7,813 7,813 2010 8,301 8,165 2011 8,760 8,516 12) Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is A) 2008. B) 2009. C) 2010. D) 2011.

B

Year Nominal GDP Real GDP 2010 14,078 13,254 2011 14,441 13,312 16) Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2011 equals A) 92.2. B) 102.6. C) 108.5. D) 109.1.

C

Year Oranges Produced Price of Oranges Shirts Produced Price of Shirts 2009 1,800 $0.90 110 $30.00 2011 2,000 1.00 110 35.00 15) Refer to Table above. Real GDP for Vicuna for 2009 using 2011 as the base year equals A) $4,620. B) $5,100. C) $5,650. D) $5,850.

C

11) Real GDP is GDP in a given year A) adjusted only for anticipated inflation. B) adjusted only for unanticipated inflation. C) valued in the prices of that year. D) valued in the prices of the base year.

D

2) In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA A) simply counts the total number of goods produced in the market place and then adds them up. B) values goods at their market prices, multiplies them by the quantity produced, and then adds them up. C) simply counts the total number of goods and services produced in the marketplace and then adds them up. D) values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

D

3) Which of the following transactions represents the purchase of a final good? A) Starbucks purchases coffee beans. B) Delta buys a new European-made jetliner. C) Apple computer buys computer processors from Intel. D) Your father buys a new John Deere riding lawn mower.

D

5) The nominal GDP of the U.S. in 2010 was approximately $14.6 trillion. This means that A) the value of output in 2010 was around $14.6 trillion. B) total income in 2010 was around $14.6 trillion. C) total spending in 2010 was around $14.6 trillion. D) all of the above are true.

D

9) Gross domestic product understates the total production of final goods and services because of the omission of A) exports. B) inflation. C) intermediate goods. D) household production.

D

Consumption expenditures $800 Investment expenditures 200 Government purchases 300 Exports 100 Imports 200 Wages 800 8) Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $1,600. C) $1,400. D) $1,200.

D

18) Residential investment includes spending by firms on office buildings.

F

20) Transfer payments are subtracted from national income to get to personal income.

F