Macroeconomics Chapter 10

A country's real GDP rose from 500 to 550 while its nominal GDP rose from 600 to 770. What was this country's inflation rate? a. 16.7% b. 20% c. -14.3% d. -20%

a. 16.7%

Which of the following is not included in GDP? a. carrots grown in your garden and eaten by your family b. carrots purchased at a farmer's market and eaten by your family c. carrots purchased at a grocery store and eaten by your family d. None of the above are included in GDP.

a. carrots grown in your garden and eaten by your family

A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for? a. consumption and imports b. consumption but not imports c. imports but not consumption d. neither consumption nor imports

a. consumption and imports

A farmer sells $50,000 of apples to individuals who take them home to eat and $75,000 of apples to a company that uses them all to produce cider. How much of the farmer's sales will be included as apples in GDP? a. $0 b. $50,000 c. $75,000 d. $125,000

b. $50,000

Suppose that an economy produces 40,000 units of good A which sells at $4 a unit and 20,000 units of good B which sells at $5 per unit. Production of good A contributes a. 2 times as much to GDP as the production of good B. b. 8/5 times as much to GDP as the production of good B. c. 5/4 times as much to GDP as the production of good B. d. 4/5 times as much to GDP as production of good B.

b. 8/5 times as much to GDP as the production of good B.

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in a. both Mexican GDP and U.S. GDP. b. Mexican GDP, but it is not included in U.S. GDP. c. U.S. GDP, but it is not included in Mexican GDP. d. neither Mexican GDP nor U.S. GDP.

b. Mexican GDP, but it is not included in U.S. GDP.

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because a. the quality of these items is not high enough to contribute value to GDP. b. measuring them is so difficult. c. the government wants to discourage the production and consumption of these items. d. these items are not reported on income tax forms.

b. measuring them is so difficult.

In the economy of Ukzten in 2010, consumption was $5300, GDP was $8800, government purchases were $1800, imports were $500, and investment was $2000. What were Ukzten's exports in 2010? a. -$800 b. -$300 c. $200 d. $300

c. $200

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP? a. Sam's and Ellen's. b. Sam's but not Ellen's. c. Ellen's but not Sam's. d. Nether Sam's nor Ellen's.

c. Ellen's but not Sam's.

Which of the following is not an example of a nondurable good? a. a loaf of bread b. a pair of jeans c. a microwave d. a pound of bacon

c. a microwave

Changes in nominal GDP reflect a. only changes in prices. b. only changes in the amounts being produced. c. both changes in prices and changes in the amounts being produced. d. neither changes in prices nor changes in the amounts being produced.

c. both changes in prices and changes in the amounts being produced.

Macroeconomists study a. the decisions of individual households and firms. b. the interaction between households and firms. c. economy-wide phenomena. d. regulations imposed on firms and unions.

c. economy-wide phenomena.

For an economy as a whole, income must equal expenditure because a. the number of firms is equal to the number of households in an economy. b. individuals can only spend what they earn each period. c. every dollar of spending by some buyer is a dollar of income for some seller. d. every dollar of saving by some consumer is a dollar of spending by some other consumer.

c. every dollar of spending by some buyer is a dollar of income for some seller.

Which of the following examples of household spending is categorized as investment rather than consumption? a. expenditures on durable goods such as automobiles and refrigerators b. expenditures on intangibles items such as medical care c. expenditures on new housing d. All of the above are correct.

c. expenditures on new housing

Consumption consists of spending by households on goods and services, with the exception of a. purchases of intangible services. b. purchases of durable goods. c. purchases of new houses. d. spending on education.

c. purchases of new houses.

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is a. 104.1 so prices are higher than in the base year. b. 104.1 so prices are lower than in the base year. c. 96.1 so prices are higher than in the base year. d. 96.1 so prices are lower than in the base year.

d. 96.1 so prices are lower than in the base year.

If a U.S. citizen buys a television made in Korea by a Korean firm, then a. U.S. net exports decrease and U.S. GDP decreases. b. U.S. net exports are unaffected and U.S. GDP decreases. c. U.S. net exports are unaffected and U.S. GDP is unaffected. d. U.S. net exports decrease and U.S. GDP is unaffected.

d. U.S. net exports decrease and U.S. GDP is unaffected.

Social Security payments are a. included in GDP because they represent current income. b. included in GDP because they represent potential consumption. c. excluded from GDP because they are not private pensions. d. excluded from GDP because they do not reflect the economy's production.

d. excluded from GDP because they do not reflect the economy's production.

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP? a.$0 b.$10,000 c.$12,000 d.$22,000

d.$22,000