Quiz 1

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is

125, and this indicates that the price level has increased by 25 percent since the base year.

Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S. The end result of these two transactions is

U.S. consumption purchases increase by $200 and U.S. GDP increases by $200.

Tesla builds a new vehicle, and completes it in December 2015. It sells the vehicle in January 2016. The value of this vehicle affects U.S. GDP

for both 2015 and 2016.

If an economy's GDP falls, then it must be the case that the economy's

income and market value of all production both fall

Suppose an economy produces only eggs and ham. In 2009, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2010, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2009,

nominal GDP is $500, real GDP is $400, and the GDP deflator is 125

In the economy of Talikastan in 2015, consumption was two-thirds of GDP, government purchases were $1000 more than investment, investment was one-ninth of GDP, and the value of exports exceeded the value of imports by $500. What was Talikastan's GDP in 2015?

$13,500

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

$250 to GDP.

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is

96.1 so prices are lower than in the base year.

In a simple circular-flow diagram, firms use the money they get from a sale to

All of the above are correct.

Which of the following transactions adds to U.S. GDP for 2015?

All of the above transactions add to U.S. GDP for 2015.

Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?

GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services.

Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they used to sell her. Which of the following statements is consistent with the way GDP is computed?

GDP will fall if Jennifer marries Thomas but not if she marries Darin.

The residents of country A earn $500 million of income from abroad. Residents of other countries earn $200 million in country A. These earnings are accounted for in country A's

GNP which is larger than GDP in country A.

Apple releases a new iPhone. Which of the following components of U.S. GDP will not be affected, given that the iPhone is manufactured in China?

It will increase U.S. net exports, since a U.S. corporation makes the iPhone.

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

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

The U.S. government pays an economist at the U.S. Department of Commerce $100,000 in salary in 2013. The economist then retires. In 2014, the government pays him $60,000 in Social Security benefits. Which of the following is correct?

The 2013 payment is included in 2013 GDP as government purchases, but the 2014 payment is not included in 2014 GDP

The Patersons bought a home that was newly constructed in 2007 for $275,000. They sold the home in 2015 for $255,000. Which of the following statements is correct regarding the sale of the house?

The 2015 sale affected neither 2007 GDP nor 2015 GDP

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?

The televisions will be counted as a change in inventory in the first quarter and so will be included in first-quarter GDP.

Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

caused measured GDP to rise.

GDP includes the value of all

final goods and services produced within a country using primarily market prices to measure the value of goods and services.