ECO 210 Ch 6 & 7

The following data about a hypothetical economy are in billions of dollars. Refer to the data. GDP in this economy is: Personal Consumption Expenditure $4,500 Consumption of Fixed Capital $150 Gross Private Domestic Investment $800 Government Purchases $950 Exports $65 Imports $85 Question 3 options: A) $6,380 billion B) $6,400 billion C) $6,230 billion D) $6,080 billion

$4,500 + $800 + $950 + $65 - $85 = $6230 C) $6,230 billion

Consider the following data for a nation: The country's real GDP declined between years: Year Nominal GDP Price Index 1 $35 90 2 $40 100 3 $45 110 4 $48 120 5 $56 140 Question 5 options: A) 3 and 4 B) 1 and 2 C) 2 and 3 D) 4 and 5

A) 3 and 4 Real GDP= Nominal GDP / Price index (in hundredths)

Which of the following is NOT a factor that increases short-run price stickiness? Question 25 options: A) A firm can lower its price without fear that rival firms will also lower their prices B) Consumers tend to prefer stable prices C) Stable prices make it easier for consumers to plan their spending D) Firms try to avoid price wars

A) A firm can lower its price without fear that rival firms will also lower their prices

The following are examples of final goods in national income accounting, except: Question 18 options: A) Lumber and steel beams purchased by a construction company B) Tractor purchased by a construction company C) Desktop computer purchased by an executive for business use D) Laptop computer purchased by an executive for personal use

A) Lumber and steel beams purchased by a construction company

To avoid multiple counting in national income accounts: Question 17 options: A) Only final goods and services should be counted B) Intermediate goods and services should be counted C) Primary, intermediate, and final goods and services should be counted D) Both final and intermediate goods and services should be counted

A) Only final goods and services should be counted

If prices are "sticky" in the short run, then: Question 2 options: A) The economy will respond to demand shocks primarily through changes in output and employment B) The economy will respond to demand shocks primarily through changes in prices and inflation C) Unemployment will not change in response to a demand shock D) Prices will adjust to equalize the quantities demanded and supplied of goods and services

A) The economy will respond to demand shocks primarily through changes in output and employment

Refer to the graphs. Which of the following best represents negative demand shock when prices are inflexible? Question 13 options: A) The shift from D2 to D1 in graph A B) The shift from D2 to D3 in graph B C) The shift from D2 to D3 in graph A D) The shift from D2 to D1 in graph B

A) The shift from D2 to D1 in graph A

GDP in an economy is $11,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports must be: Question 22 options: A) -$161 billion B) -$84 billion C) +$53 billion D) -$47 billion

B) -$84 billion

Money spent on the purchase of a new house is included in the GDP as a part of: Question 20 options: A) Household expenditures on durable goods B) Gross domestic private investment C) Personal saving D) Personal consumption expenditures

B) Gross domestic private investment

Nominal gross domestic product: Question 12 options: A) Is a measure of the overall level of prices B) Measures the value of final output produced within a nation in one year, using current prices C) Only changes when the level of output changes D) Measures the value of final output produced within a nation in one year, adjusted for changing prices

B) Measures the value of final output produced within a nation in one year, using current prices

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP? Question 23 options: A) Nominal GDP doesn't change B) Nominal GDP doubles C) Nominal GDP is halved D) There is not enough information to determine what happens to nominal GDP

B) Nominal GDP doubles

An example of intermediate goods would be: Question 4 options: A) Bricks bought by a homeowner for constructing a patio B) Paper and ink bought by a publishing company C) Sacks of groceries bought by a dentist for his family D) Cars bought by a car-rental company

B) Paper and ink bought by a publishing company

The major statistics that provide macroeconomists a picture of the health of an economy include the following, except: Question 15 options: A) Unemployment data B) Prices of oil and gasoline C) Inflation statistics D) Real gross domestic product

B) Prices of oil and gasoline

A distinguishing characteristic of public transfer payments is that: Question 9 options: A) They include wages to government workers B) They involve no contribution to current production in return C) They are counted as part of government purchases in the calculation of the gross domestic product D) They include the cost of maintaining public parks

B) They involve no contribution to current production in return

GDP excludes most nonmarket transactions. Therefore, GDP tends to: Question 14 options: A) Overestimate the rate of inflation in the economy B) Underestimate the amount of production in the economy C) Overestimate the amount of production of the economy D) Underestimate the rate of inflation in the economy

B) Underestimate the amount of production in the economy

Real gross domestic product: Question 16 options: A) Is a measure of inflation B) Will increase if there is an increase in the level of output C) Will increase if there is an increase in the price level D) Can change from one year to the next even if there is no change in output

B) Will increase if there is an increase in the level of output

Which of the following is not a component of GDP in the expenditures approach? Question 1 options: A) Government purchases B) Workers' wages and other compensation C) Gross private domestic investment D) The difference between exports and imports

B) Workers' wages and other compensation

(The following national income data for an economy are in billions of dollars.) Refer to the data. The expenditures approach to GDP calculation can be done by adding: 1 Consumption of Fixed Capital $438 2 Taxes on Production & Imports $326 3 Compensation of Employees $2,347 4 Rents $14 5 Interest $287 6 Proprietors' Income $242 7 Corporate Profits $297 8 Personal Consumption Expenditure $2,582 9 Gross private Domestic Investment $669 10 Government Purchases $815 11 Net Exports -$78 12 Net Foreign Factor Income $46 13 Statistical Discrepancy $50 Question 10 options: A) 2 through 7 B) 1 through 7 C) 8 through 11 D) 8 through 13

C) 8 through 11 C + Ig + G + Xn Consumption + Investment + Government sector + Net exports (exports - imports)

GDP is the market value of: Question 6 options: A) Resources (land, labor, capital, and entrepreneurship) in an economy in a given year B) All output produced and accumulated over the years C) All final goods and services produced in an economy in a given year D) Consumption and investment spending in an economy in a given year

C) All final goods and services produced in an economy in a given year

The gross domestic product is not a good measure of the standard of living in a nation because it: Question 7 options: A) Excludes payments for pollution control equipment B) Includes the cost of health insurance C) Does not account for the size of the population D) Does not account for the cost of police protection

C) Does not account for the size of the population

The sale of a used automobile would not be included in GDP of the current year because it is a: Question 8 options: A) Nonmarket transaction B) Purely financial transaction C) Nonproduction transaction D) Private transfer payment

C) Nonproduction transaction

Government purchases in national income accounts would include payments for: Question 19 options: A) Social Security checks to retirees B) Unemployment benefits C) Salaries for current U.S. military officers D) Public assistance for welfare recipients

C) Salaries for current U.S. military officers

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately: Question 24 options: A) $3,846 billion B) $4,379 billion C) $3,925 billion D) $4,108 billion

D) $4,108 billion 4108 / 1.12 = ^

Suppose a small economy produces only HD TV sets. In year 1, 100,000 sets are produce and sold at a price of $1,200 each. In year 2, 100,000 sets are produced and sold at a price of $1,000 each. As a result: Question 21 options: A) Nominal GDP and real GDP both decrease B) Nominal GDP decreases, and real GDP decreases even more C) Nominal GDP stays constant, while real GDP decreases D) Nominal GDP decreases, while real GDP stays constant

D) Nominal GDP decreases, while real GDP stays constant

Which of the following is included in the expenditures approach to GDP? Question 11 options: A) Value of stocks and bonds bought by businessmen B) Government spending on welfare payments C) Expenditures on used clothing at garage sales D) Spending on meals by consumers at restaurants

D) Spending on meals by consumers at restaurants