ECON 320 Chapter 2

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was: $9.50. $5. $6.50. $11.

$6.50.

The market value of all final goods and services produced within an economy in a given period of time is called: general durable purchases. gross domestic product. industrial production. the GDP deflator.

gross domestic product.

An example of an imputed value in the GDP is the: value-added of meals cooked at home. services of automobiles to their owners. housing services enjoyed by homeowners. value of illegal drugs sold.

housing services enjoyed by homeowners.

Which of the following is a flow variable? income the number unemployed government debt wealth

income

GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad. minus; plus plus; minus minus; minus plus; plus

minus; plus

The panel of economists appointed by the Senate Finance Committee estimated that the CPI ______ inflation by approximately ______ percentage point(s) per year. overestimates; 1 underestimates; 10 overestimates; 10 underestimates; 1

overestimates; 1

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP: includes the value of government transfer payments. excludes the value of goods and services exported aboard. adjusts the value of goods and services produced for changes in the foreign exchange rate. measures changes in the quantity of goods and services produced by holding prices constant.

measures changes in the quantity of goods and services produced by holding prices constant.

An increase in the price of imported goods will show up in: the GDP deflator but not in the CPI. both the CPI and the GDP deflator. the CPI but not in the GDP deflator. neither the CPI nor the GDP deflator.

the CPI but not in the GDP deflator.

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is: Fisher's ideal index. the GDP deflator. a Paasche index. the CPI.

the CPI.

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ______ percent. 7.9 9.4 7.4 4.9

7.4

When a firm sells a product out of inventory, investment expenditures ______ and consumption expenditures ______. increase; decrease decrease; remain unchanged decrease; increase remain unchanged; increase

decrease; increase

In 2013, the GDP of the United States totaled about: $16.8 trillion. $168 trillion. $168 billion. $16.8 billion.

$16.8 trillion.

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then government purchases are: $1,910. $2,977. -$843. $1,067.

$2,977.

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is: 0.80. 1. 1.25. 0.75.

1.25.

If the number of employed increases while the number of unemployed does not change, the unemployment rate: will increase. will not change. may either increase or decrease. will decrease.

will decrease.

In the national income accounts, the purchase of durables, nondurables, and services by households are classified as: government purchases. consumption. investment. net exports.

consumption.

All of the following are measures of GDP except the total: expenditures of all businesses in the economy. income from all production in the economy. value of all final production. expenditures on all final goods and services produced.

expenditures of all businesses in the economy.

An estimate of the number of unemployed workers in the economy can be obtained from: from the household survey, but not from the establishment survey. both the household and establishment surveys. from the establishment survey, but not from the household survey. from neither the household nor the establishment surveys.

from the household survey, but not from the establishment survey.

When bread is baked but put away for later sale, this is called: saving. waste. fixed investment. investment in inventory.

investment in inventory.

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. If GDP were changed so that it truly measured the sum of all final economic activity, the marriage would: leave GDP unchanged. increase GDP. first decrease and then increase GDP. decrease GDP.

leave GDP unchanged.