ECON TEST 1: CHAPTER SIX

Calculate the GDP of Dinoland using the expenditures approach given the following data: personal consumption expenditures = $10 billion; gross private domestic investment = $5 billion; government spending = $3 billion; exports = $2 billion, imports = $1 billion.

$19 billion

If C = $1,000, I = $500, G = $800, X = $400, and M = $600, what is the value of GDP?

$2,100

The U.S. nominal gross domestic product is _________ legally produced _________ within a given ________ and valued at __________.

1) all final goods and services 2) within the territorial boundaries of the United States 3) time period 4) the prices at which the goods or services are sold.

Consider the information about the economy of Pakistan. Note that the currency of Pakistan is the rupee. The government purchases: 2.702.70 trillions of rupees.Individuals consume: 9.709.70 trillions of rupees.Individuals save: 5.205.20 trillions of rupees.Businesses invest: 1.601.60 trillions of rupees.Foreigners spend: 0.630.63 trillions of rupees to purchase Pakistani firms.Pakistan imports: 1.901.90 trillions of rupees.Pakistan exports: 1.271.27 trillions of rupees. Calculate Pakistan's GDP. Assume that the values are all current and no conversions need to be made. Give your answer in terms of trillions of rupees, and round to two decimals.13.37

13.37 trillions of rupees

Which of the following is an example of monetary policy? a) A rise in short-term interest rates. b) A new bridge being built by the government. c) A reduction in the federal income tax. d) An increase in Social Security payments.

A

Which of the statements is the best description of a business cycle? a) alternating periods of increasing and decreasing economic output. b) the time it takes a firm to convert raw materials into a final good or service. c) a calendar year divided into four quarters, each containing three months. d) the relationship between the returns on Treasury securities and the time to maturity.

A

Some people believe that the government should guarantee its citizens a basic standard of living by raising the minimum wage, providing housing assistance to the poor, and offering health care coverage to everyone. What type of economist is most likely to favor this view?

A Keynesian economist

Which type of economist would be least supportive of attempts to build a new high-speed railway network by raising taxes on gasoline?

A classical economist

Classify the given goods according to whether or not they would be included in calculating the GDP for the United States. If a country is not specified, assume the action is performed in the United States. A) GM's assembly and sale of cars in Mexico. B) resale of used textbooks to college students. C) sale of wheat to Mrs. Baird's Bakery. D) Honda's assembly and sale of cars in the U.S. E) Ocean Spray purchases plastic to make bottles. F) Old Navy purchases mannequins to display clothes.

A) Not B) Not C) Not D) Included E) Not F) Included

Categorize each item below as a component of Gross Domestic Product (GDP): consumption, investment, government purchases, or net exports. A) A ticket to a local sporting event. B) A 55-cent taco. C) A public school teacher's salary. D) A dollhouse sold abroad. E) A domestically manufactured business computer. F) A domestically manufactured personal computer. G) Ice cream. H) Cab fare for personal use.

A) c B) c C) gp D) ne E) i F) c G) c H) c

At which of the following stages is the unemployment rate likely to be highest? a) At the very beginning of an economic recession. b) At the very start of an economic recovery. c) Midway through an economic recession. d) At the very end of an economic recovery.

B

Which of the following is a macroeconomic issue? a) Alex decides to spend his summer vacation at a science camp. b) South Park experiences an economic boom from increased tourism. c) Kira's Dress Factory decides to hire more workers. d) Jamal's Ice Cream Truck shuts down during the winter due to lack of customers.

B

Suppose Jollyland has a population of 1,000 people and a GDP of $1 million, while Follyland has a population of 8,000 people and a GDP of $8 million. Which country has a higher GDP per capita?

Both countries have the same GDP per capita.

Which of the following services does NOT count towards GDP? A. A doctor treats a patient in a hospital. B. An economics professor educates her students in a classroom. C. You paint your own two-story garage. D. Your real estate agent sells your house for you

C

Which of the following characteristics about Econoville could be determined based on its GDP? a) The fact that incomes are very equally distributed in Econoville. b) The fact that there is virtually no pollution in Econoville. c) The fact that there are no underground or informal markets in Econoville. d) None of the above can be determined based on Econoville's GDP.

D

Suppose that GDP is $50 million in 2015 but falls to $48 million in 2016, and that no changes in personal consumption expenditures, gross private domestic investment, and government spending are recorded. What must have happened to net exports to cause this change?

From 2015 to 2016, the difference between exports and imports must have fallen by $2 million.

In Maricaibo, sanitation engineers are being replaced with garbage robots, which have fewer negative effects and many more significant benefits. However, the labor cost efficiency of garbage robots has driven down the price of collecting garbage so significantly that sanitation engineers can no longer compete. After six months, everybody has switched to the cheaper and better garbage robots. Assume that Maricaibo consumes the same quantity of collecting garbage now as they did six months ago. Please select the choice that best describes the short‑run effects of this industrial change on Maricaibo's GDP and its standard of living.

GDP decreases and standard of living increases.

In what way(s) does GDP per capita not provide an accurate representation of living standards?

GDP per capita does not account for changes in environmental quality. GDP per capita does not account for how people distribute their time between work and leisure. GDP per capita does not measure production that occurs outside of the market economy.

Suppose one has data for the following categories: net interest, government spending, corporate profits, net exports, gross private domestic investment, rental income, and personal consumption expenditures. Which measure of GDP can be calculated?

GDP using the expenditures approach.

Suppose that the stock market rises significantly over the next year, making investors wealthier and more optimistic about the economy while raising the overall level of consumption. Is this increase in consumer confidence a microeconomic or a macroeconomic issue?

Macroeconomic

In an attempt to promote renewable energy, the President and Congress approve an annual rebate to those who install solar panels on their roofs. What type of economic policy would this represent?

Neither fiscal nor monetary policy.

What is the difference between real and nominal gross domestic product (GDP)?

Nominal GDP for a given year is measured in dollars of that year, whereas real GDP is measured in dollars of some base year.

Suppose that Pandastan has a GDP of $5 billion and a population of 2 million, while Tigerstan has a GDP of $3 billion and a population of 1 million. Which country has a higher GDP per capita, and what is that value?

Tigerstan; $3,000

The market value of which of the items would be considered double (or multiple) counting in the calculation of GDP? Please place items into the appropriate category. a) A new skateboard you buy for your niece. b) Wheels used to produce a skateboard that will be sold new. c) A used copy of the Tony Hawk video game. d) A used skateboard you buy for your brother. e) A previously-owned collectors' skateboard. f) The commission paid to the seller of a previously-owned collectors' skateboard. g) A ticket for the X Games bought from a person on a street corner. h) A new building for Tony Hawk Industries.

a) Included b) Not c) Not d) Not e) Not f) Included g) Not h) Included

A good produced in the current time period but put into a firm's inventory instead of being sold

is considered unsold inventory and counted as a part of investment in current GDP.

The GDP deflator measures

price level

Which of the Following is the Best Measure of a Country's Standard of Living?

real GDP per capita

What does the investment component of GDP measure?

spending on goods to be used in future production

Real GDP per capita is NOT an adequate measure of

the well-being of each person in an economy.