MACRO CHAPTER 7

Suppose Harry's Pizza uses $0.25 worth of pizza flour; $0.01 worth of pizza sauce; $0.80 worth of pepperoni, sausage, and spices; and $0.50 worth of mozzarella cheese to make one pizza. If it sells a pizza for $3, then the total value added for one pizza is: $2.80. $1.44. $4.25. $3.50.

$1.44.

If the GDP deflator of a country increased from 100 in 2005 to 150 in 2015 and the nominal GDP of the country in 2015 was $7,000, then the country's real GDP for 2015 in terms of 2005 dollars was approximately equal to: $5,774.50. $4,666.70. $6,245.70. $3,215.60.

$4,666.70.

Cromption Inc. produces motorbike helmets and is a major supplier of helmets in South Watermala. It uses raw materials worth $48,500 and pays wages and salaries worth $58,800. If the total revenue of the firm is $100,000, then the value added by Cromption Inc. to the gross domestic product (GDP) of South Watermala equals: $20,500. $30,800. $40,100. $51,500.

$51,500.

Number 13

13

If the GDP deflator in 2015 was 134.1 and 100 in 2014, the annual rate of inflation in 2015 was: 15.4 percent. 20.3 percent. 34.1 percent. 10 percent.

34.1 percent.

Number 43

43

Number 49

49

Number 8

8

Which of the following transactions is most likely to be included in the U.S. gross domestic product (GDP)? A local bakery buying an extra 100 pounds of butter to bake a 30-pound birthday cake An American doctor who works in Mexico charging a patient for his services The purchases and sales of stocks, bonds, and U.S. securities A stock broker's commission on the sale of U.S. securities

A stock broker's commission on the sale of U.S. securities

Which of the following is most likely to increase Japan's gross domestic product (GDP)? An American firm selling some its shares to a Japanese firm An American firm buying some of the shares of a Japanese firm An American firm outsourcing some of its production facilities to Japan A Japanese firm outsourcing some of its production facilities to China

An American firm outsourcing some of its production facilities to Japan

Which of the following is included in the gross national product of the U.S.? An American photographer receiving a paycheck for exhibiting his photographs in Singapore A Japanese singer receiving a paycheck for performing in a concert in New York An American buying antique furniture from the local garage sale Dell and its partners buying stocks of EMC2

An American photographer receiving a paycheck for exhibiting his photographs in Singapore

Which of the following transactions is most likely to increase the U.S. gross domestic product (GDP)? An American buying a sculpture from Zambia An American selling a pizza to a Mexican in the U.S. An American student receiving a $500 check from a relative An American software firm buying 30 percent of the shares of another American firm

An American selling a pizza to a Mexican in the U.S.

Which of the following is likely to increase a country's gross domestic product (GDP)? An increase in Social Security expenses An increase in retirement and pension benefits to elderly citizens An individual buying a two-year-old automobile at a local garage sale An individual receiving an annual performance bonus of $5,000

An individual receiving an annual performance bonus of $5,000

Which of the following is most likely to have added to the U.S. gross domestic product (GDP) in 2015? The U.S. government giving tax exemptions to the producers of renewable energy The U.S. Federal Reserve selling debt securities to control the money supply Chevrolet's production increasing by 30,000 cars in 2015 Dell and its partners buying EMC2 shares for $67 billion in 2015

Chevrolet's production increasing by 30,000 cars in 2015

Identify the correct statement about net investment. A low rate of net investment or a negative net investment implies a growing economy. Increases in business inventories are not included in net investment. Countries with a large net investment rate will tend to grow more rapidly than those with a low rate of net investment. Net investment excludes net additions to the stock of capital assets and allowances for depreciation of machinery and equipment.

Countries with a large net investment rate will tend to grow more rapidly than those with a low rate of net investment.

Which of the following is included in the calculation of real gross domestic product of an economy? Economic "bads" Illegal activities Final goods and services Leisure and human costs

Final goods and services

Identify the correct equation for the gross national product (GNP) of a nation. GNP = Gross domestic product − Depreciation GNP = National income + Depreciation + Indirect business taxes GNP = National income − Indirect business taxes GNP = National income − Depreciation

GNP = National income + Depreciation + Indirect business taxes

Which of the following is likely to increase the nominal value of the gross domestic product (GDP) of a country? Higher prices An increase in income transfers Higher interest rates An increase in financial transactions

Higher prices

Which of the following is not an example of indirect business taxes? Sales tax Excise tax Income tax Property tax

Income tax

Which of the following is a shortcoming of gross domestic product (GDP) as a measure of current output and income? It does not count the intermediate sale of goods and services produced in an economy. It does not count nonmarket productive activities produced by households in an economy. It does not count the financial transactions and income transfers occurring in an economy. It does not count the purchase and sale of used goods in an economy.

It does not count nonmarket productive activities produced by households in an economy.

Which of the following statements is true of a GDP deflator? It generally provides a slightly higher estimate for the annual rate of inflation than the traditional consumer price index. It generally provides a slightly lower estimate for the annual rate of inflation than the traditional consumer price index. It generally provides a slightly higher estimate for the annual rate of inflation than a chained consumer price index. It generally provides a slightly lower estimate for the annual rate of inflation than a chained consumer price index.

It generally provides a slightly lower estimate for the annual rate of inflation than the traditional consumer price index.

Which of the following is true of government's total expenditure? It is substantially higher than the government's total consumption and investment expenditures. It does not include transfer payments. It is the largest component of the GDP of a country. It does not include the government's expenditure on national defense.

It is substantially higher than the government's total consumption and investment expenditures.

Which of the following is true of a decline in a firm's inventories? It occurs when the firm's sales of goods and services exceed its current production. It occurs when the firm's current production of goods and services exceeds its sales. It results in an increase in the firm's depreciation expenditure. It results in an increase in the firm's inventory investment.

It occurs when the firm's sales of goods and services exceed its current production.

Which of the following is true of the consumer price index (CPI)? It measures the impact of price changes on the market basket of goods bought by households on a monthly basis. It measures the impact of price changes in consumer goods, capital goods, and other goods and services purchased by businesses and governments. It tends to understate the impact of the increase in the general level of prices in an economy. It tends to overstate the impact of the increase in the general level of prices in an economy.

It tends to overstate the impact of the increase in the general level of prices in an economy.

Which of the following is most likely to be included in the gross domestic product (GDP) calculations of a country? Nick buying old furniture from a garage sale in his locality Paulina's mother giving her $50 for watching a movie in a newly opened IMAX theater Kayla buying more grocery items following a declaration by the government of an increase in welfare payments The government of Palladia increasing welfare payments to laid-off workers during the recession of 2005

Kayla buying more grocery items following a declaration by the government of an increase in welfare payments

Identify the correct statement about a country's gross domestic product (GDP). Only final goods and services are counted in a country's GDP. Financial transactions and income transfers are counted in a country's GDP. A country's GDP includes the market value of all domestic assets owned by both nationals and foreigners. A country's GDP includes the value of sales at intermediate stages of production.

Only final goods and services are counted in a country's GDP. Financial transactions and income transfers are counted in a country's GDP.

Identify the correct statement about U.S. exports and imports. Negative U.S. net exports indicate that U.S. consumers spend less on foreign goods than foreign consumers spend on U.S. goods. Exports are subtracted from and imports are added to the gross domestic product because they are measures of domestic production. Positive U.S. net exports indicate that foreign consumers spend more on U.S. goods than U.S. consumers spend on foreign goods. Exports are added to and imports are subtracted from the gross domestic product because they count the output of Americans, whether generated in the U.S. or abroad.

Positive U.S. net exports indicate that foreign consumers spend more on U.S. goods than U.S. consumers spend on foreign goods.

Which of the following is included in the national income of the U.S.? The income earned by an American professional dancer performing in a concert in Toronto The income earned by an American firm from the sale of 100 shares The income earned by an American as a retirement benefit The income earned by an American from the sale of used cars

The income earned by an American professional dancer performing in a concert in Toronto

Which of the following is most likely to be included in the U.S. gross domestic product (GDP)? The income of a Canadian engineer working in the U.S. The earning of an American working abroad The purchase of Chinese raw materials by a U.S. firm for producing another good The purchase of an additional 100 shares of a U.S. firm by another U.S. firm

The income of a Canadian engineer working in the U.S.

Which of the following is included in a country's gross domestic product when it is derived using the resource cost-income approach? Government consumption and gross investment The net income earned by foreigners Personal consumption expenditures Net exports of goods and services

The net income earned by foreigners

Which of the following is true of government purchases? They are counted at their cost to taxpayers. They are counted at their value to the citizens receiving them. They include Social Security payments and other transfer payments. They include only the purchase of long-lasting capital goods.

They are counted at their cost to taxpayers.

Which of the following is true of indirect business taxes? They are cost components that are subtracted from a country's gross domestic product. They increase a firm's cost of production but decrease the cost of a good to consumers. They are always paid to the government by the person on whom they are imposed. They are imposed on the sale of a good.

They are imposed on the sale of a good.

Identify the correct statement about government expenditures. They overstate the value derived from an item when the value of the item to citizens is high relative to the tax cost of providing it. They overstate the value derived from an item when the value of the item to citizens is low relative to the tax cost of providing it. They overstate the value derived from an item because transfer payments are excluded from government expenditures. They understate the value derived from an item because transfer payments are excluded from government expenditures.

They overstate the value derived from an item when the value of the item to citizens is low relative to the tax cost of providing it.

The gross domestic product (GDP) measures the market value of: all final goods and services that flow through a country's factories and shops each year. all financial transactions and income transfers occurring in a country during a year. all intermediate goods and services produced by the nationals of a country during a year. all final goods and services produced by the nationals of a country during a year.

all final goods and services that flow through a country's factories and shops each year.

The prices used to weigh the goods and services included in the gross domestic product reflect: the difference between the market value of the output and the income generated by the resources. both the market value of the output and the income generated by the resources. the rate of growth of the gross domestic product of an economy. the purchasing power of all the consumers in an economy.

both the market value of the output and the income generated by the resources.

Based on the expenditure approach, the major components of gross domestic product (GDP) are: corporate profits, interest income, depreciation, government consumption and gross investment, and net exports to foreigners. personal consumption expenditures, indirect business taxes, depreciation, and net income of foreigners. consumption expenditures, private domestic investment, government consumption and gross investment, and net exports to foreigners. wages and salaries, rents, corporate profits, interest income, indirect business taxes, and depreciation.

consumption expenditures, private domestic investment, government consumption and gross investment, and net exports to foreigners.

Net investment is the: difference between gross investment and depreciation. sum of gross investment and depreciation. ratio of gross investment to depreciation. product of gross investment and depreciation.

difference between gross investment and depreciation.

A decrease in the sales of Lumina Technology's widgets increases its unsold stock of inventory at the end of the year. This is most likely to: increase the firm's contribution to the gross domestic product of the country. decrease the firm's contribution to the gross domestic product of the country. decrease the firm's unplanned inventory investment. keep the firm's contribution to the gross domestic product of the country unchanged.

increase the firm's contribution to the gross domestic product of the country.

The gross domestic product reflects the: sum of all incomes actually received by all the individuals or households in a country during a specific period. market value of all final goods and services produced by the factors of production of a country during a specific period minus depreciation. value of all final goods and services produced by the citizens of a country during a specific period. market value of all final goods and services produced within a country during a specific period.

market value of all final goods and services produced within a country during a specific period.

Current per capita real GDP may be an overstatement of per capita real GDP relative to earlier periods because: more output is now produced in the market sector and less in the household sector. there is reduction in both the time and physical demands of work. there is a substantial increase in the population size of the U.S. economy. more output is now produced by the household sector than by the market.

more output is now produced in the market sector and less in the household sector.

Depreciation is: included in the calculation of gross domestic product using the expenditure approach. not a direct payment to a resource owner. a direct income component of gross domestic product using the resource cost-income approach. not included in the calculation of gross national product.

not a direct payment to a resource owner.

The real gross domestic product of a nation is a measure of the: rate of output expressed at current prices. final goods and services produced by the citizens of the nation. rate of output and the year-to-year changes in the output. intermediate goods and services produced by the citizens of the nation

rate of output and the year-to-year changes in the output.

An increase in the net investment in an economy results in a(n): rightward shift of the economy's production possibility frontier. leftward shift of the economy's production possibility frontier. upward movement along the economy's production possibility frontier. downward movement along the economy's production possibility frontier.

rightward shift of the economy's production possibility frontier.

Corporate profits are earned by: resource owners. stockholders. governments. parties who extend loans to producers.

stockholders.

Net exports are: the sum of total exports and total imports. the difference between total exports and total imports. the product of total exports and total imports. the ratio of total exports to total imports.

the difference between total exports and total imports.

An increase in investment in an economy is most likely to increase the future income of the economy if: the funds invested are channeled into wealth-creating projects. there is an increase in the rate of interest prevailing in the economy. the size of the population increases. there is an increase in the total demand of the economy.

the funds invested are channeled into wealth-creating projects.

The consumer price index (CPI) is designed to measure: the percentage change in the general level of prices from one year to the next. the impact of price changes on the cost of the typical bundle of goods purchased by households. the change in the average price of the market basket of goods included in the gross domestic product. the impact of price changes on the quantities of the typical market basket purchased by households each month.

the impact of price changes on the cost of the typical bundle of goods purchased by households.

The net income of foreigners is equal to: the income foreigners earn in the United States minus the income that Americans earn abroad. the income foreigners earn in the United States minus the income that foreigners earn abroad. the income foreigners earn abroad minus the income that foreigners earn in the United States. the income Americans earn abroad minus the income that foreigners earn in the United States.

the income foreigners earn in the United States minus the income that Americans earn abroad.

National income is: the sum of proprietors' income, rents, corporate profits, and interest minus depreciation. the sum of employee compensation, proprietors' income, rents, corporate profits, and interest Income. the value of all final goods and services produced within the boundaries of a country during a specific period by its citizens. the value of all final goods and services produced within a country during a specific period.

the sum of employee compensation, proprietors' income, rents, corporate profits, and interest Income.

GDP is a measure of the value of the goods and services that were purchased by households, investors, governments, and foreigners during a year. These goods and services are usually purchased because the buyers: value the goods and services more than the purchase price. value the goods and services less than the purchase price. have unlimited wants but limited resources. do not have market power.

value the goods and services more than the purchase price.