Macroeconomics Final

Ryan lives in an apartment where he pays $7,000 a year in rent. Sarah lives in a house that could be rented for $21,000 a year. How much do these housing services contribute to GDP?

$28,000

If total spending rises from one year to the next, then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

Social Security payments are

excluded from GDP because they do not represent current government purchases of goods and services

A statistical discrepancy

exists because data sources are not perfect, so measures of expenditures and income are not equal

Institutions that help to match one person's saving with another person's investment are collectively called the

financial system.

Grapes are considered intermediate goods

if the purchaser uses them to make wine to sell others but not if the purchaser eats them.

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is

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

U.S. GDP

includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries.

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

income falls and expenditure rises.

Which of the following is a good gauge of economic progress?

the growth rate of real GDP per person, but not the level of real GDP per person

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between

the income and expenditure approaches to the calculation of GDP.

Estimates of the values of which of the following non-market goods or services are included in GDP?

the rental value of owner-occupied homes but NOT UNPAID housework

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

their investments are being financed by someone else's saving

GDP is defined as the

value of all final goods and services produced within a country in a given period of time

Real GDP will increase

when prices increase or output increases

A U.S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these cars are sold in Mexico and the other $2.5 million are sold in the U.S. In both cases $1 million of the value of the cars was due to U.S-owned equipment located in Mexico and U.S. managers working in Mexico. How much did this production contribute to U.S. GDP?

$0

If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?

$10 trillion

In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015?

$1450

A farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. How much of the farmer's sales will be included as apples in GDP?

$25,000

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.

42. Which of the following is included in GDP?

42. A. marijuana purchased legally in Colorado.

Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result,

A. Consumer surplus increases for consumers of coats in Iceland.

Gross domestic product measures

A. Income and expenditures.

In the GDP accounts production equals

A. income

GDP is equal to

All of the above are correct; C + I + G + NX, Y., and the market value of all final goods and services produced within a country in a given period of time.

Which of the following is included in the investment component of GDP?

All of the above are correct; households' purchases of newly constructed homes, net additions to firms' inventories, & firms' purchases of capital equipment.

Which of the following is included in the consumption component of GDP?

All of the above are included in the consumption component of GDP; household purchases of appliances, household purchases of medical care, & household purchases of food.

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

B. Exporting almonds and the price per pound in Uruguay increased to $4.50.

Suppose Russia exports sunflower seeds to Ireland and imports coffee from Brazil. This situation suggests

B. Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantage over Russia in producing coffee.

With which of the Ten Principles of Economics is the study of international trade most closely connected?

B. Trade can make everyone better off

In the actual economy, households

B. divide their income among spending, taxes, and saving.

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

B. producer surplus increases and total surplus decreases in the market for that good.

Which of the following is included in GDP?

BOTH the market value of rental housing services and the market value of owner-occupied housing services

Table 23-1 The table below contains data for Chereaux for the year 2015. GDP $200 Income earned by citizens abroad $9 Income foreigners earn here $5 Losses from depreciation $6 Indirect business taxes $10 Statistical discrepancy $0 Retained earnings $8 Corporate income taxes $12 Social insurance contributions $30 Interest paid to households by government $8 Transfer payments to households from government $55 Personal taxes $60 Nontax payments to government $11 Refer to Table 23-1. The market value of all final goods and services produced within Chereaux in 2015 is

C. $200

Trade among nations is ultimately based on:

C. Comparative advantage

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

C. gross domestic product

For an economy as a whole,

C. income must equal expenditure.

If a country is an exporter of a good, then it must be the case that

C. the world price is greater than its domestic price.

Trade enhances the economic well-being of a nation in the sense that

C. trade results in an increase in total surplus.

When a nation first begins to trade with other countries and the nation becomes an exporter of soybeans,

D. All of the above are correct; this is an indication that the world price of soybeans exceeds the nation's domestic price of soybeans in the absence of trade, this is an indication that the nation has a comparative advantage in producing soybeans, & the nation's consumers of soybeans become worse off and the nation's producers of soybeans become better off.

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

D. All of the above are correct; pay wages to workers, pay rent to landlords, and pay profit to the firms' owners

Which of the following tools and concepts is useful in the analysis of international trade?

D. All of the above; total surplus, domestic supply, and equilibrium price

The basic tools of supply and demand are

D. Central to macroeconomic analysis as well as to microeconomic analysis.

Which of the following headlines is more closely related to what microeconomists study than to what macroeconomists study?

D. The price of gasoline rises due to rising oil prices.

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

D. intermediate goods.

Which of the following is a correct way to measure productivity?

Divide the quantity of output by the number of hours worked

If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes

EXACTLY one-third as much to GDP as does a dress

U.S. GDP and U.S. GNP are related as follows:

GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.

A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer's inventory. How much is added to GDP?

Janet's purchase but not ABC Bakery's purchase.

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.

Which of the following is correct?

Nominal GDP equals real GDP in the base year.

Which of the following is not included in the investment component of GDP?

None of the above are included in the investment component of GDP

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?

Only Joe's and Jim's grocery store purchases are included in GDP.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

Productivity

Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house for $260,000. Which of the following statements is correct regarding the sale of the house?

The 2014 sale affected neither 2014 GDP nor 2011 GDP.

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

The government's tax revenue is equal to its expenditures.

Which of the following is a good measure of economic prosperity?

The level of real GDP

Which of the following is included in Singapore's GDP?

The value of production by an American working in Singapore

The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct?

The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP.

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs

These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower.

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,

U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

U.S. investment and GDP increase, but German GDP is unaffected.

If foreign citizens earn less income in the U.S. than U.S. citizens earn in foreign countries,

U.S. net factor payments from abroad are positive, and its GNP is larger than its GDP.

Rachel cuts her sister's hair for free. When she cuts the hair of her customers in her shop, she charges $10. When is Rachel's haircutting included in GDP?

When she cuts her customers' hair, but not her sister's.

The identity that shows that total income and total expenditure are equal is

Y = C + I + G + NX.

In the equation Y = C + I + G + NX,

Y represents the economy's total expenditure.

A form of government spending that is not made in exchange for a currently produced good or service is called

a transfer payment.

Which of the following is a way to compute GDP?

add up the market values of all final goods and services

Which of the following is included in GDP? (r h)

both the market value of rental housing services and the market value of owner-occupied housing services (r h)

Household spending on education is counted in which component or subcomponent of GDP?

consumption of services

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

increased measured GDP by the value of the restaurant meals

The value of goods added to a firm's inventory in a certain year is treated as

investment, since GDP aims to measure the value of the economy's production that year.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

market prices.

The primary economic function of the financial system is to

match one person's saving with another person's investment.

A closed economy does not engage in international trade, therefore

net exports (NX) are zero.

Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used car dealership or the purchase of an antique rocking chair by a person at a yard sale, are

not included in current GDP because GDP only measures the value of goods and services produced in the current year.

National income differs from net national product because

of a statistical discrepancy.

The inflation rate is the

percentage change in the price level from one period to another

Nominal GDP will definitely increase when

prices increase and output increases.

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

raises GDP

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study

real GDP

Tom is an organic gardener. For several years, he produced only for his own consumption, but this year he has sold his vegetables at a farmer's market. The vegetables Tom produces

​are included in GDP for this year, but prior to this year the value of his vegetables was not included in GDP.