Module 4 Test

Answer the question on the basis of the following data. All figures are in billions of dollars: Refer to the data. NDP (net domestic product) is: $15 $90 20

$116.

Answer the question on the basis of the following data. All figures are in billions of dollars: Refer to the data. GDP is:

$121

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Refer to the data. If year 2 is chosen for the base year, in year 3 nominal GDP and real GDP, respectively, are:

$180 and $120.

If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is:

$320 billion.

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is:

$360 billion.

Use the following table for a hypothetical single-product economy. Refer to the data. Nominal GDP in year 3 is:

$450.

Answer the question on the basis of the following information: In the economy above, real GDP for year 3 is:

$480.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. Refer to the data. Real GDP for year 5 is:

$64.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Refer to the data. If year 2 is chosen as the base year, real GDP for year 1 is:

$80.

Use the following table for a hypothetical single-product economy. Refer to the data. Nominal GDP in year 4 is:

$800.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Refer to the data. If year 2 is chosen as the base year, in years 1 and 3 the price index values, respectively, are:

100 and 150.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Refer to the data. The nominal GDP for year 3 is:

125 percent higher than the nominal GDP for year 1.

Use the following table for a hypothetical single-product economy. Refer to the data. Real GDP in year 3 is:

150

If nominal GDP in some year is $280 and real GDP is $160, then the GDP price index for that year is:

175.

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: Refer to the table. The level of productivity in the economy is: 200 400

2.

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

22 percent.

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is:

3 percent.

Suppose the nominal annual interest rate on a two-year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years. The annual real rate of interest is:

3 percent.

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is:

300.

Which one of the following would not shift the aggregate demand curve?

A change in the price level.

Which of the following would most likely shift the aggregate demand curve to the right?

An increase in stock prices that increases consumer wealth.

Real GDP refers to:

GDP data that have been adjusted for changes in the price level.

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:

GDP in 2010 is $500 billion.

In which of the following cases would real income rise?

Nominal income rises by 2 percent and the price level remains unchanged.

Suppose Smith pays $100 to Jones.

We need more information to determine whether GDP has changed.

A price index is:

a comparison of the current price of a market basket to a fixed point of reference.

If the dollar appreciates relative to foreign currencies, we would expect:

a country's net exports to fall.

A large negative GDP gap implies:

a high rate of unemployment.

Cost-push inflation may be caused by:

a negative supply shock.

The GDP gap measures the difference between:

actual GDP and potential GDP.

In the treatment of U.S. exports and imports, national income accountants:

add exports, but subtract imports, in calculating GDP.

If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would expect:

aggregate demand to decrease and aggregate supply to increase.

As disposable income goes up, the:

average propensity to consume falls.

A nation's gross domestic product (GDP):

can be found by summing C + Ig + G + Xn.

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information, we:

cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.

The largest component of total expenditures in the United States is:

consumption.

Inflation initiated by increases in wages or other resource prices is labeled:

cost-push inflation.

Rising per-unit production costs are most directly associated with:

cost-push inflation.

Real GDP measures:

current output at base year prices.

A decline in disposable income:

decreases consumption by moving downward along a specific consumption schedule.

If the United States wants to increase its net exports in the short term, it might take steps to:

depreciate the dollar compared to foreign currencies.

Other things equal, a serious recession in the economies of U.S. trading partners will:

depress real output and employment in the U.S. economy.

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

determinants of aggregate demand.

The relationship between the size of the negative GDP gap and the unemployment rate is:

direct.

The economy's long-run AS curve assumes that wages and other resource prices:

eventually rise and fall to match upward or downward changes in the price level.

Transfer payments are:

excluded when calculating GDP because they do not reflect current production.

The determinants of aggregate demand:

explain shifts in the aggregate demand curve.

Prices and wages tend to be:

flexible upward, but inflexible downward.

Final goods and services refer to:

goods and services purchased by ultimate users, rather than for resale or further processing.

Government purchases include government spending on:

government consumption goods and public capital goods.

Gross domestic product (GDP) measures and reports output:

in dollar amounts and percentage growth.

Other things equal, a reduction in personal and business taxes can be expected to:

increase both aggregate demand and aggregate supply.

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to:

increase domestic output and employment.

A rightward shift of the AD curve in the very flat part of the short-run AS curve will:

increase real output by more than the price level.

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP:

increased by $60 billion.

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

inflated to $1,080 billion.

In 2012, Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November 2012. The bicycle was sold to E.Z. Ryder in March 2013. This bicycle is counted as:

investment in 2012 and as negative investment in 2013.

Unlike demand-pull inflation, cost-push inflation:

is self-limiting.

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time.

An exchange rate:

is the price that the currencies of any two nations exchange for one another.

The economy's long-run aggregate supply curve:

is vertical.

A decline in investment will shift the AD curve to the:

left by a multiple of the change in investment.

GDP is the:

monetary value of all final goods and services produced within the borders of a nation in a particular year.

Cost-push inflation:

moves the economy inward from its production possibilities curve.

The system that measures the economy's overall performance is formally known as:

national income accounting.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. Refer to the data. For the years shown, the growth of:

nominal GDP accurately reflects changes in real output.

If real disposable income fell during a particular year, we can conclude that:

none of these necessarily occurred.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:

not counted.

By summing the dollar value of all market transactions in the economy, we would:

obtain a sum substantially larger than the GDP.

Demand-pull inflation:

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

Demand-pull inflation:

occurs when total spending in the economy is excessive.

The ZZZ Corporation issued $25 million in new common stock in 2013. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment:

of $18 million has occurred.

National income accountants can avoid multiple counting by:

only counting final goods.

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium:

output would necessarily rise.

The aggregate supply curve (short run) is upsloping because:

per-unit production costs rise as the economy moves toward and beyond its full-employment real output.

A rightward shift in the aggregate supply curve is best explained by an increase in:

productivity.

In national income accounting, government purchases include:

purchases by federal, state, and local governments.

If nominal GDP rises:

real GDP may either rise or fall.

Productivity measures:

real output per unit of input.

An increase in input productivity will:

reduce the equilibrium price level, assuming downward flexible prices.

Cost-push inflation:

reduces real output.

Answer the question on the basis of the following information: The economy above has experienced a:

rising real GDP.

In 2010, Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. We can conclude that Tatum's real income:

rose by approximately 3 percent.

An increase in investment spending caused by higher expected rates of return will:

shift the aggregate expenditures curve upward and the aggregate demand curve to the right.

The aggregate supply curve:

shows the various amounts of real output that businesses will produce at each price level.

Suppose that nominal wages fall and productivity rises in a particular economy. Other things equal, the aggregate:

supply curve will shift rightward.

Nominal GDP is adjusted for price changes through the use of:

the GDP price index.

If intermediate goods and services were included in GDP:

the GDP would be overstated.

If actual GDP is less than potential GDP:

the actual unemployment rate will be higher than the natural unemployment rate.

The most important determinant of consumer spending is:

the level of income.

Real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

The real interest rate is:

the percentage increase in purchasing power that the lender receives on a loan.

If aggregate demand decreases, and as a result, real output and employment decline but the price level remains unchanged, it is most likely that:

the price level is inflexible downward and a recession has occurred.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

the price level may change over time.

In the second quarter (three-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that:

the price level rose by more than nominal GDP.

If the economy adds to its inventory of goods during some year:

this amount should be included in calculating that year's GDP.

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of:

wage contracts.

Other things equal, if the real interest rate falls and business taxes rise:

we will be uncertain as to the resulting change in investment.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. Refer to the data. In determining real GDP, the nominal GDP for:

years 1 and 2 must be inflated.