Econ exam 1

Intermediate goods are excluded from GDP because? a) their inclusion would involve double counting. b)they represent goods that have never been purchased so they cannot be counted. c)their inclusion would understate GDP. d)they are not good enough to be counted in the GDP

a) their inclusion would involve double counting.

The price index was 105 in Year 1 and 108 in Year 2. What was the inflation rate? a)2.9 percent b)0.029 percent c)-2.9 percent d)102.9 percent

a)2.9 percent

Changes in the GDP deflator reflect a)only changes in prices. b)only changes in the amounts being produced. c)both changes in prices and changes in the amounts being produced. d)neither changes in prices nor changes in the amounts being produced.

a)only changes in prices.

Katherine, a French citizen, works only in the United States. The value of the output she produces is a)included in both U.S. GDP and U.S. GNP. b)included in U.S. GDP, but it is not included in U.S. GNP. c)included in U.S. GNP, but it is not included in U.S. GDP. d)included in neither U.S. GDP nor U.S. GNP.

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

The percentage change in the price level from one period to another is called the a)growth rate. b)inflation rate. c) GDP deflator. d)unemployment rate.

b)inflation rate.

The term economists use to describe a situation in which the economy's overall price level is rising is a)growth. b)inflation. c)recession. d)expansion.

b)inflation.

Gross Domestic Product a)includes all the goods and none of the services produced in a country in a given time period. b)measures the value of the production of final goods and services in a country during a given time period. c)is generally less than government spending in any time period. d)measures only the value of labor payments generated in an economy in a given time period.

b)measures the value of the production of final goods and services in a country during a given time period.

The CPI is calculated a)weekly. b)monthly. c)quarterly. d)yearly.

b)monthly.

Changes in real GDP reflect a)only changes in prices. b)only changes in the amounts being produced. c)both changes in prices and changes in the amounts being produced. d)neither changes in prices nor changes in the amounts being produced.

b)only changes in the amounts being produced.

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the a)CPI is easier to measure. b)CPI includes more goods and services that the GDP deflator does. c)CPI better reflects the goods and services bought by consumers. d)GDP deflator cannot be used to gauge inflation.

c)CPI better reflects the goods and services bought by consumers.

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption? a)Spending on education b)The purchase of stocks and bonds c)The purchase of a new house d)The purchase of durable goods such as stoves and washing machines

c)The purchase of a new house

For an economy as a whole a)wages must equal profit. b)consumption must equal income. c)income must equal expenditure. d)consumption must equal saving.

c)income must equal expenditure.

The CPI differs from the GDP deflator in that a)the CPI is a price index, while the GDP deflator is an inflation index. b)substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. c)increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator. d)increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.

c)increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.

In a simple circular-flow diagram, total income and total expenditure are? a)never equal because total income always exceeds total expenditure. b)seldom equal because of the ongoing changes in an economy's unemployment rate. c)equal only when the government purchases no goods or services. d)always equal because every transaction has a buyer and a seller.

d)always equal because every transaction has a buyer and a seller.

A farmer produces carrots and sells them to Fresh Juice, which makes carrot juice. The carrots produced by the farmer are called? a)inventory goods. b)transitory goods. c)final goods. d)intermediate goods.

d)intermediate goods.

The consumer price index is used to a)monitor changes in the level of wholesale prices in the economy. b)monitor changes in the cost of living over time. c)monitor changes in the level of real GDP over time. d)monitor changes in the stock market.

monitor changes in the cost of living over time

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 237 for 2015. President Hoover's 1931 salary was equivalent to a 2015 salary of about a)$4,965. b)$1,169,408. c)$1,057,894. d)$16,080,001.

b)$1,169,408.

Price index was 130 in Year 2, and the inflation rate was 14.0 percent between Year 1 and Year 2. The price index in Year 1 was a)116.0. b)114.0. c)13.0. d)65.0.

b)114.0.

If the total wages in Russia are 10 million dollars, rental income is 5 million dollars, and business profits are 20 million dollars, what is the GDP of Russia? a)30 million b)35 million c)15 million d)Russia does not have GDP, it's too cool for that.

b)35 million

Daniel, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in a)both Mexico's GDP and U.S. GDP. b)Mexico's GDP, but it is not included in U.S. GDP. c)U.S. GDP, but it is not included in Mexico's GDP. d)neither Mexico's GDP nor U.S. GDP.

b)Mexico's GDP, but it is not included in U.S. GDP.

You calculate the inflation rate for year 2020 and find a negative number. The negative number means that a)You did something wrong in the calculation process b)Negative inflation simply means that prices decrease, or there is deflation

b)Negative inflation simply means that prices decrease, or there is deflation

An increase in the price of bread produced domestically will be reflected in a)both the GDP deflator and the consumer price index. b)neither the GDP deflator nor the consumer price index. c)the GDP deflator but not in the consumer price index. d)the consumer price index but not in the GDP deflator.

a)both the GDP deflator and the consumer price index.

When the consumer price index rises, the typical family a)has to spend more dollars to maintain the same standard of living. b)can spend fewer dollars to maintain the same standard of living. c)finds that its standard of living is not affecte d) can offset the effects of rising prices by saving more.

a)has to spend more dollars to maintain the same standard of living.

Disposable personal income is the income that a)households have left after paying taxes and non-tax payments to the government. b)businesses have left after paying taxes and non-tax payments to the government. c)households and noncorporate businesses have left after paying taxes and non-tax payments to the government.

a)households have left after paying taxes and non-tax payments to the government.

A country reported nominal GDP of $35 billion in 2016 and $55 billion in 2015. It also reported a GDP deflator of 105 in 2016 and 115 in 2015. Between 2015 and 2016, a)real output and the price level both fell. b)real output fell and the price level rose. c)real output rose and the price level fell. d)real output and the price level both rose.

a)real output and the price level both fell.

Jane and Ben purchase avocados at a grocery store, but Ben also grows avocados in his backyarRegarding these two practices, which of the following statements is correct? a)Only Jane's grocery store purchases are included in GDP. b)Only Jane's and Ben's grocery store purchases are included in GDP. c)Jane's and Ben's grocery store purchases are included in GDP. The avocados from Ben's backyard garden are included at their market value. d)Jane's and Ben's grocery store purchases are included in GDP. The avocados from Ben's backyard garden are included at their market value, if Ben provides this information.

b)Only Jane's and Ben's grocery store purchases are included in GDP.

What basket of goods and services is used to construct the CPI? a)A random sample of all goods and services produced in the economy b)The goods and services that are typically bought by consumers as determined by government surveys c)Only food, clothing, transportation, entertainment, and education d)The least expensive and the most expensive goods and services in each major category of consumer expenditures

b)The goods and services that are typically bought by consumers as determined by government surveys

If the consumer price index was 93 in Year 1, 97 in Year 2, and 100 in Year 3, then the base year must be a)Year 2. b)Year 3. c)Year 1. d)the base year cannot be determined from the given information.

b)Year 3.

Real GDP is the yearly production of final goods and services valued at a)current prices. b)constant prices. c)expected future prices. d)the ratio of current prices to constant prices.

b)constant prices

Because every transaction has a buyer and a seller a)GDP is more closely associated with an economy's income than it is with an economy's expenditure. b)every transaction contributes equally to an economy's income and to its expenditure. c)the number of firms must be equal to the number of households in a simple circular-flow diagram. d)firms' profits are necessarily zero in a simple circular-flow diagram.

b)every transaction contributes equally to an economy's income and to its expenditure.

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: a)Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. b)Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. c) Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. d)Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

c) Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

If in some year nominal GDP was $40 billion and the GDP deflator was 70, what was real GDP? a)$110.0 billion b)$175.0 billion c)$57.1 billion d)$30.0 billion

c)$57.1 billion

If consumption expenditures are $480 million, investment is $100 million, imports are $50 million, exports are $55 million, government spending is $210 million, and government transfer payments are $20 million, then GDP a)$845 million b)$805 million c)$795 million d)$825 million

c)$795 million

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that a)the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year. b)the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year. c)neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year. d)neither the price of pretzels nor the price of cookies changes from year to year.

c)neither the number of pretzels nor the number of cookies bought by the typical

The GDP deflator is the ratio of a)real GDP to nominal GDP multiplied by 100. B)real GDP to the inflation rate multiplied by 100. c)nominal GDP to real GDP multiplied by 100. d)nominal GDP to the inflation rate multiplied by 100.

c)nominal GDP to real GDP multiplied by 100.

A recession has traditionally been defined as a period during which a)nominal GDP declines for two consecutive quarters. b)nominal GDP declines for four consecutive quarters. c)real GDP declines for two consecutive quarters. d)real GDP declines for four consecutive quarters.

c)real GDP declines for two consecutive quarters.

Two common measures of the overall level of prices are a)the inflation rate and the consumer price index. b)the inflation rate and the GDP deflator. c)the GDP deflator and the consumer price index. d)the cost of living index and nominal GDP.

c)the GDP deflator and the consumer price index.

Most goods and services produced at home a)and most goods and services produced illegally are included in GDP. b)are included in GDP while most goods and services produced illegally are excluded from GDP. c)are excluded from GDP while most goods and services produced illegally are included in GDP d)and most goods and services produced illegally are excluded from GDP.

d)and most goods and services produced illegally are excluded from GDP.

The cost of a full DVD collection with your favorite show, Futurama, five years ago was $100. After spring cleaning your house, you decided to get rid of it as it takes up a lot of space. You sold the full collection to someone through Facebook Marketplace in 2020. How does this transaction contribute to GDP? a)as investment b)as consumption c)as government purchases d)this does not count as part of GDP

d)this does not count as part of GDP