Exam 2 Flash Cards

U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.

A German citizen buys an automobile produced in the United States by a Japanese company. As a result,

consumption and imports

A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for?

$0

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?

real output and the price level both rose.

A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,

real output fell and the price level rose.

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010,

10.0%.

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate?

$65,000

A dairy buys $50,000 worth of milk and spend $5,000 on cartons and utilities. It sells the cartons of milk to a grocery store for $60,000 that then sells all of the cartons to consumers for $65,000. How much do these actions add to GDP?

$25,000

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?

$21.50

A farmer sells five pounds of pecans to a Smith's Fresh Pecans for $10. Smith's Fresh Pecans resells three pounds for $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP?

decreased.

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

$1200

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP?

raises GDP.

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

the value of the good is added to the investment category of 2014 GDP, added to the consumption category of 2015 GDP, and subtracted from the investment category of 2015 GDP.

A stove is produced by a firm in 2014, added to the firm's inventory in 2014, and sold to a household in 2015. It follows that

$17,000

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?

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

A transfer payment is

can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production.

According to the circular-flow diagram GDP

can be computed as the total income paid by firms or as expenditures on final goods and services.

According to the circular-flow diagram GDP

$4 million

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just described contribute how much to GDP?

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

All of the above are included in the consumption component of GDP.

The value of the goods and services produced by the restaurant is included in French GDP, but not in U.S. GDP.

An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?

$65,625

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

the increase in the price of rice.

Assume that consumers consider rice and potatoes to be substitutes, so that when the price of rice rises, consumers purchase less rice and more potatoes. When the CPI is computed following the increase in the price of rice, it takes into account

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

Because every transaction has a buyer and a seller,

only changes in the amounts being produced.

Changes in real GDP reflect

the consumer price index.

Changes in the producer price index are often thought to be useful in predicting changes in

GDP will fall if Jennifer marries Thomas but not if she marries Darin.

Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they use to sell her. Which of the following statements is consistent with the way GDP is computed?

households and noncorporate businesses have left after paying taxes and non-tax payments to the government.

Disposable personal income is the income that

the economy's overall price level is rising.

Economists use the term inflation to describe a situation in which

$9 million

Fine Edge manufactures lawn mowers. In 2014 it had $2 million worth of lawn mowers in inventory. In 2015 it sold $10 million worth of lawn mowers to consumers and had $1 million worth of lawn mowers in inventory. How much did the lawn mowers produced by Fine Edge add to GDP in 2015?

given year divided by the price of the basket in the base year, then multiplied by 100.

For any given year, the CPI is the price of the basket of goods and services in the

capital equipment, inventories, and structures, including household purchases of new housing.

For the purpose of calculating GDP, investment is spending on

U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount.

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being.

GDP

measuring them is so difficult.

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because

federal, state, and local governments.

Government purchases include spending on goods and services by

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

Grapes are considered intermediate goods

market prices.

Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of

Which of the following is not a correct statement about the growth of real GDP in the U.S. economy?

Growth was steady between 1965 and 2009.

CPI in 2015 - 2014 / 2014 x 100

If 2010 is the base year, then the inflation rate in 2015 equals

U.S. net exports decrease and U.S. GDP is unaffected.

If a U.S. citizen buys a television made in Korea by a Korean firm, then

U.S. imports but not U.S. exports increase.

If a U.S. company buys an electrical generator made in Japan by a Japanese firm, and the Japanese firm uses the payment to buy stocks issued by a U.S. company then

income and expenditure both rise.

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

250.

If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator?

87.5.

If in some year nominal GDP was $28 trillion and real GDP was $32 trillion, what was the GDP deflator?

$17 billion.

If in some year real GDP was $25 billion and the GDP deflator was 68, what was nominal GDP?

9.5 percent.

If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the inflation rate is

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.

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

the economy is producing a smaller output of goods and services, and goods and services are selling at lower prices.

If total spending rises from one year to the next, then which of the following could not be true?

$25,511

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?

$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

$4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising oil prices.

In 1979 and 1980,

$50,000

In 2012, GDP per person in the United States was almost

$15 trillion.

In 2012, U.S. GDP was almost

negative and about 3.5 percent the size of GDP.

In 2012, U.S. net exports were

$8 million

In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014?

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

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

$2.50

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

the costs of the remodeling materials and the increase in rent, but not the price of the house

In early 2010 Molly paid $200,000 for a house built in 2000. She spent $30,000 on new materials to remodel the house. Although Molly lived in the house after she remodeled it, its rental value rose. Which of the following contributed to real GDP in 2010?

market prices.

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

100.

In the base year, the GDP deflator is always

$1500

In the economy of Talikastan in 2015, consumption was $3000, GDP was $5500, government purchases were $1000, imports were $1000, and investment was $1000. What were Talikastan's exports in 2015?

$3200

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015?

$700

In the economy of Talikastan in 2015, consumption was $3000, exports were $400, GDP was $5000, imports were $500, and investment was $1400. What were Talikastan's government purchases in 2015?

$1900

In the economy of Talikastan in 2015, consumption was $4000, exports were $800, GDP was $7500, imports were $200, and investment was $1000. What were Talikastan's government purchases in 2015?

$300

In the economy of Talikastan in 2015, consumption was $5300, GDP was $8800, government purchases were $1800, imports were $600, and investment was $2000. What were Talikastan's exports in 2015?

$2400

In the economy of Talikastan in 2015, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $1800, and imports were $1200. What was Talikastan's investment in 2015?

$1520

In the economy of Talikastan in 2015, consumption was 75% of GDP, government purchases were $200, imports were $50 and 125% of the value of exports, investment was one-sixth of the value of consumption. What was Talikastan's GDP in 2015?

$13,500

In the economy of Talikastan in 2015, consumption was two-thirds of GDP, government purchases were $1000 more than investment, investment was one-ninth of GDP, and the value of exports exceeded the value of imports by $500. What was Talikastan's GDP in 2015?

$1370

In the economy of Talikastan in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was Talikastan's consumption in 2015?

Y represents the economy's total expenditure.

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

"consumption of fixed capital."

In the national income accounts, depreciation is called

The 2014 sale affected neither 2014 GDP nor 2011 GDP.

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?

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

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

U.S. consumption purchases increase by $200 and U.S. GDP increases by $200.

Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S. The end result of these two transactions is

long-run growth and short-run fluctuations in real GDP.

Much of macroeconomics attempts to explain

the total income earned by a nation's permanent residents in the production of goods and services.

National income is defined as

Y - (C + I + G).

Net exports equal

Atlantis, Bensalem, Merpois

On the basis of the information presented in the table below, which presents the correct ordering of real GDP per person from highest to lowest?

$25 million

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2008, Quality Motors produced $25 million worth of automobiles and sold $12 million in the U.S. and $13 million in Mexico. In addition, it sold $2 million from the previous year's inventory in the U.S. The transactions just described contribute how much to U.S. GDP for 2008?

take the Charlieville job.

Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

Bolivia, Thailand, Sweden, United States.

Rank the countries from highest to lowest based on underground economic activity as a percentage of GDP.

constant prices.

Real GDP is the yearly production of final goods and services valued at

only when output increases.

Real GDP will increase

$204.

Refer to Table 23-1. Gross national product for Chereaux in 2015 is

$201.

Refer to Table 23-1. Personal income for Chereaux in 2015 is

2016

Refer to Table 23-10. In which year was this country's real GDP highest?

$3311

Refer to Table 23-2. What was country A's consumption in 2010? Household purchases of durable goods $1293 Household purchases of nondurable goods $1717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120

$1975

Refer to Table 23-2. What were country A's government purchases in 2010?

$2315

Refer to Table 23-3. What was Crete's consumption in 2010?

$1491

Refer to Table 23-3. What was Crete's investment in 2010?

$1491

Refer to Table 23-3. What was Crete's investment in 2010? Total income $5731 Household purchases of durable goods $1108 Household purchases of nondurable goods $702 Household purchases of non-education services $203 Household purchases of education services $302 Household purchases of new housing $816 Purchases of capital equipment $333 Inventory changes $75 Purchases of new structures $267 Depreciation $401 Local government spending on goods and services $236 State government spending on goods and services $419 Federal government spending on goods and services $1182 Transfer payments $707 Foreign purchases of domestically produced goods $217 Domestic purchases of foreign goods $129

$1130

Refer to Table 23-3. What were Crete's government purchases in 2010?

​$1130

Refer to Table 23-3. What were Crete's government purchases in 2010? Total income $5731 Household purchases of durable goods $1108 Household purchases of nondurable goods $702 Household purchases of non-education services $203 Household purchases of education services $302 Household purchases of new housing $816 Purchases of capital equipment $333 Inventory changes $75 Purchases of new structures $267 Depreciation $401 Local government spending on goods and services $236 State government spending on goods and services $419 Federal government spending on goods and services $1182 Transfer payments $707 Foreign purchases of domestically produced goods $217 Domestic purchases of foreign goods $129

real GDP was $1080, and the GDP deflator was 177.8.

Refer to Table 23-5. In 2018, this country's

15.4% from 2016 to 2017.

Refer to Table 23-5. This country's output grew

29.0%.

Refer to Table 23-6. From 2012 to 2013, this country's output grew

$260.

Refer to Table 23-6. In 2010, this country's nominal GDP was

$760.

Refer to Table 23-6. In 2011, this country's real GDP was

This economy experienced growth from 1975 to 1976.

Refer to Table 23-7. Which of the following is not correct?

$191.50, and real GDP is $170.

Refer to Table 23-8. In 2012, nominal GDP is

in German GDP, but is not included in U.S. GDP.

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included

Sophia will have 5 percent more money, which will purchase 3 percent more goods.

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

If the CPI is 156.25 in 2007, then 2005 is the base year.

Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?

nominal GDP is $21,000, real GDP is $22,000, and the GDP deflator is 95.45.

Suppose an economy produces only burgers and bags of fries. In 2010, 4000 burgers are sold at $3 each and 6000 bags of fires are sold at $1.50 each. In 2008, the base year, burgers sold for $2.50 each and bags of fries sold for $2 each.

nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90.

Suppose an economy produces only cranberries and maple syrup. In 2010, 50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit. In 2009, the base year, the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit. For 2010,

the CPI will rise.

Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers deteriorates while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal,

It increased, but it less than doubled.

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

the dollar value of savings increased at 5.6 percent, and the purchasing power of savings increased at 3 percent.

Suppose that over the past year, the real interest rate was 3 percent, the CPI was 126.2 at the beginning of the year, and the CPI was 129.5 at the end of the year. It follows that

the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

less gasoline and more milk.

Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then people likely will buy

more milk and more T-shirts.

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

$57,000

Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, Inc., which produces and sells leather furniture. With each $1,000 worth of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch and sells it for $2,600. Neither firm had any inventory at the beginning of 2015. During that year, Cowhide produced enough leather for 25 couches. Couches, Inc. bought 80% of that leather for $20,000 and promised to buy the remaining 20% for $5,000 in 2016. Couches, Inc. produced 20 couches during 2015 and sold each one during that year for $2,600. What was the economy's GDP for 2015?

4.4 percent.

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. Year Price of Peaches Price of Pecans 2012 $11 per bushel $6 per bushel 2013 $9 per bushel $10 per bushel Refer to Table 24-2. If 2013 is the base year, then the inflation rate in 2013 was

100.0.

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. Year Price of Pork Price of Corn 2012 $20 per pound $12 per bushel 2013 $25 per pound $18 per bushel Refer to Table 24-3. If 2013 is the base year, then the CPI for 2013 was

$116.

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. Year Price of Pork Price of Corn 2012 $20 per pound $12 per bushel 2013 $25 per pound $18 per bushel Refer to Table 24-3. The cost of the basket in 2012 was

10 percent.

Table 24-7. The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. Year Price of hamburgers Price of hot dogs 2009 $5.00 $3.00 2010 5.50 3.30 2011 5.61 3.63 Refer to Table 24-7. If the base year is 2009, then the economy's inflation rate in 2010 is

10 percent.

Table 24-7. The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. Year Price of hamburgers Price of hot dogs 2009 $5.00 $3.00 2010 5.50 3.30 2011 5.61 3.63 Refer to Table 24-7. If the base year is 2010, then the economy's inflation rate in 2010 is

11.1 percent.

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. Year Price of a television Price of a hamburger 2013 $600 $2 2014 $550 $3 2015 $500 $2 Refer to Table 24-8. If the base year is 2013, then the economy's inflation rate in 2014 is

a typical consumer.

The CPI is a measure of the overall cost of the goods and services bought by

5 percent.

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

the prices of all final goods and services currently produced domestically, while the CPI reflects the price of a fixed basket of goods and services purchased by a typical consumer.

The GDP Deflator reflects

nominal GDP to real GDP multiplied by 100.

The GDP deflator is the ratio of

current level of prices relative to the level of prices in the base year.

The GDP deflator reflects the

central to macroeconomic analysis as well as to microeconomic analysis.

The basic tools of supply and demand are

government expenditures and imports.

The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included in

3 percent

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

5.00 percent

The consumer price index was 200 in 2012 and 208 in 2013. The nominal interest rate during this period was 9 percent. What was the real interest rate during this period?

$12 billion.

The government of a country, which has adopted American GDP accounting conventions, reported that seasonally adjusted GDP in quarter 3 was $48 billion at an annual rate. This means that the seasonally-adjusted market value of all final goods and services produced within this country in quarter 3 was

personal income.

The income that households and noncorporate businesses receive is called

percentage change in the price level from the previous period.

The inflation rate is defined as the

Kenya, Tanzania, Ghana

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

inflation.

The term economists use to describe a situation in which the economy's overall price level is rising is

includes otherwise legal transactions that go unreported or unrecorded.

The underground economy

included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.

The value of the housing services provided by the economy's owner-occupied houses is

$5731

Total income $5731 Household purchases of durable goods $1108 Household purchases of nondurable goods $702 Household purchases of non-education services $203 Household purchases of education services $302 Household purchases of new housing $816 Purchases of capital equipment $333 Inventory changes $75 Purchases of new structures $267 Depreciation $401 Local government spending on goods and services $236 State government spending on goods and services $419 Federal government spending on goods and services $1182 Transfer payments $707 Foreign purchases of domestically produced goods $217 Domestic purchases of foreign goods $129 Refer to Table 23-3. What was Crete's GDP in 2010?

the expenditures for these goods whoever buys them.

Total income from the domestic production of final goods and services equals

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

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

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

U.S. GDP

hair styling and dental care, and the value of such items is included in GDP.

When economists refer to intangible items, they are referring to such things as

Prices, including those for movie tickets, have been rising over time.

When ranking movies by nominal box office receipts, what important fact is overlooked?

real 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

a smaller quantity of that good and a larger quantity of substitutes for that good.

When the relative price of a good increases, consumers respond by buying

the value of the consumer price index may depend on the choice of a base year, but the inflation rate does not depend on the choice of a base year.

When we are calculating the consumer price index and the inflation rate for a certain year,

the Department of Commerce

Which government entity computes U.S. GDP every three months?

The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.

Which is the most accurate statement about the GDP deflator and the consumer price index?

gross national product, net national product, national income, personal income, disposable personal income

Which of the following correctly orders U.S. income measures from largest to smallest?

All of the above are included in GDP.

Which of the following domestically produced items is not included in GDP?

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

Which of the following is included in GDP?

medical marijuana purchased from a government-run pharmacy by a glaucoma patient

Which of the following is included in GDP?

All of the above are included in the investment component of GDP.

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

spending on new business equipment such as power tools but not spending on stocks and bonds

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

What is the impact of foreign competition on the U.S. auto industry?

Which of the following is not a question addressed by macroeconomists?

Why does the price of oil rise when war erupts in the Middle East?

Which of the following is not a question that macroeconomists address?

GDP and GNP typically move in opposite directions.

Which of the following is not correct?

All of the above are included in GDP.

Which of the following is not included in GDP?

Nominal / Real X 100

Which of the following is the correct formula for the GDP deflator?

nominal / real x 100

Which of the following is the correct formula for the GDP deflator?

The city of Las Vegas, Nevada pays a private firm to collect garbage in that city. The state of Nevada pays a private firm to repair a Nevada state highway. The federal government pays the salary of a Navy officer.

Which of the following items is counted as part of government purchases?

goods produced by foreign citizens working in the United States

Which of the following items is included in U.S. GDP?

CPI in 2013 = 210; CPI in 2014 = 231

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 10 percent for 2014?

Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. GDP is generally regarded as the best single measure of a society's economic well-being.

Which of the following statements about GDP is correct?

Nominal GDP values production at current prices, whereas real GDP values production at constant prices.

Which of the following statements about GDP is correct?

There is no ironclad rule for the declaration of recessions.

Which of the following statements about recessions is true?

Compared to the GDP deflator, the consumer price index is the more common gauge of inflation.

Which of the following statements is correct?

inventory investment

Which of the following subcomponents of GDP can be either positive or negative?

All of the above are correct.

Which of these events would cause the consumer price index to overstate the increase in the cost of living?