Macroeconomics Final Preparation Unit 2
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 Ukzten in 2010, exports were $200, GDP was $2000, government purchases were $300, imports were $130, and investment was $400. What was Ukzten's consumption in 2010?
$1230
Scenario 24-3 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2008. The price index was 17.6 in 1944 and 184 in 2008. 34. Refer to Scenario 24-3. Josh Holloway's 2008 income in 1944 dollars is
$20,086.96.
Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did these transactions contribute to U.S. GDP for the year?
$22,000
Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelle's 2006 salary in 1996 dollars is
$39,097.74
In the base year, the GDP deflator is always
100.
The price index was 220 in one year and 260 in the next year. What was the inflation rate?
18.2 percent
Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?
2 percent
If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is
5 percent.
Which of the following is a determinant of productivity?
A. human capital per worker B. natural resources per worker C. physical capital per worker
An increase in the price of dairy products produced domestically will be reflected in
GDP deflator rises much more than does the consumer price index
Which of the following statements regarding GDP is correct?
GDP includes factory production, but not any harm that may be inflicted on the environment.
Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?
GDP would definitely increase because GDP excludes environmental quality.
When ranking movies by nominal box office receipts, what important fact is overlooked?
Prices, including those for movie tickets, have been rising over time.
Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor county to catch up?
The poor country has poorly developed property rights.
Nominal GDP equals real GDP in the base year.
True
Which of the following transactions adds to U.S. GDP for 2015?
When Ken and Kim were both single, they lived in separate apartments and each paid $800 in rent. Ken and Kim got married in 2015 and they bought a previously unoccupied house that, according to reliable estimates, could be rented for $1,700 per month.
Net exports equal
Y - (C + I + G)
In the equation Y = C + I + G + NX
Y represents the economy's total expenditure/GDP
Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called
an intermediate good.
Technological knowledge refers to
available information on how to produce things.
Changes in nominal GDP reflect
both changes in prices and changes in the amounts being produced.
You sell fruit smoothies. One day you double the time you spend and double all your inputs, and make twice as many smoothies. Your smoothie production function has
constant returns to scale
The goal of the consumer price index is to measure changes in the
cost of living
The introduction of a new good
decreases the cost of maintaining the same level of economic well-being.
Two countries are the same, except one is poorer. Assuming the traditional assumption about the production function is made there are
diminishing returns to capital so the poor country grows faster.
If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will
double but productivity will not change.
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.
Country A experienced a growth rate of real GDP per person of 4 percent per year throughout the 1900's. In view of other countries' experiences during this time country A's growth was
exceptionally high.
Which of the following are human capital and physical capital, respectively?
for a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen
Which of the following are human capital and physical capital, respectively?
for an accounting firm: the accountants' knowledge of tax laws and computer software
In determining living standards, productivity plays a key role
for both nations and individuals.
If an American-based firm opens and operates a new clothing factory in Honduras, then it is engaging in
foreign direct investment.
In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories. The Europeans who did this engaged in
foreign portfolio investment
When the consumer price index rises, the typical family
has to spend more dollars to maintain the same standard of living.
Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists include these skills as part of Perry's
human capital.
A country's human capital increases
if its workers become better educated or healthier.
Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is
included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself.
The value of the housing services provided by the economy's owner-occupied houses is
included in GDP, and the estimated rental values of the houses are used to place a value on these housing services
During the current quarter, a firm produces consumer goods and adds some of those goods to its inventory rather than selling them. The value of the goods added to inventory is
included in the current quarter GDP as investment
Gross domestic product measures
income and expenditures.
The CPI differs from the GDP deflator in that
increases in the prices of domestically produced goods that are sold to the U.S. government show up in the GDP deflator but not in the CPI.
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.
When a society decides to increase its quantity of physical capital, the society
is in effect deciding to consume fewer goods and services in the present
A decrease in the price of large tractors imported into the United States from Russia
leaves both the GDP deflator and the consumer price index unchanged.
If a country were to increase its saving rate, then in the long run it would also increase its
level of income.
Rapid population growth
may depress economic prosperity by reducing the amount of capital which each worker has to work with.
An American retailer purchased 100 pairs of shoes from a company in Denmark in the second quarter of 2010 but does not sell them to a consumer until the third quarter of 2010. In which quarter(s) is (are) the value of the shoes included in U.S. GDP?
neither the second nor the third quarter
Which of the following always uses prices and quantities from the same period?
nominal GDP but not real GDP
Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,
nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.
A country experiencing a growth rate of 8% per year can go from being one of the poorest to one of the richest in
one generation. In the last couple of decades China's growth rate has been higher than 8%
Changes in real GDP reflect
only changes in the amounts being produced.
By not taking into account the possibility of consumer substitution, the CPI
overstates the cost of living
Suppose the typical consumer buys more bananas than oranges. In fixing the basket of goods and services for the purpose of calculating the consumer price index, the Bureau of Labor Statistics
places more weight on the price of bananas than on the price of oranges; the weights of the two prices are determined by surveying consumers
Patents turn new ideas into
private goods, and increase the incentive to engage in research.
Which of the following is included in the consumption component of U.S. GDP?
purchases of natural gas by U.S. households
Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?
substitution bias
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
the CPI better reflects the goods and services bought by consumers.
Estimates of the values of which of the following non-market goods or services are included in GDP?
the estimated rental value of owner-occupied homes
What basket of goods and services is used to construct the CPI?
the goods and services that are typically bought by consumers as determined by government surveys
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
the increase in the price of rice
The percentage change in the price level from one period to another is called
the inflation rate
In a particular production process, if the quantities of all inputs used double, then the quantity of output doubles as well. This means that
the relevant production function has the constant-returns-to-scale property.