chapter 10

In the economy of Ukzten in 2010, consumption was $3000, GDP was $5500, government purchases were $1000, imports were $2000, and investment was $1000. What were Ukzten's exports in 2010? a. $2500 b. -$1500 c. $1500 d. $500

a. $2500

Which of the following is included in GDP? a. medical marijuana purchased from a government-run pharmacy by a glaucoma patient b. recreational marijuana purchased from a drug dealer by a college student c. recreational marijuana produced and consumed by a man in his attic d. All of the above are included in GDP.

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

What were country A's exports in 2010? Answers: a. -$32 b. $88 c. $32 d. $120

b. $88

Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has a. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted. b. caused measured GDP to rise. c. not caused any change in measured GDP. d. caused measured GDP to fall.

b. caused measured GDP to rise.

Recessions are not associated with which of the following? a. falling incomes b. falling unemployment c. increased bankruptcies d. falling profits

b. falling unemployment

The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included in a. in government expenditures and exports. b. government expenditures and imports. c. imports, but not government expenditures. d. exports, but not government expenditures

b. government expenditures and imports.

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, a. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 90. b. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90. c. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 111.1. d. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 111.1.

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

Changes in the GDP deflator reflect a. only changes in the amounts being produced. b. only changes in prices. 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 prices.

Which of the following is included in the consumption component of U.S. GDP? a. purchases of staplers, paper clips, and pens by U.S. business firms b. purchases of natural gas by U.S. households c. purchases of newly constructed homes by U.S. households d. All of the above are correct.

b. purchases of natural gas by U.S. households

Table 23-4 The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. 2008 cereal $4.00=90 milk $1.50=150 2009 cereal $4.00=100 milk $2.00=180 Refer to Table 23-4. In 2009, this country's a. real GDP was $660, and the GDP deflator was 115.2. b. real GDP was $670, and the GDP deflator was 113.4. c. real GDP was $660, and the GDP deflator was 113.4 d. real GDP was $670, and the GDP deflator was 115.2

b. real GDP was $670, and the GDP deflator was 113.4.

Table 23-4 The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. 2008 cereal $4.00=90 milk $1.50=150 2010 cereal $5.00=120 milk $2.50=200 Refer to Table 23-4. In 2010, this country's a. real GDP was $780, and the GDP deflator was 133.3 b. real GDP was $780, and the GDP deflator was 141.0. c. real GDP was $825, and the GDP deflator was 141.0 d. real GDP was $825, and the GDP deflator was 133.3.

b. real GDP was $780, and the GDP deflator was 141.0.

If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP? a. $2.5 trillion b. $40 trillion c. $10 trillion d. $100 trillion

c. $10 trillion

Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard? a. $1 b. $19 c. $20 d. $21

c. $20

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? a. $57,000 b. $18,000 c. $22,000 d. $39,000

c. $22,000

Consider two cars manufactured by Chevrolet in 2009. During 2009, Chevrolet sells one of the two cars to Sean for $24,000. Later in the same year, Sean sells the car to Kati for $19,000. The second automobile, with a market value of $30,000, is unsold at the end of 2010 and it remains in Chevrolet's inventory. The transactions just described contribute how much to GDP for 2009? a. $73,000 b. $24,000 c. $54,000 d. $43,000

c. $54,000

Suppose that an economy produces 40,000 units of good A which sells at $4 a unit and 20,000 units of good B which sells at $5 per unit. Production of good A contributes a. 2 times as much to GDP as the production of good B. b. 4/5 times as much to GDP as production of good B. c. 8/5 times as much to GDP as the production of good B. d. 5/4 times as much to GDP as the production of good B.

c. 8/5 times as much to GDP as the production of good B.

Rank the countries from highest to lowest based on underground economic activity as a percentage of GDP. a. Bolivia, Thailand, United States, Sweden. b. United States, Bolivia, Sweden, Thailand. c Bolivia, Thailand, Sweden, United States. d. Thailand, United States, Sweden, Bolivia.

c. Bolivia, Thailand, Sweden, United States.

How does U.S. gross domestic product (GDP) differ from U.S. gross national product (GNP)? a. GNP = GDP - losses from depreciation b. GNP = GDP - depreciation - retained earnings c. GNP = GDP + income earned by U.S. citizens abroad - income that foreign citizens earned in the U.S. d. GNP = GDP + transfer payments to households + - indirect sales taxes

c. GNP = GDP + income earned by U.S. citizens abroad - income that foreign citizens earned in the U.S.

Which of the following statements about GDP is correct? a. Nominal GDP values production at the cost of the resources used in the production process, whereas real GDP values production at market prices.. b. Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process. c. Nominal GDP values production at current prices, whereas real GDP values production at constant prices. d. Nominal GDP values production at constant prices, whereas real GDP values production at current prices.

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

Which of the following is included in GDP? a. the market value of owner-occupied housing services, but not the market value of rental housing services b. neither the market value of owner-occupied housing services nor the market value of rental housing services. c. both the market value of rental housing services and the market value of owner-occupied housing services d. the market value of rental housing services, but not the market value of owner-occupied housing services.

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

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise? a. both real GDP and nominal GDP b. real GDP but not nominal GDP c. nominal GDP but not real GDP d. neither nominal GDP nor real GDP

c. nominal GDP but not real GDP

Unemployment compensation is a. part of GDP because it represents income. b. not part of GDP because the payments reduce business profits. c. not part of GDP because it is a transfer payment. d. part of GDP because the recipients must have worked in the past to qualify.

c. not part of GDP because it is a transfer payment.

Net national product for Bahkan in 2010 is a. $106 b. $116 c. $104 d. $96

d. $96

Which of the following is included in the consumption component of GDP? a. household purchases of appliances. b. household purchases of medical care. c. household purchases of food. d. All of the above are included in the consumption component of GDP.

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

A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them before the end of the second quarter, and holds the others in its warehouse. How will the 200,000 unsold DVDs be treated in the GDP statistics? a. The DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP. b. Since the DVDs eventually will be bought by consumers, they will be included as consumption in the second quarter. c. The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise third-quarter GDP. d. Since the DVDs were not purchased in the second quarter, they will be counted as an increase in third-quarter GDP.

Correcta. The DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP.

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? ta. $25 million b. $14 million c. $27 million d. $12 million

a. $25 million

he table below contains data for Bahkan for the year 2010. GDP $110 Income earned by citizens abroad $5 Income foreigners earn here $15 Losses from depreciation $4 Indirect business taxes $6 Statistical discrepancy $0 Retained earnings $5 Corporate income taxes $6 Social insurance contributions $10 Interest paid to households by government $5 Transfer payments to households from government $15 Personal taxes $30 Non tax payments to government $5 Refer to Table 23-1. Disposable personal income for Bahkan in 2010 is a. $54. b. $37. c. $44. d. $63.

a. $54.

The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009. 2009 waffles $2.00=120 pancakes $2.00=150 2011 waffles $4.00=180 pancakes $3.00=220 a. $800. b. $1380. c. $540. d. $930.

a. $800

Refer to Table 23-1. Personal income for Bahkan in 2010 is a. $89. b. $87. c. $103. d. $105.

a. $89

Suppose that an economy produces 30,000 units of good A which sells at $3 a unit and 60,000 units of good B which sells at $2 per unit. Production of good A contributes a. 3/4 times as much to GDP as the production of good B. b. 1/2 times as much to GDP as the production of good B. c. 3/2 times as much to GDP as the production of good B. d. 4/3 times as much to GDP as production of good B.

a. 3/4 times as much to GDP as the production of good B.

In 2008, this country's nominal GDP was 2008 Waffles $2.00=120 Pancakes 2=1.50 a. $300. b. $400. c. $540. d. $390.

a. 300

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is a. 96.1 so prices are lower than in the base year. b. 104.1 so prices are lower than in the base year. c. 104.1 so prices are higher than in the base year. d. 96.1 so prices are higher than in the base year

a. 96.1 so prices are lower than in the base year.

How is net national product (NNP) calculated? Selected Answer: a. Depreciation losses are subtracted from the total income of a nation's citizens. b. Saving is added to the total income earned within a nation. c. Saving is added to the total income of a nation's citizens. d. Depreciation losses are subtracted from the total income earned within a nation

a. Depreciation losses are subtracted from the total income of a nation's citizens.

Which of the following is correct? a. Nominal GDP equals real GDP in the base year. b. Nominal GDP equals real GDP in all years but the base year. c. Nominal GDP is always greater than real GDP. d. Nominal GDP is always less than real GDP.

a. Nominal GDP equals real GDP in the base year.

The local Chevrolet dealership has an increase in inventory of 25 newly produced cars in 2006. In 2007, it sells all 25 cars. Which of the following statements is correct? a. The value of the cars in inventory will be counted as part of 2006 GDP, and the value of the cars sold in 2007 will not increase 2007 GDP. b. The value of the cars in inventory will be counted as part of 2006 GDP, and the value of the cars sold in 2007 will increase 2007 GDP. c. The value of the cars in inventory will not affect 2006 GDP, and the value of the cars sold in 2007 will increase 2007 GDP. d. The value of the cars in inventory will not affect 2006 GDP, and the value of the cars sold in 2007 will not increase 2007 GDP.

a. The value of the cars in inventory will be counted as part of 2006 GDP, and the value of the cars sold in 2007 will not increase 2007 GDP.

The table below contains data for the country of Togogo. The base year is 1974. Refer to Table 23-7. Which of the following is not correct? a. This economy experienced growth from 1975 to 1976. b. This economy experienced growth from 1976 to 1977. c. This economy experienced growth from 1974 to 1975. d. This economy experienced inflation from 1974 to 1975, from 1975 to 1976, and from 1976 to 1977.

a. This economy experienced growth from 1975 to 1976.

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle, a. U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same. b. U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500. c. U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500. d. U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000

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

Retained earnings is income that a. corporations have earned but have not paid out to their owners. b. households retain after paying taxes. c. corporations have earned but have not used to invest in plant, equipment, and inventories. d. businesses retain after paying taxes.

a. corporations have earned but have not paid out to their owners.

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

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

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is a. included in U.S. GNP, but it is not included in U.S. GDP. b. included in both U.S. GDP and U.S. GNP. c. included in neither U.S. GDP nor U.S. GNP. d. included in U.S. GDP, but it is not included in U.S. GNP

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

What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services? a. consumption b. costs c. capital d. investment

a. investment

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 a. not included in current GDP because GDP only measures the value of goods and services produced in the current year. b. not included in current GDP because it is difficult to determine their value. c. included in current GDP but valued at their original prices. d. included in current GDP because GDP measures the value of all goods and services sold in the current year.

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

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

a. only changes in the amounts being produced.

The inflation rate is the a. percentage change in the price level from one period to another. b. absolute change in real GDP from one period to another. c. absolute change in the price level from one period to another. d. percentage change in real GDP from one period to another

a. percentage change in the price level from one period to another.

Which of the following is not included in U.S. GDP? a. production of U.S citizens working in foreign countries. b. the estimated rental value of owner-occupied housing c. the value of food purchased from a grocery store to make meals at home without pay d. additions of newly produced output to inventory

a. production of U.S citizens working in foreign countries

If real GDP doubles and the GDP deflator doubles, then nominal GDP . quadruples. b. triples. c. doubles. d. remains constant.

a. quadruples.

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, a. real output fell and the price level rose. b. real output rose and the price level fell. c. real output and the price level both fell. d. real output and the price level both rose.

a. real output fell and the price level rose.

National income is defined as a. the total income earned by a nation's permanent residents in the production of goods and services. b. the total income of a nation's permanent residents minus losses from depreciation. c. the income that households and noncorporate businesses receive. d. the income that households and noncorporate businesses have left after satisfying all their obligations to the government.

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

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which component(s) of fourth-quarter GDP? a. they increase consumption and decrease investment b. they increase consumption and have no affect on investment c. they have no affect on either consumption or investment d. they have no affect on consumption and decrease investment

a. they increase consumption and decrease investment

Government purchases include spending on goods and services by a. federal, state, and local governments. b. the federal government, but not by state or local governments. c. federal and state governments, but not by local governments. d. federal, state, and local governments, as well as household spending by employees of those governments.

a/b. federal, state, and local governments.

Michigan Tea Company sold $15 million worth of tea it produced. In producing this tea it purchased $5 million dollars worth of ingredients from foreign countries and paid workers who reside in Canada but commute to the U.S. $1 million. How much did these transactions add to U.S. GDP? a. $15 million b. $10 million c. $21 million d. $9 million

b. $10 million

Table 23-1 The table below contains data for country A for the year 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 Refer to Table 23-1. What was country A's GDP in 2010? a. $8147 b. $7253 c. $7136 d. $6359

b. $7253

In the economy of Ukzten in 2010, consumption was one-half of GDP, government purchases were $2000 more than investment, investment was one-sixth of GDP, and the value of imports exceeded the value of exports by $500. What was Ukzten's GDP in 2010? a. $4500 b. $9000 c. $15,000 d. $3000

b. $9000

What were country A's net exports in 2010? Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 a. $88 b. -$32 c. $32 d. $120

b. -$32

In the economy of Ukzten in 2010, consumption was $200, exports were $50, GDP was $325, government purchases were $100, imports were $125, and investment was $100. What were Ukzten's net exports in 2010? a. $50 b. -$75 c. $75 d. -$50

b. -$75

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2009. 2009 Movies $11.00=500 Popcorn $4=900 2010 Movies $12.00=600 Popcorn $5=1000 Refer to table 23-5 What was this country's GDP deflator in 2010? a. 86.9 b. 115.1 c. 120.5 d. None of the above is correct.

b. 115.1

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is a. 80, and this indicates that the price level has decreased by 20 percent since the base year. b. 125, and this indicates that the price level has increased by 25 percent since the base year. c. 125, and this indicates that the price level has increased by 125 percent since the base year. d. 80, and this indicates that the price level has increased by 80 percent since the base year.

b. 125, and this indicates that the price level has increased by 25 percent since the base year.

The base year is 2009. In 2011, this country's GDP deflator was 2009 waffles $2.00=120 pancakes $2.00=150 2011 waffles $4.00=180 pancakes $3.00=220 a. 58.0. b. 172.5. c. 148.1. d. 100.

b. 172.5.

Which of the following is not a correct statement about the growth of real GDP in the U.S. economy? a. The output of goods and services produced grew on average about 3 percent per year between 1965 and 2009. b. Growth was steady between 1965 and 2009. c. Continued growth in real GDP enables the typical American to enjoy greater economic prosperity than his or her parents and grandparents did. d. Real GDP in 2009 was almost four times its 1965 level.

b. Growth was steady between 1965 and 2009.

Which of the following is not a question that macroeconomists address? a. Why do prices rise rapidly in some periods of time while they are more stable in other periods? b. Why does the price of oil rise when war erupts in the Middle East? c. Why is average income high in some countries while it is low in others? d. Why do production and employment expand in some years and contract in others?

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

Expenditures on a nation's domestic production a. are less than its domestic production. b. are equal to its domestic production. c. are greater than its domestic production. d. could be less than, equal to, or greater than its domestic production.

b. are equal to its domestic production.

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person a. was unchanged. b. grew, but by less than 12 percent. c. grew by more than 12 percent. d. decreased.

b. grew, but by less than 12 percent.

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included a. in both German GDP and U.S. GDP. b. in German GDP, but is not included in U.S. GDP. c. in U.S. GDP, but is not included in German GDP. d. in neither German GDP nor U.S. GDP.

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

Gross domestic product includes all Correcta. legal final goods and services, but it excludes illegal final goods and services. b. legal and illegal final goods, but it excludes all legal and illegal final services. c. legal and illegal final goods and all legal and illegal final services. d. legal and illegal final goods and legal final services, but it excludes illegal final services.

b. legal and illegal final goods, but it excludes all legal and illegal final services.

Much of macroeconomics attempts to explain a. changes in the price of oil and gasoline. b. long-run growth and short-run fluctuations in real GDP. c. changes in the growth rate of state government spending. d. changes in the prices and quantities of individual goods and services.

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

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarter(s) does(do) these transactions raise investment? a. the first and the second b. the first but not the second c. the second but not the first d. neither the first nor the second

b. the first but not the second

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

b. the inflation rate.

Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist? a. the effect of taxes on the prices of airline tickets, and the profitability of automobile-manufacturing firms b. the percentage of the labor force that is out of work, and differences in average income from country to country c. the price of beef, and wage differences between genders d. how consumers maximize utility, and how prices are established in markets for agricultural products

b. the percentage of the labor force that is out of work, and differences in average income from country to country

GDP is defined as the a. value of all final goods and services produced within a country in a given period of time. b. value of all goods and services produced within a country in a given period of time. c. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. d. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

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

Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp, Inc., which uses the rawhide to produce and sell dog chews. With each $2 of rawhide that it buys from Rolling Rawhide, Chewy Chomp, Inc. produces a dog chew and sells it for $5. Neither firm had any inventory at the beginning of 2008. During that year, Rolling Rawhide produced enough rawhide for 1000 dog chews. Chewy Chomp, Inc. bought 75% of that rawhide for $1500 and promised to buy the remaining 25% for $500 in 2009. Chewy Chomp, Inc. produced 750 dog chews during 2008 and sold each one during that year for $5. What was the economy's GDP for 2008? a. $5250 b. $3750 c. $4250 d. $5750

c. $4250

Table 23-4 The table below reports nominal and real GDP for the U.S. from 1929 to 1932. Refer to table 23-3. If prices had remained constant between 1929 and 1930, GDP would have decreased a. 13.6%. b. 9.43%. c. 8.62%. d. 11.97%.

c. 8.62%.

The U.S. government pays an economist at the U.S. Department of Commerce $50,000 in salary in 2006. The economist then retires. In 2007, the government pays him $30,000 in retirement benefits. Which of the following is correct? a. The 2006 payment is included in 2006 GDP as government purchases, and the 2007 payment is allocated to previous years' GDP according to the amount of work performed by the economist each year. b. The 2006 payment is included in 2006 GDP as government purchases, and the 2007 payment is included in 2007 GDP as government transfer payments. c. The 2006 payment is included in 2006 GDP as government purchases, but the 2007 payment is not included in 2007 GDP. d. The 2006 payment is included in 2006 GDP as government purchases, and the 2007 payment is included in 2007 GDP as government purchases

c. The 2006 payment is included in 2006 GDP as government purchases, but the 2007 payment is not included in 2007 GDP.

The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result, a. U.S. government purchases are unaffected; U.S. net exports decrease by $30,000; and U.S. GDP decreases by $30,000. b. U.S. government purchases increase by $30,000; U.S. net exports are unaffected; and U.S. GDP increases by $30,000. c. U.S. government purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP is unaffected. d. U.S. government purchases, net exports, and GDP are unaffected.

c. U.S. government purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP is unaffected.

A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes a. a positive contribution both to consumption and to GDP. b. a positive contribution to investment, but it does not affect GDP. c. a positive contribution both to investment and to GDP. d. a positive contribution to GDP, but it does not affect investment or consumption

c. a positive contribution both to investment and to GDP.

A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes a. a positive contribution to GDP, but it does not affect investment or consumption. b. a positive contribution both to consumption and to GDP. c. a positive contribution both to investment and to GDP. d. a positive contribution to investment, but it does not affect GDP.

c. a positive contribution both to investment and to GDP.

Macroeconomists study a. regulations imposed on firms and unions. b. the decisions of individual households and firms. c. economy-wide phenomena. d. the interaction between households and firms.

c. economy-wide phenomena

When economists refer to intangible items, they are referring to such things as a. illegal goods, and the value of such items is excluded from GDP. b. hair styling and dental care, and the value of such items is excluded from GDP. c. hair styling and dental care, and the value of such items is included in GDP. d. illegal goods, and the value of such items is included in GDP.

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

Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly's decision to buy the house change GDP? a. it raises GDP by $238,000 b. it reduces GDP by $12,000 c. it does not change GDP d. it raises GDP by $250,000

c. it does not change 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, a. nominal GDP is $100, real GDP is $50, and the GDP deflator is 50. b. nominal GDP is $50, real GDP is $100, and the GDP deflator is 50. c. nominal GDP is $100, real GDP is $50, and the GDP deflator is 200. d. nominal GDP is $50, real GDP is $100, and the GDP deflator is 200.

c. nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.

The inflation rate is the a. absolute change in the price level from one period to another. b. percentage change in real GDP from one period to another. c. percentage change in the price level from one period to another. d. absolute change in real GDP from one period to another

c. percentage change in the price level from one period to another.

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? a. the price of the house, the cost of remodeling materials, the increase in rental value b. the price of the house and the cost of remodeling materials, but not the increase in rental value c. the costs of the remodeling materials and the increase in rent, but not the price of the house d. None of the above are correct

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

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarter(s) does(do) these transactions raise consumption? a. the first and the second b. the first but not the second c. the second but not the first d. neither the first nor the second

c. the second but not the first

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which component(s) of fourth-quarter GDP? a. they have no affect on either consumption or investment b. they increase consumption and have no affect on investment c. they increase consumption and decrease investment d. they have no affect on consumption and decrease investment

c. they increase consumption and decrease investment

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 a. $400 to GDP. b. $150 to GDP. c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. d. $250 to GDP.

d. $250 to GDP.

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. 2008 cereal $4.00=90 milk $1.50=150 2009 cereal $4.00=100 milk $2.00=180 2010 cereal $6.00=120 milk $3.50=200 Refer to Table 23-4. This country's inflation rate from 2009 to 2010 was a. 16.4%. b. 44.7%. c. 41.0%. d. 24.3%.

d. 24.3%.

If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator ? a. 400 b. 40 c. 25 d. 250

d. 250

What is the GDP deflator and the inflation rate for 1932? a. 1236.46, 11.7 b. 1236.46, 13.3 c. 8.09.16, -13.3 d. 8.09, -11.7

d. 8.09, -11.7

If nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is a. 83.33, and this indicates that the price level has increased by 83.33 percent since the base year. b. 120, and this indicates that the price level has increased by 20 percent since the base year. c. 120, and this indicates that the price level has increased by 120 percent since the base year. d. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.

d. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.

GDP does not reflect a. the value of leisure. b. the value of goods and services produced at home. c. the quality of the environment. d. All of the above are correct.

d. All of the above are correct.

In a simple circular-flow diagram, a. households spend all of their income. b. all goods and services are bought by households. c. expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production. d. All of the above are correct.

d. All of the above are correct.

Which of the following is included in the investment component of GDP? a. households' purchases of newly constructed homes b. net additions to firms' inventories c. firms' purchases of capital equipment d. All of the above are correct.

d. All of the above are correct.

Which of the following items is counted as part of government purchases? a. The federal government pays the salary of a Navy officer. b. The state of Nevada pays a private firm to repair a Nevada state highway. c. The city of Las Vegas, Nevada pays a private firm to collect garbage in that city. d. All of the above are correct.

d. All of the above are correct.

Which of the following statements about GDP is correct? a. 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. b. Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. c. GDP is generally regarded as the best single measure of a society's economic well-being. d. All of the above are correct.

d. All of the above are correct.

Which of the following is not included in GDP? a. a can of bug spray b. the services of an exterminator c. the honey produced and sold by a beekeeper d. All of the above are included in GDP.

d. All of the above are included in GDP.

Which of the following values would be included in U.S. GDP for 2009? a. the rent that Sean, an American citizen, would have paid on his home in New York in 2009 had he not owned that home b. the rent that John, an American citizen, paid on his apartment in San Francisco in 2009 c. the value of the legal services provided by Juan, an attorney and a Mexican citizen, who lived in Houston and practiced law there in 2009 d. All of the above would be included in U.S. GDP for 2009.

d. All of the above would be included in U.S. GDP for 2009.

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? a. Bolivia, Argentina, Peru b. Peru, Bolivia, Argentina c. Argentina, Bolivia, Peru d. Argentina, Peru, Bolivia

d. Argentina, Peru, Bolivia

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? a. It was unchanged. b. It decreased. c. It more than doubled. d. It increased, but it less than doubled.

d. It increased, but it less than doubled.

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person? a. It more than doubled. b. It decreased. c. It increased, but it less than doubled. d. It was unchanged.

d. It was unchanged.

The Patersons bought a home that was newly constructed in 2007 for $275,000. They sold the home in 2009 for $205,000. Which of the following statements is correct regarding the sale of the house? a. The 2009 sale increased 2009 GDP by $205,000 and had no effect on 2007 GDP. b. The 2009 sale reduced 2009 GDP by $70,000 and had no effect on 2007 GDP. c. The 2009 sale increased 2009 GDP by $205,000; and caused 2007 GDP to be revised downward by $70,000. d. The 2009 sale affected neither 2007 GDP nor 2009 GDP

d. The 2009 sale affected neither 2007 GDP nor 2009 GDP

Recently, the U.S. national income accounts have switched to calling government purchases a. transfer payments and gross investment by government. b. government spending and transfer payments. c. government wages, salaries, and investment expenditure. d. government consumption expenditure and gross investment.

d. government consumption expenditure and gross investment.

Which of the following correctly orders U.S. income measures from largest to smallest? a. personal income, net national product, national income, gross national product, disposable personal income b. disposable personal income, gross national product, national income, net national product, personal income c. disposable personal income, personal income, national income, net national product, gross national product d. gross national product, net national product, national income, personal income, disposable personal income

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

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

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

The value of the housing services provided by the economy's owner-occupied houses is a. excluded from GDP since the value of these housing services cannot be estimated with any degree of precision. b. excluded from GDP since these services are not sold in any market. c. included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services. d. included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.

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

Consumer goods that are produced, go into inventory, and are not sold during the current period are a. counted as intermediate goods and so are not included in current period GDP. b. included in current period GDP as consumption. c. counted in current period GDP only if the firm that produced them sells them to another firm. d. included in current period GDP as inventory investment

d. included in current period GDP as inventory investment

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. 2008 cereal $4.00=90 milk $1.50=150 2011 cereal $6.00=150 milk $3.50=200 In 2011, this country's a. real GDP was $1065, and the GDP deflator was 177.8. b. real GDP was $1065, and the GDP deflator was 150.2. c. real GDP was $900, and the GDP deflator was 150.2. d. real GDP was $900, and the GDP deflator was 177.8.

d. real GDP was $900, and the GDP deflator was 177.8.

Which of the following is always measured in prices from a base-year? a. both nominal and real GDP b. neither nominal nor real GDP c. nominal but not real GDP d. real but not nominal GDP

d. real but not nominal GDP

If nominal GDP doubles and the GDP deflator doubles, then real GDP a. quadruples. b. triples c. remains constant. d. doubles.

d. remains constant.

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between a. estimates of GDP and actual GDP. Correctb. the income and expenditure approaches to the calculation of GDP. c. the quarterly and annual approaches to the calculation of GDP. d. personal income and personal disposable income.

d. the income and expenditure approaches to the calculation of GDP.

To encourage formation of small businesses, the government could provide subsidies; these subsidies a. would not be included in GDP because the government raises taxes to pay for them. b. would be included in GDP because they are part of investment expenditures. c. would be included in GDP because they are part of government purchases. d. would not be included in GDP because they are transfer payments.

d. would not be included in GDP because they are transfer payments