Chapter 15

41. At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current GDP. a. TRUE b. FALSE

A

Changes in the GDP deflator reflect only changes in the prices of goods and services. a. TRUE b. FALSE

A

Consumption consists of spending by households on goods and services, with the exception of A. purchases of new houses. B. purchases of intangible services. C. spending on education. D. purchases of durable goods

A

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

A

Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10 per unit and the price of fish was $75 per unit. For 2010, A. nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5. B. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160. C. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5. D. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160.

A

The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly. a. TRUE b. FALSE

A

Which government entity computes U.S. GDP every three months? A. the Department of Commerce B. the Council of Economic Advisers C. the Department of Treasury D. the Federal Reserve

A

Which is the largest component of GDP? consumption investment government purchases net exports

A

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

A

Which of the following statements regarding GDP is correct? A. GDP includes factory production, but not any harm that may be inflicted on the environment. B. GDP accounts for all activities taking place outside markets. C. GDP provides detailed information about the distribution of income. D. GDP is a good measure of economic well-being for all purposes.

A

12. APLIA

APLIA

Changes in nominal GDP reflect A. only changes in the amounts being produced. B. both changes in prices and changes in the amounts being produced. C. only changes in prices. D. neither changes in prices nor changes in the amounts being produced.

B

GDP is the market value of all final goods and services produced by a country's citizens in a given period of time. a. TRUE b. FALSE

B

Macroeconomic statistics tell us about a particular household, firm, or market. a. TRUE b. FALSE

B

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

B

Social Security payments are A. excluded from GDP because they are not private pensions. B. excluded from GDP because they do not reflect the economy's production. C. included in GDP because they represent current income. D. included in GDP because they represent potential consumption.

B

Suppose that an economy produces 20,000 units of good A which sells at $3 a unit and 40,000 units of good B which sells at $1 per unit. Production of good A contributes A. 2/3 times as much to GDP as production of good B. B. 3/2 times as much to GDP as the production of good B. C. 3 times as much to GDP as the production of good B. D. 1/3 times as much to GDP as the production of good B

B

The government computes measures of income other than GDP because these other measures usually tell different stories about overall economic conditions. a. TRUE b. FALSE

B

42. The purchase of rice produced this period is included in GDP if the rice is A. used in a meal a restaurant sells during the same period they buy the rice. B. purchased by a family who uses it to make tuna casserole for its supper. C. purchased by a frozen food company to increase its inventory. D. B and C are correct

D

Changes in the GDP deflator reflect A. both changes in prices and changes in the amounts being produced. B. neither changes in prices nor changes in the amounts being produced. C. only changes in the amounts being produced. D. only changes in prices.

D

GDP A. is not used to monitor the performance of the overall economy but is the single best measure of a society's economic well-being. B. is not used to monitor the performance of the overall economy and is not the single best measure of a society's economic well-being. C. is used to monitor the performance of the overall economy but is not the single best measure of a society's economic well-being. D. is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being.

D

Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct? A. GDP could either increase or decrease because GDP includes leisure. B. GDP could either increase or decrease because GDP excludes leisure. C. GDP would definitely increase, despite the fact that GDP includes leisure. D. GDP would definitely increase because GDP excludes leisure.

D

25. aplia very important

aplia

29. aplia

aplia

39. aplia

aplia

44. aplia

aplia

46. aplia

aplia

5. aplia

aplia

GDP excludes the value of intermediate goods because their value is included in the value of final goods. a. TRUE b. FALSE

A

Gross domestic product measures A. income and expenditures. B. expenditures but not income. C. income but not expenditures. D. neither income nor expenditures

A

In a simple circular-flow diagram, firms A. purchase resources from households. B. purchase the output produced by households. C. receive income by selling resources to households. D. All of the above are correct

A

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 A. included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself. B. included in GDP if Susan changes it herself, but not if she pays Speedy Lube to change it. C. included in GDP whether Susan pays Speedy Lube to change it or changes it herself. D. not included in GDP whether Susan pays Speedy lube to change it or she changes it herself.

A

After the terrorist attacks on September 11, 2001, governments within the United States raised expenditures to increase security at airports. These purchases of goods and services are A. not included in GDP since the government collects taxes to pay for them. B. included in GDP since government expenditures on goods and services are included in GDP. C. not included in GDP since they do not represent production. D. included in GDP only to the extent that the federal government, rather than state or local governments, paid for them

B

An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate? A. The value added by American workers and equipment in France is included in U.S. GDP and the value added by French workers and equipment is added to French GDP. B. The value of the goods and services produced by the restaurant is included in French GDP, but not in U.S. GDP. C. The value of the goods and services produced by the restaurant is included in U.S. GDP, but not in French GDP. D. The value of the goods and services produced by the restaurant is included in both French GDP and U.S. GDP

B

The government's purchases of goods but not its purchases of services are included in GDP. a. TRUE b. FALSE

B

The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland's A. net factor payments from abroad are positive, and its GNP is larger than its GDP. B. net factor payments from abroad are negative, and its GDP is larger than its GNP. C. net factor payments from abroad are negative, and its GNP is larger than its GDP. D. net factor payments from abroad are positive, and its GDP is larger than its GNP

B

The value of goods added to a firm's inventory in a certain year is treated as A. spending on durable goods, since the goods could not be inventoried unless they were durable. B. investment, since GDP aims to measure the value of the economy's production that year. C. consumption, since the goods will be sold to consumers in another period. D. intermediate goods, and so is not included in that year's GDP.

B

[ASK]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? A. $3 million B. $8 million C. $11 million D. $7 million

B

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

C

An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction? Net exports and GDP both rise. Net exports and GDP both fall. Net exports fall, while GDP is unchanged. Net exports are unchanged, while GDP rises

C

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because A. these items are not reported on income tax forms. B. the government wants to discourage the production and consumption of these items. C. measuring them is so difficult. D. the quality of these items is not high enough to contribute value to GDP

C

The GDP deflator for years subsequent to the base year measures the change in A. real GDP from the base year that cannot be attributable to a change in nominal GDP. B. real GDP from the base year that cannot be attributable to a change in prices. C. nominal GDP from the base year that cannot be attributable to a change in real GDP. D. nominal GDP from the base year that cannot be attributable to a change in prices.

C

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, net exports, and GDP are unaffected. B. U.S. government purchases are unaffected; U.S. net exports decrease by $30,000; and U.S. GDP decreases 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 increase by $30,000; U.S. net exports are unaffected; and U.S. GDP increases by $30,000

C

The residents of country A earn $500 million of income from abroad. Residents of other countries earn $200 million in country A. These earnings are accounted for in country A's A. GNP which is smaller than GDP in country A. B. GDP which is smaller than GNP in country A. C. GNP which is larger than GDP in country A. D. GDP which is larger than GNP in country A.

C

Which of the following is correct? A. Nominal GDP is always less than real GDP. B. Nominal GDP is always greater than real GDP. C. Nominal GDP equals real GDP in the base year. D. Nominal GDP equals real GDP in all years but the base year.

C

Which of the following is included in GDP? A. neither the market value of owner-occupied housing services nor the market value of rental housing services. B. 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 D. the market value of owner-occupied housing services, but not the market value of rental housing services

C

50. [ask] Which of the following is included in the calculation of GDP? A. The purchase of ink and paper supplies by a textbook company for the production of new textbooks. B. The purchase of a new edition of a foreign textbook that was produced in a different nation. C. The purchase of a used textbook from a friend who took the same class last year. D. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

D

If real GDP doubles and the GDP deflator doubles, then nominal GDP A. doubles. B. triples. C. remains constant. D. quadruples.

D

In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015? A. $1350 B. $1050 C. $1750 D. $1450

D

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as A. investment. B. consumption of durable goods. C. government spending. D. consumption of services

D

The inflation rate is the A. absolute change in real GDP from one period to another. B. percentage 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 the price level from one period to another

D

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. nominal GDP. B. the GDP deflator. C. GNP. D. real GDP.

D