Chapter 2 - Manskiw

In 2013, American net borrowings from abroad, per person, in current dollars, amounted to approximately: A) $100. B) $220. C) $1,600. D) $10,000.

C) $1,600

In 2013, the GDP of the United States totaled about: A) $16.8 billion. B) $168 billion. C) $16.8 trillion. D) $168 trillion.

C) $16.8 trillion

Assume that a rancher sells McDonald's a quarter-pound of meat for $1 and that McDonald's sells you a hamburger made from that meat for $2. In this case, the value included in GDP should be: A) $0.50. B) $1. C) $2. D) $3.

C) $2

In 2013, GDP per person in the United States was approximately: A) $5,000. B) $35,000. C) $53,000. D) $353,000.

C) $53,000

If GDP (measured in billions of current dollars) is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are: A) $673. B) -$673. C) $704. D) -$704.

C) $704

If nominal GDP in 2009 equals $14 trillion and real GDP in 2009 equals $11 trillion, what is the value of the GDP deflator? A) 0.79 B) 1.03 C) 1.27 D) 1.30

C) 1.27

If real GDP grew by 6 percent and population grew by 2 percent, then real GDP per person grew by approximately ______ percent. A) 2 B) 3 C) 4 D) 8

C) 4

If the adult population equals 250 million, of which 145 million are employed and 5 million are unemployed, the labor force participation rate equals ______ percent. A) 50 B) 58 C) 60 D) 67

C) 60

Real GDP means the value of goods and services is measured in ______ prices. A) current B) actual C) constant D) average

C) constant

Nominal GDP measures the value of goods and services in ______ prices, while real GDP measures the value of goods and services in ______ prices. A) foreign; domestic B) domestic; foreign C) current; constant D) constant; current

C) current; constant

According to the definition used by he U.S. Bureu of Labor Statistics, people are considered to be unemployed if they: A) are out of job, but not looking for work B) retired from the labor force before age 65 C) do not have a job, but have looked for work in the past 4 weeks D) are absent from work because of bad weather or illness

C) do not have a job, but have looked for work in the past 4 weeks

The core inflation rate: A) measures the change in producer prices. B) is measured using a Paasche index. C) excludes food and energy prices. D) includes the price of exports and includes the price of imports.

C) excludes food and energy prices

Assume that a bakery hires more workers and pays them wages and that the workers produce more bread. GDP increases in all of the following cases except when the bread: A) is sold to households. B) is stored away for later sale. C) grows stale and is thrown away. D) is sold to other firms.

C) grows stale and is thrown away

The underground economy: A) is included in the latest GDP accounts. B) includes only illegal activities. C) includes domestic workers for whom Social Security tax is not collected. D) excludes the illegal drug trade.

C) includes domestic workers for whom Social Security tax is not collected

It is a national income accounting rule that all expenditure on purchases of products in the economy is necessarily equal to: A) profits of firms. B) wages of employees. C) income of the producers of the products in the economy. D) income of employees.

C) income of the producers of the products in the economy

When a firm sells a product out of inventory, GDP: A) increases. B) decreases. C) is not changed. D) increases or decreases, depending on the year the product was produced.

C) is not changed

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner. She earns $1,000,000 per year both before and after her marriage. If GDP were changed so that it truly measured the sum of all final economic activity, the marriage would: A) decrease GDP B) increase GDP C) leave GDP unchanged D) first decrease and then increase GDP

C) leave GDP unchanged

GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad. A) plus; plus B) minus; minus C) minus; plus D) plus; minus

C) minus; plus

In the national income accounts, consumption expenditures include all of the following except household purchases of: A) durable goods. B) nondurable goods. C) new residential housing. D) services.

C) new residential housing

National income differs from net national product by an amount called: A) depreciation. B) indirect business taxes. C) statistical discrepancy. D) net foreign factor income payments.

C) statistical discrepancy

The CPI is determined by computing: A) an average of prices of all goods and services. B) the price of a basket of goods and services that changes every year, relative to the same basket in a base year. C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year. D) nominal GDP relative to real GDP.

C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year

If the GDP deflator in 2009 equals 1.25 and nominal GDP in 2009 equals $15 trillion, what is the value of real GDP in 2009? A) $12 trillion B) $12.5 trillion C) $15 trillion D) $18.75 trillion

A) $12 trillion

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then government purchases are: A) $2,977. B) $1,910. C) -$843. D) $1,067.

A) $2,977

The GDP deflator is equal to: A) the ratio of nominal GDP to real GDP. B) the ratio of real GDP to nominal GDP. C) real GDP minus national GDP. D) nominal GDP minus real GDP

A) the ratio of nominal GDP to real GDP

Which of the following is a stock variable? A) wealth B) consumption C) investment D) income

A) wealth

44. Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 5 in 2009, then the GDP deflator in 2009, using a base year of 2002, was approximately: A) 1.5. B) 1.7. C) 1.9. D) 2.0. B

B) 1.7

All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of a: A) book printed in 2009, entitled The Year 3000. B) 2001 Jeep Cherokee. C) year 2010 calendar printed in 2009. D) ticket to see the movie 2001.

B) 2001 Jeep Cherokee

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent. A) 3.5 B) 4.7 C) 4.9 D) 7

B) 4.7

The number of households interviewed in the monthly employment survey of the U.S. Bureau of Labor Statistics is approximately: A) 6,000. B) 60,000. C) 600,000. D) 6 million.

B) 60,000

Assume that the adult population of the US is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ___ percent A) 4.9 B) 7.4 C) 7.9 D) 9.4

B) 7.4

The economic statistic used to measure the level of prices is: A) GDP. B) CPI. C) GNP. D) real GDP.

B) CPI

Nominal GDP is measured in _____ prices _____ time. A) current; at a point in B) current; per unit of C) constant; at a point in D) constant; per unit of

B) Current; per unit of

The statistic used by economists to measure the value of economic output is: A) the CPI. B) GDP. C) the GDP deflator. D) the unemployment rate.

B) GDP

The GDP deflator is a: A) Laspeyres price index. B) Paasche price index. C) Laspeyres quantity index. D) Paasche quantity index.

B) Paasche price index

The national income accounts identity, for an open economy, is: A) Y = C + I + G - NX. B) Y = C + I + G + NX. C) Y = C + I + G. D) Y = C + I - G.

B) Y = C + I + G + NX

Chain-weighted measures of real GDP make use of prices from: A) an unchanging base year. B) a continuously changing base year. C) a base year that is changed approximately every 5 years. D) a base year that is changed approximately every 10 years.

B) a continuously changing base year

The labor force participation rate is the percentage of the A) adult population that is employed B) adult population that is in the labor force C) labor force that is employed D) labor force that is unemployed

B) adult population that is in the labor force

The largest component of national income is: A) corporate profits. B) compensation of employees. C) proprietors' income. D) net interest.

B) compensation of employees

When a firm sells a product out of inventory, investment expenditures ______ and consumption expenditures ______. A) increase; decrease B) decrease; increase C) decrease; remain unchanged D) remain unchanged; increase

B) decrease; increase

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. The marriage A) does not change GDP B) decreases GDP by $60,000 C) increases GDP by $60,000 D) increases GDP by more than $60,000

B) decreases GDP by $60,000

Imputed values included in GDP are the: A) market prices of goods and services. B) estimated value of goods and services that are not sold in the marketplace. C) price of goods and services measured in constant prices. D) price of goods and services measured in current prices.

B) estimated value of goods and services that are not sold in the marketplace

In the national income accounts, net exports equal: A) exported goods minus imported goods. B) exported goods and services minus imported goods and services. C) exported goods minus imported services. D) exported goods and services plus imported goods and services.

B) exported goods and services minus imported goods and services

An estimate of the number of unemployed workers in the economy can be obtained from: A) Both the household and establishment surveys B) from the household survey, but not from the establishment survey C) from the establishment survey, but not from the household survey D) from neither the household nor the establishment surveys

B) from the household survey, but not from the establishment survey

Prices of items included in the CPI are: A) averaged with the price of every item weighted equally. B) weighted according to amount of the item produced in GDP. C) weighted according to quantity of the item purchased by the typical household. D) chained to the base year by the year-to-year growth rate of the item.

C) weighted according to quantity of the item purchased by the typical household

The household survey conducted by the Bureau of Labor Statistics provides estimates of the number works ___, while the establishment survey provides estimates of the number of workers ____ A) self-employed; unemployed B) unemployed; self-employed C) with jobs; on firms' payrolls D) on firms' payrolls, with jobs

C) with jobs; on firms' payrolls

If total consumption (measured in billions of current dollars) equals $3,657, consumption of durable goods is $480, and consumption of nondurable goods is $1,194, then consumption of services is: A) $1,674. B) $2,463. C) $2,083. D) $1,983.

D) $1,983

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are: A) $131. B) -$131. C) $31. D) -$31.

D) -$31

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is: A) 0.75. B) 0.80. C) 1. D) 1.25.

D) 1.25

Assume that a tire company sells 4 tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is: A) $20,000. B) $20,000 less the automobile company's profit on the car. C) $20,900. D) $20,900 less the profits of all three companies on the items that they sold.

A) $20,000

In 2013 in the United States, the approximate amount of GDP (in current dollars) that was spent on consumption per person was: A) $36,400. B) $53,100. C) $8, 400. D) $16,800.

A) $36,400

If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately ______ percent. A) 2 B) 3 C) 5 D) 8

A) 2

The CPI is a: A) Laspeyres price index. B) Paasche price index. C) Laspeyres quantity index. D) Paasche quantity index.

A) Laspeyres price index

In the circular flow model, the flow of dollars from firms to households is paid _____ and the flow of dollars from households to firms is paid _____. A) as wages and profits; for goods and services B) for value added; as imputed values C) in current dollars; in constant dollars D) as interest and dividends; for depreciation and taxes

A) as wages and profits; for goods and services

An estimate of total employment in the economy can be obtained from A) both the household and establishment surveys B) from the household survey, but not from the establishment survey C) from the establishment survey, but not from the household survey D) from neither the household nor the establishment surveys

A) both the household and establishment surveys

In the national income accounts, the purchase of durables, nondurables, and services by households are classified as: A) consumption. B) investment. C) government purchases. D) net exports.

A) consumption

Nominal GDP means the value of goods and services is measured in ______ prices. A) current B) real C) constant D) average

A) current

GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services. D) output of the economy.

A) expenditure of everyone in the economy

The total income of everyone in the economy is exactly equal to the total: A) expenditure on the economy's output of goods and services. B) consumption expenditures of everyone in the economy. C) expenditures of all businesses in the economy. D) government expenditures.

A) expenditure on the economy's output of goods and services

All of the following are measures of GDP except the total: A) expenditures of all businesses in the economy. B) income from all production in the economy. C) expenditures on all final goods and services produced. D) value of all final production.

A) expenditures of all business in the economy

To avoid double counting in the computation of GDP, only the value of ______ goods are included. A) final B) used C) intermediate D) investment

A) final

To compute the value of GDP: A) goods and services are valued at market prices. B) the sale of used goods is included. C) production for inventory is not included. D) goods and services are valued by weight.

A) goods and services are valued at market prices

If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent. A) increased; 2 B) decreased; 2 C) increased; 8 D) decreased; 8

A) increased; 2

Disposable personal income: A) is computed by subtracting personal tax from personal income. B) is generally greater than personal income. C) includes corporate profits but not dividends. D) does not include government transfers to individuals.

A) is computed by subtracting personal tax from personal income

According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person: A) is going to school full time. B) is temporarily absent from a job because of illness. C) has been temporarily laid off. D) is out of a job and looking for work during the previous four weeks.

A) is going to school full time

The new chain-weighted measures of real GDP are an improvement over traditional measures because the prices used to compute real GDP are: A) never far out of date. B) always from the same base year. C) imputed. D) chained to the CPI.

A) never far out of date

The panel of economists appointed by the Senate Finance Committee estimated that the CPI ______ inflation by approximately ______ percentage point(s) per year. A) overestimates; 1 B) overestimates; 10 C) underestimates; 1 D) underestimates; 10

A) overestimates; 1

The investment component of GDP includes all of the following except: A) purchases of corporate stock. B) spending on new plants and equipment. C) purchases of new housing by households. D) changes in business inventories.

A) purchases of corporate stock

An increase in the price of imported goods will show up in: A) the CPI but not in the GDP deflator. B) the GDP deflator but not in the CPI. C) both the CPI and the GDP deflator. D) neither the CPI nor the GDP deflator.

A) the CPI but not in the GDP deflator

Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is: A) $10,000. B) $12,000. C) $20,000. D) $22,000.

B) $12,000

A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is: A) $1 B) $2 C) $3 D) $4

B) $2

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was: A) $5. B) $6.50. C) $9.50. D) $11.

B) $6.50

Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of GDP is: A) 10 pieces of fruit. B) $7. C) $8. D) $10.

B) $7

In 2013 in the United States, total government purchases per person (in current dollars) amounted to approximately: A) $1,900. B) $9,900. C) $13,500. D) $25,600.

B) $9,900

If total investment (measured in billions of current dollars) equals $741, business fixed investment is $524, and residential fixed investment is $222, then inventory investment is: A) $5. B) -$5. C) $15. D) -$15.

B) -$5

Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation, A) provides a real, rather than a nominal, rate of inflation. B) gives a better measure of ongoing, sustained price changes. C) is more consistent with measures of inflation used in other countries. D) fluctuates more than measures of inflation that include food and energy prices.

B) gives a better measure of ongoing, sustained price changes

The market value of all final goods and services produced within an economy in a given period of time is called: A) industrial production. B) gross domestic product. C) the GDP deflator. D) general durable purchases.

B) gross domestic product

An example of an imputed value in the GDP is the: A) value-added of meals cooked at home. B) housing services enjoyed by homeowners. C) services of automobiles to their owners. D) value of illegal drugs sold.

B) housing services enjoyed by homeowners

In the national income accounts, goods bought for future use are classified as which type of expenditure? A) services B) investment C) government purchases D) net exports

B) investment

A worker with two jobs is counted: A) once in both the household and the establishment surveys B) once in the household survey, but twice in establishment survey C) once in the establishment survey; but twice in the household survey D) twice in both the household and the establishment survey

B) one in the household survey, but twice in establishment survey

The best measure of the economic satisfaction of the members of a society is: A) nominal GDP. B) real GDP. C) the rate of inflation. D) the value of corporate profits.

B) real GDP

In principle, the GDP accounts should—but do not—have an imputation for: A) housing services enjoyed by homeowners. B) rental services of automobiles driven by owners. C) meals cooked in restaurants. D) housing services enjoyed by renters.

B) rental services of automobiles by homeowners

The amount of capital in an economy is a ______ and the amount of investment is a ______. A) flow; stock B) stock; flow C) final good; intermediate good D) intermediate good; final good

B) stock; flow

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is: A) Fisher's ideal index. B) the CPI. C) the GDP deflator. D) a Paasche index.

B) the CPI

An increase in the price of goods bought by firms and the government will show up in: A) the CPI but not in the GDP deflator. B) the GDP deflator but not in the CPI. C) both the CPI and the GDP deflator. D) neither the CPI nor the GDP deflator.

B) the GDP deflator but not in the CPI

All of the following are a stock except: A) a consumer's wealth. B) the government budget deficit. C) the number of unemployed people. D) the amount of capital in the economy.

B) the government budget deficit

The employment statistics computed from the establishment survey do not included: A) workers with two jobs B) the self-employed C) workers on firms' payrolls D) part time workers on firms' payrolls

B) the self employed

Since GDP includes only the additions to income, not transfers of assets, ______ are not included in the computation of GDP. A) final goods B) used goods C) consumption goods D) goods produced for inventory

B) used goods

If an increasing proportion of the adult population is retired, then the labor force participation rate: A) will increase B) will decrease C) will remain constant D) may increasing, decrease, or remain constant

B) will decrease

If the number of employed increases while the number of unemployed does not change, the unemployment rate: A) will increase B) will decrease C) will not change D) may either increase or decrease

B) will decrease

Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given this data, a Laspeyres price index of 2009 prices using 2004 as the base year would be: A) 1.05. B) approximately 1.07. C) approximately 1.33. D) 1.50.

D) 1.5

If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals ___ million A) 11.28 B) 176.72 C) 188 D) 200

D) 200

According to the usual seasonal pattern of the U.S. economy, GDP is highest in the quarter of the year that includes: A) January, February, and March. B) April, May, and June. C) July, August, and September. D) October, November, and December.

D) October, November, and December

All of the following actions are investments in the sense of the term used by macroeconomists except: A) IBM's building a new factory. B) corner candy store's buying a new computer. C) John Smith's buying a newly constructed home. D) Sandra Santiago's buying 100 shares of IBM stock.

D) Sandra Santiago's buying 100 shares of IBM stock

Real GDP is measured in _____ prices ____ time. A) current; at a point in B) current; per unit of C) constant; at a point in D) constant; per unit of

D) constant; per unit of

GDP is the market value of all ______ goods and services produced within an economy in a given period of time. A) used B) intermediate C) consumer D) final

D) final

Unlike the GDP deflator, the CPI includes the prices of: A) goods purchased by firms. B) goods purchased by governments. C) exported goods. D) imported goods.

D) imported goods

Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income

D) income

When bread is baked but put away for later sale, this is called: A) waste. B) saving. C) fixed investment. D) investment in inventory.

D) investment in inventory

Net national product equals GNP: A) plus net investment. B) minus net investment. C) plus depreciation. D) minus depreciation.

D) minus depreciation

The labor force equals the: A) adult population B) number of employed individuals C) number of unemployed individuals D) number of employed and unemployed individuals

D) number of employed and unemployed individuals

A fixed-weight price index like the CPI ______ the change in the cost of living because it ______ take into account that people can substitute less expensive goods for ones that have become more expensive. A) underestimates; does not B) overestimates; does C) accurately estimates; does D) overestimates; does not

D) overestimates; does not

In the national income accounts, government purchases are goods and services purchased by: A) the federal government. B) the federal and state governments. C) the state and local governments. D) the federal, state, and local governments.

D) the federal, state, and local governments

All of the following are a flow except: A) the number of new automobile purchases. B) the number of people losing their jobs. C) business expenditures on plant and equipment. D) the government debt.

D) the government debt

In the United States since the end of World War II: A) the labor force participation rate of both men and women have increased B) the labor force participation rates of both men an women have decreased C) the labor force participation rate of men has increased, while the labor force participation rate of women have decreased D) the labor force participation rate of men has decreased, while the labor force participation rate of women have increased

D) the labor force participation rate of men has decreased, while the labor force participation rate of women have increased

The value added of an item produced refers to: A) a firm's profits on the item sold. B) the value of the labor inputs in the production of an item. C) the value of a firm's output less the value of its costs. D) the value of a firm's output less the value of the intermediate goods that the firm purchases.

D) the value of a firm's output less the value of the intermediate goods that the firm purchases

In computing GDP, A) expenditures on used goods are included. B) production added to inventories is excluded. C) the amount of production in the underground economy is imputed. D) the value of intermediate goods is included in the market price of the final goods.

D) the value of intermediate goods is included in the market price of the final goods

Two equivalent ways to view GDP are as the: A) total payments made to all workers in the economy or the total profits of all firms and businesses in the economy. B) total expenditures on all goods produced in the economy or the total income earned from producing all services in the economy. C) total profits of all firms and businesses in the economy or the total consumption of goods and services by all households in the economy. D) total income of everyone in the economy or the total expenditure on the economy's output of goods and services.

D) total income of everyone in the economy or the total expenditure on the economy's output of goods and services

An economy's ______ equals its ______. A) consumption; income B) consumption; expenditure on goods and services C) expenditure on goods; expenditures on services D) total income; total expenditure on goods and services

D) total income; total expenditure on goods and service

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP: A) excludes the value of goods and services exported abroad. B) includes the value of government transfer payments. C) measures changes in the quantity of goods and services produced by holding prices constant. D) adjusts the value of goods and services produced for changes in the foreign exchange rate.

c) measures changes in the quantity of goods and services produced by holding prices constant