Eco test #2

Suppose that the consumer price index at year-end 2010 was 180 and by year-end 2011 had risen to 189. What was the inflation rate during 2011?

5 percent

Which one of the following transactions would be included in GDP?

Ava pays $50 for a used picture frame at a neighborhood garage sale. Ethan donates $500 to his town's junior college scholarship fund. Emily pays $500 to fix the front end of her car damaged in a recent accident.+ Mia pays $5,000 to purchase 100 shares of Microsoft stock.

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Both your nominal and real wages increased.

What does gross private domestic investment include?

Business purchases of capital goods, all new construction, and inventory investment.

Per capita GDP is

a measure of income per person

When the expenditure approach is used to measure GDP, the major components of GDP are

consumption, investment, government consumption and gross investment, and net exports.

If you wanted to measure whether the output of an economy was increasing or decreasing across time periods, you would use the real GDP data rather than the nominal GDP data because

real GDP adjusts for changes in the general level of prices, but nominal GDP does not.

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

selling price of a product includes these taxes, which are income to the government .

An important difference between the GDP deflator and the consumer price index is that

the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers.

Which of the following would be counted in the calculation of GDP?

the brokerage commission from the sale of 100 shares of Microsoft stock

The consumer price index (CPI) is designed to measure

the impact of price changes on the cost of the typical bundle of goods purchased by households.

Gross domestic product is

the market value of final goods and services produced within a country during a time period.

Which of the following is true of inflation?

It is an increase in the general price level of goods and services.+ The purchasing power of money increases as the result of inflation. Inflation is similar to interest payments on future money income, such as pensions and receipts from outstanding loans. Inflation has no effect on real resources.

Which statement represents most correctly the relationship between nominal GDP and real GDP?

Nominal GDP measures current production using current prices, whereas real GDP measures current production using base-year prices.

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which country's GDP will the car be counted?

The GDP of the United States because that is where it was built

A real estate salesperson sells a house in 2011 that was built in 1994. How does this transaction get counted in the GDP statistics?

The real estate salesperson's commission but not the price of the house is included in 2011's GDP.

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 215 for 2008. Ruth's 1931 salary was equivalent to a 2008 salary of

$1,131,579.

A firm purchases $400,000 worth of raw materials and pays wages and salaries of $300,000 and dividends of $100,000. If the firm sells its output for $1 million, the firm's value added to GDP is

$600,000.

In recent years, people have benefited from greater amounts of leisure time. This trend

is not accounted for in GDP.

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated.

is part of the underground economy.