Macroeconomics Exam 1

If a country passes a labor law limiting the number of hours of work per week, GDP would ________ and leisure would ________.

decrease; increase

If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be

greater than 100

What is the largest component of spending in the United States? A) consumption spending B) government spending C) net investment spending D) investment spending

A) Consumption spending

An inflation rate of 5% between 2015 and 2016 would be implied by a change in the GDP deflator from ________ in 2015 to ________ in 2016. A) 400; 420 B) 375; 390 C) 200; 205 D) 105; 115

A) 400; 420

Increases in real GDP would understate the well-being of a country over time if, over that time period, the A) amount of pollution decreased. B) percentage of people addicted to illegal drugs increased. C) average hours worked per week increased. D) crime rate increased.

A) Amount of pollution decreased

In 2014, which component of GDP had a negative value? A) investment B) consumption C) government spending D) net exports

D) Net exports

In periods when prices are falling, on average, A) real GDP will grow slower than nominal GDP. B) one cannot calculate real GDP. C) real GDP will grow as fast as nominal GDP. D) real GDP will grow faster than nominal GDP

D) Real GDP will grow faster than nominal GDP

Who receives the goods and services produced in the United States depends largely on

How income is distributed

If real GDP increases we know for sure that

Output has risen

The measure of production that values output using base-year prices is called

Real GDP

Gross domestic product is calculated by summing up

The total market value of final goods and services produced in the economy during a period of time

In the circular flow model, the value of total income for an economy ________ the value of total production. A) equals B) is greater than C) is less than D) may be greater than or less than

A) Equals

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP? A) GDP will decrease. B) GDP will increase. C) GDP will not change. D) GDP may increase or may decrease depending on inflation.

A) GDP will decrease

The purchase of a new house is included in A) investment expenditures. B) government purchases. C) consumption expenditures. D) net exports.

A) Investment expenditures

Nominal GDP is GDP in a given year A) valued in the prices of that year. B) adjusted for anticipated inflation. C) valued in the prices of the base year. D) adjusted for inflation.

A) Valued in the prices of that year

Which of the following goods is directly counted in GDP? A) the plastic bags that Subway purchases to wrap its sandwiches B) a 12-inch Subway sandwich purchased by a student C) the lettuce that Subway purchases for its sandwiches D) the bread that Subway purchases for its sandwiches

B) A 12-inch Subway sandwich purchased by a student

The GDP deflator is a measure of the A) total production of the economy unadjusted for inflation. B) average level of prices of final goods and services in the economy. C) average level of prices of intermediate goods and services in the economy. D) total production of the economy adjusted for inflation.

B) Average level of prices of final goods and services in the economy

Investment, as defined by economists, would include the purchase of a A) corporate bond. B) computer by an accounting firm. C) share of stock in ExxonMobil. D) government bond.

B) Computer by an accounting firm

The size of the underground economy would tend to decrease if the government of a country A) increased business taxes. B) increased income tax rates. C) made over-the-counter drugs illegal. D) decreased government regulations on businesses

D) Decreased government regulations on businesses

To calculate GDP by the expenditure method, one must add A) wages, rents, interest, and profits. B) consumption spending, investment spending, government spending, and net exports. C) labor, natural resources, entrepreneurship, and capital. D) consumption spending, investment spending, government spending, and exports.

B) Consumption spending, investment spending, government spending, and NET exports

The underground economy can be described as A) production of intermediate goods and services. B) economic activity that is hidden from the government to avoid taxes or because the activity is illegal. C) production of infrastructure that spurs growth in the rest of the economy. D) economic production that includes mining.

B) Economic activity that is hidden from the government to avoid taxes or because the activity is illegal

Gross domestic product understates the total production of final goods and services because of the omission of A) exports. B) household production. C) intermediate goods. D) inflation.

B) Household production

Legalizing all forms of illegal activities A) reduces GDP and increases the size of the underground economy. B) increases GDP and reduces the size of the underground economy. C) increases GDP and increases the size of the underground economy. D) reduces GDP and reduces the size of the underground economy.

B) Increases GDP and reduces the size of the underground economy

What is an economic model? A) It is a description of an economic issue that includes all possible related information. B) It is a simplified version of some aspect of economic life used to analyze an economic issue. C) It is a description of an economic issue based on official government information. D) It is a detailed version of some aspect of economic life used to analyze an economic issue.

B) It is a simplified version of some aspect of economic life used to analyze an economic issue

Which of the following is likely to increase measured GDP? A) More people decide to do their own lawn maintenance and give up using a professional service. B) Marijuana becomes legal to grow and sell. C)A greater number of women decide to stay at home and provide day care for their children under age 5. D) Tax rates increase and more people attempt to underreport their income for tax purposes

B) Marijuana becomes legal to grow and sell

If the GDP deflator is 142, by how much have prices changed since the base year? A) Prices have decreased by 4.2%. B) Prices have increased by 42%. C) Prices have increased by 142%. D) Prices have increased by 58%

B) Prices have increased by 42%

If real GDP in 2016 (using 2009 prices) is lower than nominal GDP of 2015, then A) nominal GDP in 2016 equals nominal GDP in 2015. B) prices in 2016 are lower than prices in 2015. C) real GDP in 2016 is larger than real GDP in 2015. D) prices in 2016 are higher than prices in 2015.

B) Prices in 2016 are lower than prices in 2015

The study of economics arises due to A) resources. B) scarcity. C) greed. D) money.

B) Scarcity

Under what circumstances would the GDP deflator be less than 100 after the base year? A) There are no circumstances under which the GDP deflator could be less than 100. B) The GDP deflator will be less than 100 if there has been deflation relative to the base year. C) The GDP deflator will be less than 100 if there has been inflation of less than 2% per year relative to the base year. D) The GDP deflator will be less than 100 if there has been inflation relative to the base year.

B) The GDP deflator will be less than 100 if there has been deflation relative to the base year

Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016? A) the value of the house in 2016 B) the value of the services of the real estate agent C) the value of the house in 2016 minus depreciation D) the value of the house in 2003

B) The value of the services of the real estate agent

Real GDP is GDP in a given year A) adjusted only for unanticipated inflation. B) valued in the prices of the base year. C) valued in the prices of that year. D) adjusted only for anticipated inflation.

B) Valued in the prices of the base year

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is A) 12.5 B) 80 C) 125 D) 800

C) 125

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is A) 105% higher in year 1 than in year 2. B) 5% higher in year 1 than in year 2. C) 5% higher in year 2 than in year 1. D) 105% higher in year 2 than in year 1.

C) 5% higher in year 2 than in year 1

Economics is the study of the ________ people make to attain their goals, given their ________ resources A) purchases; unlimited B) income; available C) choices; scarce D) decisions; household

C) Choices; scarce

Which of the following statements is true? A) A decrease in the crime rate increases GDP as people will spend more on security. B) Household production is counted in GDP as it amounts to real production. C) GDP accounting rules do not adjust for production that pollutes the economy. D) GDP growth distributes income equally to people in the economy.

C) GDP accounting rules do not adjust for production that pollutes the economy

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will A) increase GDP and increase well-being in the economy. B) decrease GDP and decrease well-being in the economy. C) increase GDP and decrease well-being in the economy. D) decrease GDP and increase well-being in the economy.

C) Increase GDP and decrease well-being in the economy

An example of an intermediate good would be A) the potato chips sold by Quiznos. B) a sub sandwich sold by Quiznos. C) the bread that goes into a sub sandwich that is sold by Quiznos. D) the soda pop sold by Quiznos.

C) The bread that goes into a sub sandwich that is sold by Quiznos

Which of the following could cause nominal GDP to decrease, but real GDP to increase? A) The price level rises and the quantity of final goods and services produced falls. B) The price level falls and the quantity of final goods and services produced falls. C) The price level rises and the quantity of final goods and services produced rises. D) The price level falls and the quantity of final goods and services produced rises

C) The price level rises and the quantity of final goods and services produced rises

Scarcity refers to the situation in which A) unlimited resources exceed limited wants. B) a country's population is larger than its resource base. C) unlimited wants exceed limited resources. D) a nation's poverty level increases faster than its population.

C) Unlimited wants exceed limited resources

Investment, as defined by economists, would not include which of the following? Ford A) builds another assembly plant in the United States. B) buys a new robotic machine (from a plant in Ohio) to assemble cars. C) adds 1,000 new cars to inventories. D) buys U.S. government bonds.

D) Buys U.S. government bonds

Which of the following is a macroeconomics question? A) What determines the wages and benefits of flight attendants? B) How is the production quantity of digital cameras determined? C) What factors determine the price of iPhones? D) What determines the unemployment rate?

D) What determines unemployment rate?

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

Macroeconomics

The purchase by a household in China of a CD produced in the United States is included in U.S

Net exports

To examine how the total production of an economy has changed over time, it would be best to examine

Real GDP