Pre Test
If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is
12 percent WRONG
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Refer to Scenario 24-1. Josh Holloway's current year income in 1944 dollars is
16,923
The market value of all final goods and services produced within Chereaux in 2019 is
200
The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as
Consumption of services
Which of the following correctly orders U.S. income measures from largest to smallest?
Disposable personal income, gross national product, national income, net national product, personal income WRONG
GDP is the market value of all final goods and services produced by a country's citizens in a given period of time.
False
The government's purchases of goods but not its purchases of services are included in GDP.
False
An economy's income is the same as its expenditure because every transaction has a buyer and a seller.
True
Expenditures by households on education are included in the consumption component of GDP.
True
In 2015, the level of U.S. real GDP was more than four times its 1965 level
True
Janet is a farmer. Which of the following are included in her human capital?
What she's learned from experience but not her tractor
In an economy where net exports are zero, if saving rises in some period, then in that period
consumption falls and investment rises
statistical discrepancy
exists because data sources are not perfect, so measures of expenditures and income are not equal.
Additions to inventory subtract from GDP, and when the goods in inventory are sold, the reductions in inventory add to GDP
false
Economists generally believe that inward-oriented policies are more likely to foster growth than outward-oriented policies. True False
false
If the GDP deflator in 2009 was 150 and the GDP deflator in 2010 was 175, then the inflation rate in 2010 was 25%.
false
Nominal GDP uses constant base-year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.
false
The largest sector in the consumer price index market basket is food and beverage purchases.
false
When an American doctor opens a practice in Bermuda, his production there is part of U.S. GDP.
false
Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?
the purchase of new house
A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.
true
Archie has a savings account at a bank. If he earns 6 percent interest on his account and if there is deflation, then his purchasing power rises by more than 6 percent over the course of a year.
true
Assuming constant returns to scale, if two countries are otherwise the same, the one that is poorer grows faster. True False
true
Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation.
true
GDP does not make adjustments for leisure time, environmental quality, or volunteer work.
true
If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm is considered to have "purchased" the good so it will count as part of that period's investment expenditures.
true
If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.
true
If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.
true
In 2014 income per person in the United States was about 10 times that in India. True False
true
In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP deflator.
true
Over the last 140 years or so, on average Canada's real GDP per-person grew faster than that of the U.K.
true
Petroleum is an example of a nonrenewable resource.
true
Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.
true
The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living. True False
true
The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.
true
U.S. GDP excludes the production of most illegal goods
true
When an American doctor opens a practice in Bermuda, his production there is part of U.S. GNP.
true
journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8 hours a day. Journey's productivity was 1/4.
true
Refer to Table 23-3. What was the growth rate of real GDP for 1930?
−8.62%. Real GDP is a better gauge of economic well-being than nominal GDP.
Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period?
3.7 percent
U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.
False
if real GDP is higher in one country than in another, then we can be sure that the standard of living is higher in the country with the higher real GDP.
False
U.S. GDP and U.S. GNP are related as follows:
GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.
A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called
Intermediate goods
If exports are $500, GDP is $8000, government purchases are $1200, imports are $700, and investment is $800, then consumption is $6200.
True
In the GDP accounts production equals
income
Japan's status as a rich nation is attributable to
international trade, but not to Japan's domestic quantities of natural resources.
Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his backyard. Regarding these two practices, which of the following statements is correct?
only Joe's and Jim's grocery store purchases are included in GDP.
A recession has traditionally been defined as a period during which
real GDP declines for 2 consecutive quarters
A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,
real output and the price level both rose
