Ch. 4
If real GDP falls from one period to another, we can conclude that A deflation occurred. B nominal GDP fell. C inflation occurred. D none of these necessarily occurred.
D
Nominal gross domestic product A is not affected by the level of inflation. B changes only when there is a change in output. C changes only when there is a change in the price level. D can change when there is a change in either output or the price level.
D
Of the measures discussed in this chapter, which is the best measure of the average individual's well-being. A Nominal GDP B Nominal GDP per capita C Real GDP D Real GDP per capita
D
Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to NGDP and RGDP? A NGDP goes down, RGDP goes down. B NGDP does not change, RGDP does not change. C NGDP goes up, RGDP goes down. D NGDP goes up, RGDP does not change.
D
important
GDP = total spending = income
GDP deflator
Nominal GDP/Real GDP x 100
GDP deflator
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
unplanned spending
changes in the inventories that firms maintain in order to cover the difference between the smooth production process and the very erratic spending
Does GDP include the purchase of a haircut? A Yes B No
A
planned spending
spending on machines and factories
Nominal GDP
the dollar value of all final goods and services produced in a country in one year in current year prices
Real GDP
the dollar value of all goods and services produced in a country in a year (with inflation) (adjusted for price changes)
GDP excludes nonmarket transactions. Therefore, GDP tends to A Underestimate the amount of production in the economy. B Overestimate the rate of inflation in the economy. C Overestimate the amount of production of the economy. D Underestimate the rate of inflation in the economy.
A
Nominal GDP is adjusted for price changes through the use of A the GDP price index. B exchange rates. C the Producer Price Index (PPI). D the Consumer Price Index (CPI).
A
The problem with using nominal GDP as opposed to real GDP as a measure of output is that A nominal GDP is affected by the inflation rate. B nominal GDP does not account for leisure time. C real GDP does not count unintended expenditures. D all of the above.
A
If a country has a larger real GDP than another country, then it should also have a higher real GDP per capita than the other country. A True. B False.
B
Real GDP is: A the nominal value of all goods and services produced in the economy. B the dollar value of all goods and services produced in the economy corrected for inflation or deflation. C that aggregate output that is produced when the economy is operating at full employment. D always greater than nominal GDP.
B
Which definition is the best one for GDP? A The sum of all final goods and services consumed in a country in a given year. B The sum of all final goods and services produced in a country in a given year. C The sum of all final goods and services produced in a country minus the goods imported. D The sum of all final goods and services produced by citizens of a country in a given year.
B
A nation's GDP can be found by adding up the dollar value of the goods produced, the income earned, or total spending because A the factors of production are land, labor, capital, and entrepreneurship. B the costs of production are equal to the factors of production. C price equals cost equals income earned equals money spent. D all of the above.
C
All of the following are synonyms of GDP except A income B output C total spending D the level of economic activity
C
China has one of the largest real GDPs in the world. What does that measure not consider when determining the well-being of its citizens? A The inflation rate. B The current exchange rate. C The number of people in the country.
C
GDP understates the amount of economic production in the United States because it excludes: A Spending for the U.S. military B Purchases of stocks and bonds C Work performed by people for their own benefit D Transfer payments
C
If a country is experiencing deflation: A Changes in real GDP are less than changes in nominal GDP. B Changes in real GDP are equal to changes in nominal GDP. C Changes in real GDP are greater than changes in nominal GDP.
C
The RGDP tends to underestimate the productive activity in the economy because it excludes the value of output from: A The consumption of fixed capital. B Public transfer payments to households. C work done around the house by the homeowner. D all of the above.
C
Which of the following government agencies estimates and compiles the U.S. GDP accounts? A The American Economic Association B The Federal Reserve System C The Bureau of Economic Analysis D The Bureau of Labor Statistics
C
Why is the purchase of a share of stock not included in GDP? A Money is not being exchanged when a stock is purchased. B A company sells too many stocks for it to be included. C The purchase of a share of stock does not correspond to the production of a good or service.
C
A large underground economy results in an A understated GDP price index. B overstated GDP price index C overstated GDP. D understated GDP.
D
