ECON 1202 Chapter 7 HW

Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Assuming that 2014 was the base year, the growth rate of real GDP from 2013 to 2014 was: - -5%. - 20%. - 11.25%. - 4.7%.

4.7%.

Which equation is the BEST one for GDP? -GDP = C+ I + G - X + IM -GDP = C + I + G + X - IM -GDP = C + I + G + taxes + X + IM -GDP = C + I + G + taxes - value added

GDP = C + I + G + X - IM

True or False: A market basket is a hypothetical set of consumer purchases of goods and services.

True

The total income of households after taxes and government transfers is called: -investment. -aggregate spending. -disposable income. -private savings.

disposable outcome

The national accounts do NOT keep track of: -exchange rates. -business investment. -the sales of producers. -the spending of consumers and the government.

exchange rates

In the circular-flow diagram, an organization that produces goods and services for sale is a: -factor. -government. -household. -firm.

firm

A country's exports minus its imports during a period are: -net exports. -net imports. -gross imports. -gross exports.

net exports

If real GDP falls while nominal GDP rises, then prices on average have: -risen. -Real GDP cannot rise when nominal GDP falls. -stayed the same. -fallen.

risen

An example of an intermediate good is: -vegetables purchased for your dinner. -wages paid to an employee. -steel purchased by aircraft manufacturers. -electric bills for your house.

steel purchased by aircraft manufacturers.

Which factor is NOT included in investment spending in the national income accounts? -the purchase of stocks and bonds by a business -spending on inventories -the purchase of machinery and other productive physical capital -new residential construction

the purchase of stocks and bonds by a business

Which item would NOT be included in this year's GDP? -the hiring of a new schoolteacher -the purchase of a new hybrid truck -the purchase of your neighbor's house, which was built in 1994 -the production of a television show

the purchase of your neighbor's house, which was built in 1994

Which definition BEST describes GDP? -the total value of all goods and services produced and sold in the economy during a given year the total value of all primary, intermediate, and final goods and services produced in the economy during a given year -the total value of all final goods and services produced in the economy during a given year -the total value of all goods and services produced in the economy during a given year

the total value of all final goods and services produced in the economy during a given year

GDP does NOT exclude: -the value of housework. -the value of leisure. -damage to the environment. -the value of owner-occupied housing.

the value of owner-occupied housing.

GDP is the total: -value of all final goods and services produced by Americans at home and abroad in a year. -value of all final goods and services produced in a year. -value of all transactions in a year. -value of all goods produced in the economy in a year.

value of all final goods and services produced in a year.

Most households derive the bulk of their income from: -rent. -wages. -profit. -interest.

wages

A transfer payment is a payment for: -being transferred to a different city by your employer. -transfer of a debt to a different person. -a military transfer to a war zone. -which no services were rendered by the government.

which no services were rendered by the government.

Purchases of foreign-produced goods and services are: -exports. -transfer payments. -imports. -net exports.

imports

Disposable income equals: -income plus government spending minus taxes. -income minus taxes minus government transfers. -income minus taxes plus government spending. -income plus government transfers minus taxes.

income plus government transfers minus taxes.

How much is total government spending? -$200 -$370 -$220 -$20

$220

Table: Measuring GDP. Total expenditures on GDP on the household sector are: $200 billion. $100 billion. $500 billion. $150 billion.

$500 billion

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The value of nominal GDP in years 1 and 2, respectively, is: -$180,000 and $257,400. -$900 and $1,077.50. -$900 and $990. -$1,000 and $1,005.

-$900 and $1,077.50

Use Table: Pizza Economy II. GDP in this economy is: -$74,000. -$5,000. -$16,000. -$29,000.

-16,000

The growth rate of per capita nominal GDP was: Year Nominal GDP Population 2011 3,000 5 2014 8,000 10 -33%. -10%. -20%. -25%.

33%

If the cost of a market basket is $150 in year 1 and $200 in year 2, the price index for year 1 using year 2 as the base is: -100. -133. -75. -150.

75

The Arcadia Entertainment Co. produced 20,000 DVDs of the movie Thor in 2011. Only 4,000 copies remained unsold at the end of 2011. As a result: -all 20,000 DVDs will be included in GDP in 2011, 16,000 as consumption expenditure and 4,000 as investment expenditure. -only 16,000 DVDs are included in GDP of 2011; the remaining 4,000 are counted in GDP of 2012. -only 16,000 DVDs should be included in GDP in 2011 as consumption expenditure. -all 20,000 DVDs are initially counted in 2011 GDP as consumption expenditure, but they will be subtracted and added to 2012 GDP as the merchandise gets sold.

all 20,000 DVDs will be included in GDP in 2011, 16,000 as consumption expenditure and 4,000 as investment expenditure.

Real GDP per capita is: -the only way to measure living standards among different countries. -a perfect measure of a country's standard of living. -used only by the United Nations to compare nations based on measures of welfare. -an incomplete measure of a country's standard of living.

an incomplete measure of a country's standard of living.

If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in government spending, holding everything else constant, which outcome is likely to occur? -an increase in the nominal GDP -an increase in the unemployment rate -a decrease in the inflation rate -a decrease in the real GDP

an increase in the nominal GDP

Real GDP is nominal GDP adjusted for: -changes in prices. -population. -double counting. -imports.

changes in prices

The consumer price index reflects: -the prices of all goods and services computed from the ratio of nominal GDP to real GDP. -the level of prices for raw materials. -changes in the prices of goods and services typically purchased by consumers. -the level of prices for intermediate goods and services purchased by businesses.

changes in the prices of goods and services typically purchased by consumers.

Economists frequently use GDP per capita to reflect: -differences in living standards across countries. -people who are employed. -both people who are employed and those who are unemployed. -the impact of prices on GDP.

differences in living standards across countries.

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's: -disposable income. -trade deficit. -gross domestic product. -budget deficit.

gross domestic product

In the U.S. economy, the circular-flow diagram does NOT illustrate: -flows of money. -the purchase and sale of factors of production. -flows of goods and services. -growing income inequality.

growing income inequality.