Kumar Problem Set 1

All the following actions are investments in the sense of the term used by macroeconomists except: a. Apple's building a new factory. b. a corner candy store's buying a new computer. c. John Smith's buying a newly constructed home. d. Sandra Santiago's buying 100 shares of Apple stock. e. All of the above actions are investments in the sense of the term used by macroeconomists.

D - sandra santiagos buying 100 shares of apple stock

All of these are flow vairables EXCEPT: A - the number of new automobile purchases B - the number of people losing their jobs C - business expenditures on plant and equipment D - the govt debt

D - the govt debt

An increase in the price of imported goods will show up in: a. the consumer price index (CPI) but not in the gross domestic product (GDP) deflator. b. the GDP deflator but not in the CPI. c. both the CPI and the GDP deflator. d. neither the CPI nor the GDP deflator.

a - the consumer price index(CPI but not in the GDP deflator

Suppose the Bureau of Labor Statistics (BLS) interviews 196,700 people in its monthly survey; 94,500 are not in the labor force, 91,150 are employed, 8,870 are unemployed, and 2,180 are in the armed forces. What is the unemployment rate that the BLS would estimate? a. 8.87 percent b. 4.51 percent c. 9.39 percent d. 9.73 percent e. 10.81 percent

a. 8.87 percent

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was: a. $5. b. $6.50. c. $9.50. d. $11. e. None of the above.

b. $6.50.

If real GDP has increased, which of the following statements is always true? a. Nominal GDP has increased. b. Output has increased. c. Prices have remained the same. d. Output might have decreased if prices have risen enough. e. Both (a) and (d).

b. Output has increased.

The largest component of national income is: a. corporate profits. b. compensation of employees. c. proprietors' income. d. net interest.

b. compensation of employees.

In principle, the gross domestic product accounts should—but do not—have an imputation for: a. housing services enjoyed by homeowners. b. rental services of automobiles driven by owners. c. meals cooked in restaurants. d. housing services enjoyed by renters. e. any of the above.

b. rental services of automobiles driven by owners.

When prices of different goods are increasing in different proportions and households substitute away from more expensive goods, the price index that will rise the fastest is: a. the PCE index. b. the consumer price index (CPI). c. the gross domestic product (GDP) deflator. d. a Paasche index.

b. the consumer price index (CPI).

GDP can be measured by a. the value of all sales in the economy. b. the market value of final goods and services produced in the economy. c. the value of all intermediate goods produced in the economy. d. net national product plus investment. e. both (a) and (d).

b. the market value of final goods and services produced in the economy.

The employment statistics computed from the establishment survey do not include: a. workers with two jobs. b. those who are self-employed. c. workers on firms' payrolls. d. part-time workers on firms' payrolls. e. The establishment survey includes all of the above.

b. those who are self-employed.

If GDP measured in billions of current dollars is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are: a. $673. b. -$673. c. $704. d. -$704. e. To answer this question requires knowledge of whether consumption includes imported items or not.

c. $704.

Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given these data, a Paasche index for 2009 using 2004 prices would be: a. 1.05. b. approximately 1.07. c. approximately 1.33. d. 1.50. e. None of the above.

c. approximately 1.33.

Real GDP is a better measure of economic well-being than nominal GDP because real GDP: a. excludes the value of goods and services exported abroad. b. includes the value of government transfer payments. c. measures changes in the quantity of goods and services produced by holding prices constant. d. adjusts the value of goods and services produced for changes in the foreign exchange rate.

c. measures changes in the quantity of goods and services produced by holding prices constant.

The household survey conducted by the Bureau of Labor Statistics provides estimates of the number of workers ______, while the establishment survey provides estimates of the number of workers ______. a. Self-employed; unemployed b. unemployed; self-employed c. with jobs; on firms' payrolls d. on firms' payrolls; with jobs e. None of the above.

c. with jobs; on firms' payrolls

An economy's ______ equals its ______. a. consumption; income b. consumption; expenditure on goods and services c. expenditure on goods; expenditures on services d. total income; total expenditure on goods and services e. both (b) and (d)

d - total income; total expenditure on goods and services

Assume that a bakery hires more workers and pays them wages and that the workers produce more bread. GDP increases in all the following cases except when the bread: a. is sold to households. b. is stored away for later sale. c. grows stale and is thrown away. d. is sold to other firms. e. GDP increases in all cases above.

d. is sold to other firms.

The value added of an item produced refers to: a. a firm's profits on the item sold. b. the value of the labor inputs in the production of an item. c. the value of a firm's output less the value of its costs. d. the value of a firm's output less the value of the intermediate goods that the firm purchases. e. None of the above.

d. the value of a firm's output less the value of the intermediate goods that the firm purchases.

Short Answer

Short Answer

The aggregate C + I + G most closely approximates a. gross domestic product minus net foreign spending on US goods. b. gross domestic product plus net foreign spending on US goods. c. gross domestic product plus net factor income from abroad. d. gross national product. e. gross domestic product.

a. gross domestic product minus net foreign spending on US goods.

If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent. a. increased; 2 b. decreased; 2 c. increased; 8 d. decreased; 8 e. None of the above.

a. increased; 2