Question 1

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

Accepted Answer

A)   GDP increases by $1.50.
B)   GDP increases by $3.50.
C)   GDP increases by $6.00.
D)   GDP increases by $7.50.E) C) and D)
F) A) and D)

Question 2

The CPI is based on

Accepted Answer

A)   a basket of goods that is updated every year.
B)   a broader range of goods and services than the GDP deflator.
C)   the same set of goods and services as the GDP deflator.
D)   a fixed basket of goods purchased during an earlier base period.E) None of the above
F) All of the above

Question 3

U.S. GDP and U.S. GNP are related as follows:

Accepted Answer

A)   GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.
B)   GNP = GDP + Income earned by foreigners in the U.S. - Income earned by U.S. citizens abroad.
C)   GNP = GDP + Value of exported goods - Value of imported goods.
D)   GNP = GDP - Value of exported goods + Value of imported goods.E) None of the above
F) B) and C)

Question 4

Which of the following will increase this year's GDP?

Accepted Answer

A)   the sale of a used economics textbook to the college bookstore
B)   family lawn services provided by a 16-year-old son or daughter
C)   $60,000 of income earned by an American college professor teaching in England
D)   a $100 sales commission to a broker for a purchase of 100 shares of stock
E)   $10 billion of damage caused by a hurricane that hit the coast of FloridaF) A) and B)
G) C) and D)

Question 5

Use the table below to choose the correct answer.
Table 7-4
 
-Refer to Table 7-4. Gross domestic product equals

Accepted Answer

A)   $3,550.
B)   $4,000.
C)   $4,150.
D)   $8,100.E) A) and C)
F) A) and D)

Question 6

Use the table below to answer the following question.
Table 7-13
 
-Refer to Table 7-13. Between 2001 and 2002, the real output of this economy increased by approximately

Accepted Answer

A)   1.9 percent.
B)   2.4 percent.
C)   4.1 percent.
D)   6.7 percent.E) B) and C)
F) None of the above

Question 7

If the price of hot dogs was $2 last year and $3 this year, then 100 hotdogs will contribute

Accepted Answer

A)   $200 to last year's nominal GDP and $166 to this year's nominal GDP.
B)   $200 to last year's real GDP and $300 to this year's real GDP.
C)   the same dollar amount to each year's nominal GDP because hotdogs are intermediate goods.
D)   $200 to last year's nominal GDP and $300 to this year's nominal GDP.E) C) and D)
F) B) and D)

Question 8

A professor of economics gets a $100 a month raise. She figures that even with her new monthly salary she will be unable to buy as many goods and services as she could 12 months ago.

Accepted Answer

A)   Her real and nominal salary have risen.
B)   Her real and nominal salary have fallen.
C)   Her real salary has risen and her nominal salary has fallen.
D)   Her real salary has fallen and her nominal salary has risen.E) B) and D)
F) B) and C)

Question 9

Government purchases include spending on goods and services by

Accepted Answer

A)   the federal government only.
B)   state and federal governments only.
C)   local, state and federal governments.
D)   local, state and federal governments, as well household spending by employees of those governments.E) All of the above
F) C) and D)

Question 10

Because GDP does not fully account for improvements in the quality of goods, the GDP calculation

Accepted Answer

A)   tends to overstate the true value of output in the United States.
B)   tends to understate the true value of output in the United States.
C)   provides an accurate value of output in the United States.
D)   measures the value correctly because price changes always capture the value of quality changes.E) A) and C)
F) A) and D)

Question 11

If the consumer price index (CPI)  at the end of year one was 100 and was 108 at the end of year two, the inflation rate during year two was

Accepted Answer

A)   zero; the CPI of 100 indicates that prices were stable.
B)   8 percent.
C)   5 percent.
D)   108 percent.E) A) and B)
F) None of the above

Question 12

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Accepted Answer

A)   producers are likely to change the number of goods they sell from year to year.
B)   producers will generally reduce the quality of goods as prices increase over time.
C)   consumers will tend to substitute away from goods that become more expensive.
D)   consumers will usually reduce their consumption of goods when they become relatively cheaper.E) B) and D)
F) None of the above

Question 13

Which of the following events will reduce GDP?

Accepted Answer

A)   A hurricane destroys your house.
B)   You lose $500 playing poker.
C)   You pay $500 to repair the damage done to your house by a hurricane.
D)   You work 15 hours less this month so that you can repair the damage done to your home by a hurricane.E) A) and B)
F) B) and D)

Question 14

Double counting in the resource cost-income approach to GDP statistics is avoided by

Accepted Answer

A)   correct accounting of the values of exports and imports
B)   choosing only one method to calculate GDP--either the income or the expenditures method
C)   counting only the value added at each stage of a good's production process
D)   counting the value of final and intermediate goods and services
E)   subtracting the total value of intermediate goods and services from the total value of final goods and servicesF) A) and E)
G) C) and D)

Question 15

Use the table below to choose the correct answer.
Table 7-10
 
-Refer to Table 7-10. Measured in 1993 prices, real GDP in 2003 was

Accepted Answer

A)   $7,982 billion.
B)   $9,177 billion.
C)   $10,381 billion.
D)   $11,624 billion.E) A) and D)
F) A) and C)

Question 16

A wealthy stamp collector recently sold a rare stamp for $80,000 that he purchased two years earlier for only $10,000. What impact will this transaction have on GDP?

Accepted Answer

A)   GDP increases by $80,000.
B)   GDP increases by $70,000.
C)   GDP declines by $70,000.
D)   There is no change in GDP.E) All of the above
F) A) and C)

Question 17

A real estate salesperson sells a house in 2009 that was built in 1990. How does this transaction get counted in the GDP statistics?

Accepted Answer

A)   The price of the house and the real estate salesperson's commission are both included in 2009's GDP.
B)   Neither the price of the house or the commission is included in 2009's GDP.
C)   The real estate salesperson's commission but not the price of the house is included in 2009's GDP.
D)   The price of the house would be included in both 1990's GDP and the GDP for 2009.E) A) and B)
F) B) and D)

Question 18

One of the widely-acknowledged problems with the consumer price index (CPI)  as a measure of the cost of living is that the CPI

Accepted Answer

A)   fails to account for consumer spending on housing.
B)   accounts only for consumer spending on food, clothing, and energy.
C)   fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods.
D)   fails to account for the introduction of new goods.E) A) and D)
F) A) and C)

Question 19

Which one of the following events will leave GDP unchanged?

Accepted Answer

A)   You pay $500 to repair your car damaged in an accident.
B)   You buy a new domestic car to replace one that was stolen.
C)   You lose $500 playing blackjack with friends.
D)   You work extra hours this month to help make up for the money you lost playing blackjack.E) B) and C)
F) B) and D)

Question 20

The typical bundle of goods and services on which the GDP deflator is based

Accepted Answer

A)   is narrower than the one used to calculate the CPI.
B)   is updated once every decade.
C)   is the same as the one used to calculate the CPI.
D)   is updated every year.E) All of the above
F) A) and B)

Exam 7: A : Taking the Nations Economic Pulse

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

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Which of the following events will reduce GDP?

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Because GDP does not fully account for improvements in the quality of goods, the GDP calculation

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Which of the following will increase this year's GDP?

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Use the table below to answer the following question. Table 7-13 -Refer to Table 7-13. Between 2001 and 2002, the real output of this economy increased by approximately

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One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

Correct AnswerverifiedShow Answer

Double counting in the resource cost-income approach to GDP statistics is avoided by

Correct AnswerverifiedShow Answer

U.S. GDP and U.S. GNP are related as follows:

Correct AnswerverifiedShow Answer

The CPI is based on

Correct AnswerverifiedShow Answer

Use the table below to choose the correct answer. Table 7-4 -Refer to Table 7-4. Gross domestic product equals

Correct AnswerverifiedShow Answer

The typical bundle of goods and services on which the GDP deflator is based

Correct AnswerverifiedShow Answer

A wealthy stamp collector recently sold a rare stamp for $80,000 that he purchased two years earlier for only $10,000. What impact will this transaction have on GDP?

Correct AnswerverifiedShow Answer

A real estate salesperson sells a house in 2009 that was built in 1990. How does this transaction get counted in the GDP statistics?

Correct AnswerverifiedShow Answer

A professor of economics gets a $100 a month raise. She figures that even with her new monthly salary she will be unable to buy as many goods and services as she could 12 months ago.

Correct AnswerverifiedShow Answer

Which one of the following events will leave GDP unchanged?

Correct AnswerverifiedShow Answer

Government purchases include spending on goods and services by

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Use the table below to choose the correct answer. Table 7-10 -Refer to Table 7-10. Measured in 1993 prices, real GDP in 2003 was

Correct AnswerverifiedShow Answer

If the consumer price index (CPI) at the end of year one was 100 and was 108 at the end of year two, the inflation rate during year two was

Correct AnswerverifiedShow Answer

If the price of hot dogs was $2 last year and $3 this year, then 100 hotdogs will contribute

Correct AnswerverifiedShow Answer

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

Correct AnswerverifiedShow Answer

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