Understanding Gross Domestic Product (GDP) and Its Components, Exams of Economics

Download Understanding Gross Domestic Product (GDP) and Its Components and more Exams Economics in PDF only on Docsity! Practice Test Module 4 Started: April 18, 2011 12:37 AM Submitted: April 18, 2011 12:40 AM Time spent: 00:03:21 Total score: 0/100 = 0% 1. Gross domestic product serves as a measure of two things: Student Response Value Correct Answer Feedback 1. the value of the nation's output of goods and services for domestic citizens and the value of the nation's output of goods and services for the rest of the world. 2. the nation's saving and the nation's investment. 3. the total income of everyone in the economy and the total expenditure on the nation's output of goods and services. 4. the total spending of everyone in the economy and the total saving of everyone in the economy. Score: 0/2 2. If someone in the United States buys a surfboard produced in Australia, that purchase is included in both the consumption component of U.S. GDP and the net exports component of U.S. GDP. Student Response Value Correct Answer Feedback 1. False 2. True Score: 0/2 3. GDP is defined as Student Response Value Correct Answer Feedback 1. the market value of all final goods and services produced within a country in a given period of time. 2. the market value of all goods and services produced by the citizens of a country, regardless of where they are living in a given period of time. 3. the market value of all goods and services produced within a country in a given period of time. 4. the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. Score: 0/2 4. A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result, Student Response Value Correct Answer Feedback 1. U.S. investment, U.S. GDP, and German GDP all increase. equipment, inventories, and structures. 4. putting money away in a 401K pensions fund system. Score: 0/2 9. If Nominal GDP increased from $1.0 trillion in 2000 to $1.2 trillion in 2005, we: Student Response Value Correct Answer Feedback 1. can say that output increased by 20% in the economy through that period. 2. can say that prices increased by 20% in the economy through that period. 3. don't have enough information from this to determine how much output actually increased in the economy. 4. can say that output increased by 20% in the economy compared to the base year. Score: 0/2 10. Economists consider Nominal GDP to be a good measure of a country's productivity. Student Response Value Correct Answer not answered 0% False Score: 0/2 11. Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment. Student Response Value Correct Answer Feedback 1. True 2. False Score: 0/2 12. Nobel Laureate in Economics, Joseph Stiglitz, commented in a video shown in class on the shortcomings of GDP when used as an indicator of human well-being. One of the points he made was: Student Response Value Correct Answer Feedback 1. The incarceration of people increases GDP. 2. A measure of "Green GDP" would better take into account industry's effect on human well- being than GDP. 3. GDP does not tell us anything about income inequality. 4. All of the choices are correct. Score: 0/2 13. In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of bread, 3 robes and 2 gallons of gasoline. The per-unit prices of these goods have been as follows: Table 24-3 Year Apples Bread Robes Gasoline 2002 $1.00 $2.00 $10.00 $1.00 2003 $1.00 $1.50 $9.00 $1.50 2004 $2.00 $2.00 $11.00 $2.00 2005 $3.00 $3.00 $15.00 $2.50 Refer to Table 24-3. Using 2002 as the base year, what was the inflation rate between 2004 and 2005? (Round your answer.) Student Response Value Correct Answer Feedback 1. 40 percent 2. 41 percent 3. 46 percent 4. 48 percent Score: 0/2 14. To calculate the CPI, the Bureau of Labor Statistics uses Student Response Value Correct Answer Feedback 1. all prices of all goods and services produced domestically. 2. the prices of all final goods and services. 3. the prices of all consumer goods and services. 4. the prices of selected consumer goods and services. Score: 0/2 15. If the prices of highly popular Australian-made shoes imported into the United States increase, then, as a result, Student Response Value Correct Answer Feedback 1. the GDP deflator 2. $536,000. 3. $1,216,000. 4. $1,026,000. Score: 0/2 19. Indexation refers to Student Response Value Correct Answer Feedback 1. a process of adjusting the nominal interest rate so that it is equal to the real interest rate. 2. using a law or contract to automatically correct a dollar amount for the effects of inflation. 3. using a price index to deflate dollar values. 4. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator. Score: 0/2 20. Which among the following statements is correct about the relationship between inflation and interest rates? Student Response Value Correct Answer Feedback 1. The nominal interest rate is determined by the rate of inflation. 2. There is no relationship between inflation and real interest rates. 3. In order to fully understand inflation, we need to know how to correct for the effects of interest rates. 4. In order to fully understand interest rates, we need to know how to correct for the effects of inflation. Score: 0/2 21. The real interest rate tells you Student Response Value Correct Answer Feedback 1. the purchasing power of your bank account today. 2. the number of dollars in your bank account today. 3. how fast the purchasing power of your bank account rises over time. 4. how fast the number of dollars in your bank account rises over time. Score: 0/2 22. The CPI is computed by finding the market price of a basket of goods whose contents vary each year. Student Response Value Correct Answer Feedback 1. True 2. False Score: 0/2 23. The level of real GDP per person Student Response Value Correct Answer Feedback 1. and the growth rate of real GDP per person vary widely across the world. 2. differs widely across the world, but the growth rate of real GDP per person is similar across the world. 3. and the growth rate of real GDP per person are similar across the world. 4. is very similar across the world, but the growth rate of real GDP per person differs widely across the world. Score: 0/2 24. Accumulating capital Student Response Value Correct Answer Feedback 1. allows society to consume more in the present. 2. decreases saving rates. 3. has no tradeoffs. 4. requires that society sacrifice consumption goods in the present. Score: 0/2 25. Other things the same, a country that increases its saving rate increases 2. These are outward- oriented policies and most economists believe they would have beneficial effects on growth. 3. These are inward- oriented policies and most economists believe they would have adverse effects on growth. 4. These are outward- oriented policies and most economists believe they would have adverse effects on growth. Score: 0/2 29. The concept of diminishing returns of capital refers to the idea that: Student Response Value Correct Answer Feedback 1. firms in rich countries invest less than firms in poor countries. 2. any given increase in investment yields less economic growth in a rich country than in a poor country. 3. firms in poor countries invest less than firms in rich countries. 4. any given increase in investment yields less economic growth in a poor country than in a rich country. Score: 0/2 30. The key to increasing real average incomes in a nation lies in: Student Response Value Correct Answer Feedback 1. activist labor unions that force businesses to increase the wages throughout the nation. 2. raising significantly the minimum wage. 3. increasing productivity. 4. limiting imports to protect our jobs and wages. Score: 0/2 31. A given increase in a nation's rate of saving will lead to Student Response Value Correct Answer Feedback 1. an increase in the stock of capital. 2. an increase in productivity. 3. an increase in Real GDP. 4. an increase in the growth rate of the economy. 5. All the answers are correct. Score: 0/2 32. An increase in the saving rate permanently increases the growth rate of real GDP per person. Student Response Value Correct Answer Feedback 1. False 2. True Score: 0/2 33. Accumulating ever more physical capital, human capital, natural resources, and technological knowledge are strategies designed to increase our: Student Response Value Correct Answer Feedback 1. net exports 2. taxes 3. population 4. productivity Score: 0/2 34. In order for an economy to increase investment: Student Response Value Correct Answer Feedback 1. society must save more. 2. businesses must spend less. 3. the government must raise taxes. 4. exports must increase. Score: 0/2 35. The key to increasing real average incomes in a nation lies in: Student Response Value Correct Answer Feedback 1. activist labor unions, that funds decreased. 2. The supply of loanable funds decreased. 3. The supply of loanable funds increased. 4. The demand for loanable funds increased. Score: 0/2 40. Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds according to the theory learned in class? Student Response Value Correct Answer Feedback 1. The interest rate and investment would rise. 2. None of the choices are correct. 3. The interest rate and investment would fall. 4. The interest rate would rise and investment would fall. Score: 0/2 41. If the government changes the tax code in a way that encourages households to save more: Student Response Value Correct Answer Feedback 1. the supply of loanable funds will shift to the right, leading to a lower interest rate. 2. the demand for loanable funds will shift to the right, leading to a higher interest rate. 3. the supply of loanable funds will shift to the left, leading to a higher interest rate. 4. the demand for loanable funds will shift to the left, leading to a lower interest rate. Score: 0/2 42. If Canada increases its budget deficit, it will reduce Student Response Value Correct Answer Feedback 1. None of the choices are correct. 2. private saving and so decrease the supply of loanable funds. 3. investment and so cause an increase in the demand for loanable funds. 4. public saving and so decrease the supply of loanable funds. Score: 0/2 43. The source of the supply of loanable funds is the group of people who wish to borrow them for the purpose of investment. Student Response Value Correct Answer not answered 0% False Score: 0/2 44. The labor force equals the Student Response Value Correct Answer Feedback 1. number of people who are unemployed. 2. number of people employed plus the number of people unemployed. 3. adult population. 4. number of people who are employed. Score: 0/2 45. John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn’t appear to be falling, there seems to be more people applying than jobs available. Student Response Value Correct Answer Feedback 1. John and Curtis are both structurally unemployed. 2. John is structurally unemployed, and Curtis is frictionally unemployed. 3. John is frictionally unemployed, and Curtis is structurally unemployed. 4. John and Curtis are both frictionally unemployed. Score: 0/2 46. The natural unemployment rate includes