Economics 101 Quiz 5: Macroeconomics and Gross Domestic Product, Quizzes of Economics

Download Economics 101 Quiz 5: Macroeconomics and Gross Domestic Product and more Quizzes Economics in PDF only on Docsity! Name Economics 101 Davidson College Fall 2002 Mark C. Foley Quiz #5 Suggested Solutions 1. Macroeconomics includes the study of topics such as B (a) the price of Intel stock, the wage rate of carpenters, and antitrust laws. (b) national output, the national unemployment rate, the rate of inflation, and the trade deficit. (c) the expected effect of bad weather in North Carolina on the price of tobacco. (d) how prices coordinate the decisions of millions of buyers and sellers in a market. 2. Gross Domestic Product measures C (a) the total income of everyone in the economy. (b) the total expenditure on the economy’s output of goods and services. (c) both (a) and (b) (d) neither (a) nor (b) 3. In a simple circular-flow diagram, total income and total expenditure in an economy C (a) are seldom equal because of the dynamic changes which occur in an economy. (b) are equal only when all goods and services produced are sold. (c) are always equal because every transaction has both a buyer and a seller. (d) are always equal because of accounting rules. 4. An example of a non-market good or service whose estimated value is included A in GDP is (a) the estimated rental value of owner-occupied homes. [page 496, “of all …” section] (b) the value of housework performed by individuals in their own homes. (c) the value of vegetables that people grow in their gardens. (d) all of the above are correct examples. 5. Goods and services produced and sold illegally B (a) are included in GDP to the extent they can be measured. (b) are excluded from GDP. (c) are included in GDP only if income from the sales is reported on income tax returns. (d) are included in GDP. 6. GDP includes the value of final goods and not intermediate goods because A (a) the value of intermediate goods is already included in the value of final goods. (b) the value of intermediate goods is too difficult to measure. (c) the value of intermediate goods is measured by GNP. (d) the value of intermediate goods depends on the number of separate production processes. 7. The value of an intermediate good will be added to GDP if B (a) the administration needs to show a rapidly growing economy in an election year. (b) the intermediate good is produced and added to a firm’s inventory of goods to be used or sold at a later date. (c) the intermediate good is used to produce a final service rather than a final good. (d) None of the above is correct. The value of intermediate goods are never included in GDP. 8. An American company owns a fast food restaurant in Moscow, Russia. The value of D goods and services produced in the store (a) are included in both Russian and American GDP. (b) are included partly in Russian GDP and partly in American GDP. (c) are included in American GDP, but not Russian GDP. (d) are included in Russia GDP, but not American GDP. 9. You buy pencils so that you can do your problem sets. A state university buys D pencils so that professors can grade students’ homework. The pencil store buys pencils for its employees to use. Which of these purchases will be counted as part of GDP? (a) your purchase only yes (b) your purchase and the pencil store’s purchase[not the pencil store’s purchase because they are purchasing the pencil as an input into their production process (the business of selling stuff/pencils) so it is not a final product] (c) the pencil store’s purchase and the university’s purchase (d) your purchase and the university’s purchase[yes, on both since your purchase is buying a final good for consumption (C) and the university’s purchase increases government purchases (G) since it’s a state university, e.g., Kansas University – rock chalk, jayhawk!] 10. Unemployment insurance B (a) is part of GDP because it represents income. (b) is not part of GDP because it is a transfer payment. (c) is part of GDP because the recipients must have worked in the past to qualify. (d) is not part of GDP because the payments reduce business profits. 11. Real GDP is the production of goods and services B (a) valued at current prices. (b) valued at constant prices. (c) valued at future prices. (d) valued at the ratio of current year to constant year prices. 12. When constructing the CPI, the Bureau of Labor Statistics tries to include C (a) all goods and services produced in the economy. (b) all goods and services purchased in the economy. (c) all goods and services that typical consumers buy. (d) The Bureau of Labor Statistics does not construct the CPI. 13. The steps involved in calculating the consumer price index include, in order B (a) choose a base year, find the prices, fix the basket, compute the basket’s cost, compute the CPI and the inflation rate (b) fix the basket, find the prices, compute the basket’s cost, choose a base year, compute the CPI and the inflation rate (c) fix the basket, find the prices, compute the inflation rate, compute the basket’s cost, compute the CPI (d) choose a base year, fix the basket, compute the inflation rate, compute the basket’s cost, compute the CPI