Test Bank Chapter 10, Quizzes of Macroeconomics

Download Test Bank Chapter 10 and more Quizzes Macroeconomics in PDF only on Docsity! Chapter 10 Measuring a Nation’s Income 1. Macroeconomists study a. decisions of households and firms. b. economy-wide phenomena. c . d. regulations of firms and unions. TYPE: M DIFFICULTY: 1 SECTION: 10.0 2. Which of the following headlines would be more closely related to what microeconomists study than what macroeconomists study? a. ‘Unemployment rate rises from 5 percent to 55 percent, b. Real GDP grows by 3.1 percent in the third quarter. c. Retail sales at stores show large gains. d. The price of oranges rises after an early frost. TYPE: M DIFFICULTY: 1 SECTION: 10.0 3. Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist? a. Why do prices in general rise by more in some countries than others? b. Why do wages differ across industries? c d. Why has average income increased over time? TYPE: TF DIFFICULTY: 1 SECTION: 23.0 4, Macroeconomics includes the study of topics such as a. b._ the price of Cisco stock, wage differences between genders, and antitrust laws. c. differences in market structure, and how consumers maximize utility. d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.0 5. The goal of macroeconomics is a. to explain how economic changes affect prices of particular goods. b. to devise policies to deal with market failures such as externalities and monopoly. © toexplain changes that affect households and firms in general. d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.0 6. The basic tools of supply and demand are a. b. useful in analyzing the overall economy, but not in analyzing individual markets. c. not particularly useful in either macroeconomic or microeconomic analysis. d. central to macroeconomic analysis as well as to microeconomic analysis. TYPE: M DIFFICULTY: 1 SECTION: 10.0 7. Which of the following statistics is the best single measure of an economy’s well-being? a. the unemployment rate b. the inflation rate © d._ the trade deficit TYPE: M DIFFICULTY: 1 SECTION: 10.0 8. Which of the following is correct for an economy? a. Income is greater than production. D. Production is greater than income. c. Income always equals production. d. Income equals production only when saving is zero. TYPE: M DIFFICULTY: 1 SECTION: 10.1 277 278 0 Chapter 10/Measuring a Nation’s Income 9. Robert works as a lawyer. a. GDP computations should be made using his income from providing legal services, not his production of legal services, b. GDP computations should be made using his production, not his income from providing legal services. c. GDP computations should include both his income and his production. d. GDP computations should include either his income or his production, but not both. TYPE: M DIFFICULTY: 1 SECTION: 10.1 10. If GDP rises, a. income and production must both rise. b. income and production must both fall. c. income must rise, but production may rise or fall. d. production must rise, but income may rise or fall. TYPE: M DIFFICULTY: 1 SECTION: 10.1 11. Ina simple circular-flow diagram total income and total expenditure are a. seldom equal because of the dynamic changes which occur in an economy. b. equal only when all goods and services produced are sold. c. always equal because every transaction has a buyer and a seller. d. always equal because of accounting rules. TYPE: M DIFFICULTY: 1 SECTION: 10.1 12, Ina simple circular-flow diagram, total income and total expenditures in an economy are a. equal because firms are ultimately owned by households. b. equal only if there is no saving. c. equal because every transaction has a buyer and a seller. d. never equal because some people’s income is not for production. TYPE: M DIFFICULTY: 1 SECTION: 10.1 13, Firms use the money they get from a sale for a. paying wages. b. making a profit. c. paying rents. d. All of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.0 14. The simple circular-flow diagram illustrates that a. production generates income so that income and production are the same. b. the economy’s income exceeds its production. c. the production of an economy exceeds its income. d. None of the above are necessarily correct. TYPE: M DIFFICULTY: 1 SECTION: 10.1 15. _Inan economy consisting of only households and firms, GDP can be computed by a. adding up the total expenditures of households. b. adding up the total income paid by firms. c. Either a or b are correct. d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.1 16. Production equals income because a. by law firms must pay out all their revenue as income to someone. b. for every sale there is a buyer and a seller. cc. because ultimately firms are owned by households. d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.1 17. Which of the following is the correct definition of GDP? a. the market value of all goods produced within a country b. the market value of all final goods and services produced by the citizens of a country c. the market value of all final goods and services produced within a country d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.2 Chapter 10/Measuring a Nation’s Income 0 281 34. Ifa state legalized gambling and then reversed its decision and made gambling illegal, then other things the same GDP a. necessarily increases. b. necessarily decreases. c. doesn’t change because both legal and illegal production are included in GDP. d. doesn’t change because gambling is never included in GDP. TYPE: M DIFFICULTY: 1 SECTION: 10.2 35. Roommates Grace and Kelly are sharing household chores and think they have an even exchange. Other things the same, if instead they paid each other for the chores the other did GDP would a. tise, b. fall. c. be unaffected because paid or not, household chores are not included in GDP. d. be unaffected because paid or not, household chores are included in GDP. TYPE: M DIFFICULTY: 1 SECTION: 10.2 36. Which of the following is correct? a. The value of all intermediate goods and final goods are included in GDP. b. The value of intermediate goods are included in GDP only if they were produced in the previous year. c. The value of intermediate goods are included in GDP only if they are purchased by firms rather than households. d. The value of intermediate goods are not included in GDP. TYPE: M DIFFICULTY: 1 SECTION: 10.2 37. GDP a. includes the value of intermediate goods so we can get a measure of sales. b. excludes the value of intermediate goods because they are too difficult to measure. c. excludes the value of intermediate goods because their value is already counted in the value of final goods. d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.2 38. The total sales of all firms in the economy for a year a. equals GDP for the year. b. is larger than GDP for the year. c. is smaller than GDP for the year. d. equals GNP for the year. TYPE: M DIFFICULTY: 2 SECTION: 22.2 39. Grapes are a. always counted as an intermediate good. b. counted as an intermediate good only if they are used to produce another good like wine. c. counted as an intermediate good only if they are consumed. d. counted as an intermediate good whether they are used to produce another good or consumed. TYPE: M DIFFICULTY: 1 SECTION: 10.2 40. Flour is a. always counted as an intermediate good. b. counted as an intermediate good if it is used by a company to make bread. cc. counted as a final good if it is used by a consumer who bakes bread for his own consumption. d. Both b and c are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.2 41. Gasoline is a. always considered an intermediate good. b. counted as a final good if a company uses it to provide transportation services. c. counted as a final good if a consumer uses it to run a lawnmower to mow her yard. d. Both b and c are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.2 282 0 Chapter 10/Measuring a Nation’s Income 42. Goods that go into inventory and are not sold during the current period are a. counted as intermediate goods and so are not included in current period GDP. b. counted in current GDP only if the firm that produced them sells them to another firm. c. included in current period GDP as inventory investment. d. included in current period GDP as consumption. TYPE: M DIFFICULTY: 1 SECTION: 10.2 43. The local Chevrolet dealership has an increase in inventory of 25 cars in 2003. In 2004 it sells all 25 cars. a. The value of increased inventory will be counted as part of GDP in 2003, but the value of the cars sold in 2004 will not cause GDP to increase. b. The value of the increased inventory will not affect 2003 GDP, but will be included in 2004 GDP. c. The value of the increased inventory will be counted as 2003 GDP and the value of the cars sold in 2004 will increase 2004 GDP. d. None of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.2 44. A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them before the end of the second quarter, and holds the others in its warehouse. a. Since the DVDs will eventually be bought by consumers, they are included as consumption in the second juarter. b. Since the DVDs were not purchased this quarter, they will be counted as an increase in third-quarter GDP. c. The DVDs will be counted as a change in inventory in the second quarter and so will be included in second- quarter GDP. d. The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise GDP. TYPE: M DIFFICULTY: 2 SECTION: 10.2 45. George buys and lives in a newly constructed home he paid $200,000 for in 2003. He sells the house in 2004 for $225,0000. a. The 2004 sale increases 2004 GDP by $225,000 and does nothing to 2003 GDP. b. The 2004 sale increases 2004 GDP by $25,000 and does nothing to 2003 GDP. c. The 2004 sale does not increase 2004 GDP and does nothing to 2003 GDP. d. The 2004 sale increases 2004 GDP by $225,000 and 2003 GDP is revised upward by $25,000. TYPE: M DIFFICULTY: 2 SECTION: 10.2 46. Darla, a Canadian citizen, only works in the United States. The value added to production from her employment is a. included in both US. GDP and U.S. GNP. b. included only in U.S. GDP. c. included only in U.S. GNP. d. not included in either US. GDP or U.S. GNP. TYPE: M DIFFICULTY: 2 SECTION: 10.2 47. Greg, a USS. citizen, works only in Canada. The value added to production from his employment is a. included in both US. GDP and U.S. GNP. b. included only in U.S. GDP. c. included only in U.S. GNP. d. not included in either US. GDP or U.S. GNP. TYPE: M DIFFICULTY: 2 SECTION: 10.2 48. Anna, a U.S. citizen, works only in Germany. The value added to production from her employment is included a. only in US. GDP. b. only in German GDP. c. in both German and U.S. GDP. d. in neither German nor U.S. GDP. TYPE: M DIFFICULTY: 2 SECTION: 10.2 49. An Italian company opens a pasta company in the U.S. The profits from this pasta company are included in a. both US. and Italian GNP. b. both US. and Italian GDP. c. U.S.GDP and Italian GNP. d. U.S. GNP and Italian GDP. TYPE: M DIFFICULTY: 2 SECTION: 10.2 Chapter 10/Measuring a Nation’s Income 0 283 50. An American company owns a fast food restaurant in Romania. The value of goods and services it produces is included a. in both Romanian and U.S. GDP. b. partly in Romanian GDP and partly in U.S. GDP. c. in Romanian GDP, but not U.S. GDP. d. in U.S.GDP, but not Romanian GDP. TYPE: M DIFFICULTY: 2 SECTION: 10.2 51. Which of the following is included in GDP? a. the sale of stocks and bonds b. the sale of used goods c._ the sale of services such as visits to a doctor d. All of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.2 52. Which of the following is included in GDP? a. the sale of stocks and bonds b. the estimated rental value of owner occupied housing c. unpaid production of goods and services at home d. All of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.2 53. | Which of the following is included in U.S. GDP? a. goods produced by foreign citizens working in the United States b. the difference in the price of the sale of an existing home and its original purchase price c. known illegal activities d. None of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.2 54, Which of the following is counted in U.S. GDP? a. final goods and services purchased by the government b. both the peaches used by a bakery to make peach pies and the peach pies c. goods and services produced by U.S. citizens working in foreign countries d. None of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.2 55. | Which of the following is counted in GDP? a. the estimated value of housework b. the value of illegally produced goods and services c. the value of newly issued stocks and bonds d. None of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.2 56. U.S. GNPis calculated from U.S. GDP by a. including income eamed by foreigners in the United States and excluding income earned by U.S. citizens abroad. b. including income eamed by USS. citizens abroad and excluding income earned by foreigners in the U.S. c. including income eared by foreigners in the United States. d. excluding income earned by U.S. citizens abroad. TYPE: M DIFFICULTY: 2 SECTION: 10.2 57. How is NNP calculated? a. by subtracting saving from the total income of citizens of a nation b. by subtracting business expenses and taxes from the total profits earned by citizens of a nation. c. by subtracting depreciation from the total income of citizens of a nation d. by subtracting depreciation from the total profits earned by citizens of a nation TYPE: M DIFFICULTY: 2 SECTION: 10.2 58. In the national income accounts, depreciation is called a. "consumption of fixed capital." b. "total tax depreciation." cc. "consumption of circulating capital.” d. "loss due to wear.” TYPE: M DIFFICULTY: 2 SECTION: 10.2 286 0 Chapter 10/Measuring a Nation’s Income 71. _ If the government reports that “GDP increased at an annual rate of 6.0 percent for the fourth quarter of 2002” then GDP increased by a. 6.0 percent during 2002. b. 24.0 percent during 2002. c. 6.0 percent during the fourth quarter. d. 1.5 percent during the fourth quarter. TYPE: M DIFFICULTY: 1 SECTION: 10.2 72. Recent values of GDP suggest that in the fourth quarter U.S. GDP is about $10 trillion dollars. a. This number reflects the actual amount of final goods and services produced in the fourth quarter. b. To find the amount actually produced in that quarter we would have to divide by four because GDP is reported at annual rates. cc. The amount actually produced in the fourth quarter is somewhat higher because GDP is seasonally adjusted and nonseasonally adjusted GDP for the fourth quarter is typical higher. d. To find the amount actually produced in that quarter would require both dividing it by about four and then adding back in what had been removed for seasonal adjustment. TYPE: M DIFFICULTY: 2 SECTION: 10.2 73. In the United States real GDP is reported each quarter. a. These numbers are adjusted to make them measure at annual and seasonally adjusted rates. b. These numbers are adjusted to make them annual rates, but no adjustment for seasonal variations are made. c. These numbers are quarterly rates that have been seasonally adjusted. d. These numbers are at quarterly rates and have not been seasonally adjusted. TYPE: M DIFFICULTY: 1 SECTION: 10.2 74. In the nation of Ophelia, quarterly GDP is always higher in the second quarter than in other quarters. In order to account for this predictable jump in GDP, Ophelia’s government statisticians will a. make sure to account for inventory changes during the second quarter. b. report real GDP, not nominal GDP. cc. focus on GNP rather than GDP during the second quarter. d. make a seasonal adjustment for the second quarter data. TYPE: M DIFFICULTY: 2 SECTION: 10.2 75. In computing GDP, investment is spending on a. stocks, bonds, and other financial assets. b. real estate and financial assets. c. new capital equipment, inventories, and structures, including new housing. d. capital equipment, inventories, and structures, excluding household purchases of new housing. TYPE: M DIFFICULTY: 2 SECTION: 10.3 76. Government purchases include spending on goods and services by a._ the federal government only. b. state and federal governments only. c. local, state and federal governments. d. local and state governments, but not the federal government. TYPE: M DIFFICULTY: 1 SECTION: 10.3 77. Ifyou buy a burger and fries at your favorite fast food restaurant a. neither GDP nor consumption spending will be affected because you would have eaten at home if you hadn't eaten at the restaurant. b. GDP will be higher, but consumption spending will be unchanged. c. GDP will be unchanged, but consumption spending will be higher. d. both GDP and consumption spending will be higher. TYPE: M DIFFICULTY: 1 SECTION: 10.3 78. Consider two things that might be included in GDP: A. The estimated rental value of owner-occupied housing, and B. Purchases of newly constructed homes. a. Both A and Bare included as consumption. b. Ais included as consumption, while B is included as investment. c. Bis included as consumption, while A is included as investment. d. Only Bis included in GDP and it is included as investment. TYPE: M DIFFICULTY: 2 SECTION: 10.3 Chapter 10/Measuring a Nation’s Income 0 287 79. When afirm produces consumer goods and adds some to inventory rather than selling it. It is a. not counted in the current quarter GDP. b. counted in the current quarter GDP as investment. c. counted in the current quarter GDP as consumption. d. counted in the current quarter GDP as a statistical discrepancy. TYPE: M DIFFICULTY: 1 SECTION: 10.3 80. _ A firm produces consumer goods and adds some to inventory in the third quarter. In the fourth quarter the firm sells the goods at a retail outlet which leaves their inventory diminished. As a result of these actions, what component(s) of real GDP change in the fourth quarter? a. only investment and it decreases b. only consumption and it increases c. Investment decreases and consumption increases. d. None of the above is correct. TYPE: M DIFFICULTY: 3 SECTION: 10.3 81. AUS. publisher purchases new computers. This purchase by itself makes a. investment and GDP higher. b. investment higher and leaves GDP unchanged. c. investment higher and reduces GDP. d. neither investment nor GDP higher. TYPE: M DIFFICULTY: 1 SECTION: 10.3 82. A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result a. U.S. investment and GDP increase, but German GDP is unaffected. b. U.S. investment and German GDP increase, but U.S. GDP is unaffected. c. U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods. d. US. investment, U.S. GDP, and German GDP all increase. ANSWER: a. U.S. investment and GDP increase, but German GDP is unaffected. TYPE: M DIFFICULTY: 2 SECTION: 10.3 83. Ifa U.S. citizen buys a television made in Korea by a Korean firm, a. U.S. net exports decrease, and U.S. GDP decreases. b. U.S. net exports are unaffected, and U.S. GDP decreases. c. U.S. net exports are unaffected, and U.S. GDP is unaffected. d. U.S. net exports decrease but U.S. GDP is unaffected. TYPE: M DIFFICULTY: 2 SECTION: 10.3 84. Ifa U.S. household buys a $75 handbag from Italy, U.S. consumption increases by $75, U.S. a. imports increase by $75, and U.S. GDP increases by $75. b. imports increase by $75, but U.S. GDP is unaffected. c. imports are unaffected, and U.S. GDP is unaffected. d. exports increase by $75, and U.S. GDP increases by $75. TYPE: M DIFFICULTY: 2 SECTION: 10.3 85. Steph buys a designer dress produced by an American-owned fashion shop in France. As a result, U.S. consumption increases, U.S. net exports a. decrease, U.S. GDP is unaffected, but U.S. GNP increases. b. decrease, U.S. GDP increases, but U.S. GNP is unaffected. c. decrease, U.S. GNP increases, but French GDP is unaffected. d. are unaffected, U.S. GDP is unaffected, but French GDP increases. TYPE: M DIFFICULTY: 3 SECTION: 10.3 86. A German citizen buys an automobile produced in the United States by a Japanese company. As a result, a. U.S. net exports increase, U.S. GNP and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. b. U.S. net exports, GNP, and GDP increase, Japanese GDP increases, German net exports decrease, and German GDPis unaffected. c. U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GDP and GNP are unaffected. d. US. net exports, GNP, and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GDP and GNP fall. TYPE: M DIFFICULTY: 3 SECTION: 10.3 288 0 Chapter 10/Measuring a Nation’s Income 87. After the terrorist attack on September 11, governments raised expenditures to increase security at airports. These purchases of goods and services are a. not included in GDP since they are not productive. b. not included in GDP since the government will have to raise taxes to pay for them. c. included in GDP since government expenditures are included in GDP. d. included in GDP only to the extent that the Federal, and not state or local governments, paid for them. TYPE: M DIFFICULTY: 2 SECTION: 10.3 88. The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result, a. US. government purchases increase by $30,000 and U.S. net exports decrease by $30,000. U.S. GDP and GNP are unaffected. b. US. government purchases increase by $30,000 and U.S. GNP increases by $30,000. U.S. GDP and net exports are unaffected. c. U.S. government purchases, net exports, GDP, and GNP are unaffected. d. U.S. government purchases increase by $30,000 and U.S. net exports decrease by $30,000. U.S. GNP increases by $30,000, but U.S. GDP is unaffected. TYPE: M DIFFICULTY: 2 SECTION: 10.3 89. A wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses local workers. a. U.S. investment, GDP, and GNP all increase by the same amount. b. US. investment increases, but GDP and GNP are unaffected by the purchase. c. U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount. d. U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount. TYPE: M DIFFICULTY: 3 SECTION: 10.3 90. A transfer payment is a. a payment for moving expenses a worker receives when he or she is transferred by an employer to a new location. b. a payment that is automatically transferred from your bank account to pay your utility bill. c. the term that is used to indicate that your paycheck has been automatically deposited to your bank account. d. a form of government spending that is not made in exchange for a currently produced good or service. TYPE: M DIFFICULTY: 1 SECTION: 10.3 91. Which of the following represents a transfer payment? a. you transfer $1,000 from your bank account to a mutual fund. b. the government sends your grandfather his Social Security check. c. the bank transfers $10 quarterly interest to your savings account. d. your employer automatically transfers $100 each month from your wages to a non-taxable medical spending account. TYPE: M DIFFICULTY: 1 SECTION: 10.3 92, If the U.S. government pays an economist at the U.S. Department of Commerce $50,000 in salary in 2003, and $30,000 in retirement benefits in 2004 a. each payment will be included in GDP as government purchases for the respective years. b. the 2003 payment is included in 2003 GDP as government purchases, but the 2004 payment is not included in 2004 GDP. c. the 2003 payment is included in 2003 GDP as government purchases, and the 2004 payment is included in 2004 GDP as government transfer payments. d. the 2003 payment is included in 2003 GDP as government purchases, and the 2004 payment is allocated to previous years’ GDP according to the amount of work performed each year. TYPE: TF DIFFICULTY: 2 SECTION: 23.3 93. To encourage formation of small businesses, the government could provide subsidies; these subsidies would a. be included in GDP because they are part of government expenditures. b. be included in GDP because they are part of investment expenditures. c. not be included in GDP because they are transfer payments. d. not be included in GDP because the government raises taxes to pay for them. TYPE: M DIFFICULTY: 1 SECTION: 10.3 Chapter 10/Measuring a Nation’s Income 0 291 111. If total spending rises from one year to the next, then a. the economy must be producing a larger output of goods and services. b. prices at which goods and services are sold must be higher. c. either the economy must be producing a larger output of goods and services, or the prices at which goods and services are sold must be higher, or both. d. employment or productivity must be rising. TYPE: M DIFFICULTY: 1 SECTION: 10.4 112. Real GDP a. evaluates current production at current prices. b. evaluates current production at the Prices that prevailed in some specific year in the past. c. is nota valid measure of the economy's performance, since prices change from year to year. d. is a measure of the value of goods only, hence, it excludes the value of services. TYPE: M DIFFICULTY: 1 SECTION: 10.4 113. Which of the following statements about GDP is most accurate? a. Nominal GDP values production at current prices, while real GDP values production at constant prices. b. Nominal GDP values production at constant prices, while real GDP values production at current prices. c. Nominal GDP values production at market prices, while real GDP values production at the cost of the resources used in the production process. d. Nominal GDP consistently underestimates the value of production, while real GDP consistently overestimates the value of production. TYPE: M DIFFICULTY: 1 SECTION: 10.4 114. If real GDP doubles and the GDP deflator doubles, then nominal GDP will a. stay the same. b. double. c. triple. d. quadruple. TYPE: M DIFFICULTY: 2 SECTION: 10.4 115. Consider the following table for the country of Ophir: Year Nominal GDP GDP Deflator 2000 $4000 100 2001 $4100 105 2002 $4200 110 From this information we can conclude that real GDP was higher in a. 2002 than in 2001, and real GDP in 2001 was higher than in 2000. b. 2001 than in 2000, and real GDP in 2001 was higher than in 2002. c. 2000 than in 2001, and real GDP in 2001 was higher than in 2002. d. 2000 than in 2002, and real GDP in 2001 was higher than in 2000. TYPE: M SECTION: 10.4 DIFFICULTY: 3 116. Suppose GDP consists of wheat and rice. In 2002, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in 2001, the base year, nominal 2002 GDP is a. $100, real 2002 GDP is $50, and the GDP deflator is 50. b. $50, real 2002 GDP is $100, and the GDP deflator is 200. c. $100, real 2002 GDP is $50, and the GDP deflator is 200. d. $40, real 2002 GDP is $100, and the GDP deflator is 50. TYPE: M DIFFICULTY: 2 SECTION: 10.4 117. Suppose that the country of Samiam produces only eggs and ham. In 2002 it produced 100 units of eggs at $3 each and 50 units of ham at $4 each. In 2001, the base year, eggs sold for $1.50 per unit and ham for $5. a. Nominal 2002 GDP is $500, real 2002 GDP is $400, and the GDP deflator is 80. b. Nominal 2002 GDP is $500, real 2002 GDP is $400 and the GDP deflator is 125. c. Nominal 2002 GDP is $400, real 2002 GDP is $400, and the GDP deflator is 100. d. Nominal 2002 GDP is $400, real 2002 GDP is $500, and the GDP deflator is 125. TYPE: M DIFFICULTY: 2 SECTION: 10.4 292 0 Chapter 10/Measuring a Nation’s Income 118, In the country of Mainia, GDP consists of cranberries and maple syrup. In 2002, 50 units of cranberries are sold at $20 per unit, and 100 units of maple syrup are sold at $10 per unit. If the price of cranberries was $10 per unit and the price of maple syrup was $15.00 per unit in 2001, the base year, then nominal 2002 GDP is a. $2,000, real 2002 GDP is $2,000, and the GDP deflator is 100. b. $2,000, real 2002 GDP is $2,500, and the GDP deflator is 125. c. $2,500, real 2002 GDP is $2,000, and the GDP deflator is 83.3. d. None of the above are correct. TYPE: M DIFFICULTY: 2 SECTION: 10.4 119. Suppose that Wisconsin produces cheese and fish. In 2002, 20 units of cheese are sold at $5 each, and 8 units of fish are sold at $50 each. In 2001, the base year, the price of cheese was $10 per unit, and the price of fish was $75 per unit. a. Nominal 2002 GDP is $800, real 2002 GDP is $500, and the GDP deflator is 160. b. Nominal 2002 GDP is $500, real 2002 GDP is $800, and the GDP deflator is 160. c. Nominal 2002 GDP is $500, real 2002 GDP is $800, and the GDP deflator is 62.5. d. Nominal 2002 GDP is $800, real 2002 GDP is $500, and the GDP deflator is 62.5. TYPE: M DIFFICULTY: 2 SECTION: 10.4 120. Real GDP is the production of final goods and services valued at a. current year prices. b. constant prices. c. future year prices. d._ the ratio of current year prices to constant year prices. TYPE: M DIFFICULTY: 1 SECTION: 10.4 121. Which statement represents most correctly the relationship between nominal GDP and real GDP? a. Nominal GDP measures base-year production using base-year prices, while real GDP measures current production using current prices. b. Nominal GDP measures current production using base-year prices, while real GDP measures current production using current prices. c. Nominal GDP measures current production using current prices, while real GDP measures current production using base-year prices. d. Nominal GDP measures current production using current prices, while real GDP measures base-year production using base-year prices. TYPE: M DIFFICULTY: 2 SECTION: 10.4 122, Which of the following statements about nominal GDP and real GDP is most accurate? Nominal GDP is a better gauge of economic well-being than is real GDP. Real GDP is a better gauge of economic well-being than is nominal GDP. Real GDP and nominal GDP are equally good measures of economic well-being. |. Whether real GDP or nominal GDP is a better measure of economic well-being depends on what sort of goods are produced. TYPE: M DIFFICULTY: 1 SECTION: 10.4 aoe 123, When economists talk about growth in the economy, they measure that growth with the a. absolute change in nominal GDP. b. percentage change in real GDP. c. absolute change in real GDP. d. percentage change in nominal GDP. TYPE: M DIFFICULTY: 1 SECTION: 10.4 124, The GDP deflator is the ratio of a. real GDP to nominal GDP. b. real GDP to nominal GDP multiplied by 100. nominal GDP to real GDP. d. nominal GDP to real GDP multiplied by 100. TYPE: M DIFFICULTY: 1 SECTION: 10.4 Chapter 10/Measuring a Nation’s Income 0 293 125. If nominal GDP is $10 trillion and real GDP is $8 trillion, the GDP deflator is a. 0.8. b. 1.25. c. 80. d. 125. TYPE: M DIFFICULTY: 1 SECTION: 10.4 126. If the GDP deflator is 200 and nominal GDP is $10,000 billion, then real GDP is a. $5,000 billion. b. $2,000 billion. c. $50 billion. d. None of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 10.4 127. If asmall country has current nominal GDP of $20 billion and a GDP deflator of 50, what is its real GDP? a. $100 billion b. $40 billion c. $10 billion d. $4 billion TYPE: M DIFFICULTY: 1 SECTION: 10.4 128. If asmall country has current nominal GDP of $25 billion and the GDP deflator is 125, what is real GDP? a. $312.5 billion b. $207.5 billion c. $31.25 billion d. $20 billion TYPE: M DIFFICULTY: 1 SECTION: 10.4 129, If a country reported nominal GDP of 100 billion in 2002 and 75 billion in 2001 and reported a GDP deflator of 125 in 2002 and a deflator of 120 in 2001 then from 2001 to 2002 real output a. and prices both rose. b. rose and prices fell. c. fell and prices rose. d. and prices both fell. TYPE: M DIFFICULTY: 2 SECTION: 10.4 130. If a country reported nominal GDP of 200 billion in 2002 and 180 billion in 2001 and reported a GDP deflator of 125 in 2002 and of 105 in 2001, then from 2001 to 2002 real output a. and prices both rose. b. rose and prices fell. c. fell and prices rose. d. and prices both fell. TYPE: M DIFFICULTY: 2 SECTION: 10.4 131. If a country reported a nominal GDP of 115 billion in 2002 and 125 billion in 2001 and reported a GDP deflator of 85 in 2002 and a deflator of 100 in 2001, then from 2001 to 2002 real output a. and prices both rose. b. rose and prices fell. c. fell and prices rose. d. and prices both fell. TYPE: M DIFFICULTY: 2 SECTION: 10.4 132, If a country reported a nominal GDP of 85 billion in 2002 and 100 billion in 2001 and reported a GDP deflator of 100 in 2002 and of 105 in 2001, then from 2001 to 2002 real output a. and prices both rose. b. rose and prices fell. c. fell and prices rose. d. and prices both fell. TYPE: M DIFFICULTY: 2 SECTION: 10.4