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45) Real GDP can increase if the
i. quantities of goods and services produced decrease and prices fall by a smaller
percentage.
ii. quantities of goods and services produced decrease and prices fall by a larger
percentage.
iii. quantities of goods and services produced decrease and prices do not change.
iv. quantities of goods and services produced increase.
A) i only
B) iii only
C) iv only
D) i and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
46) ________ is most likely to contribute to an improvement in our living standard.
A) An increase in real GDP
B) An increase in the price level
C) A decrease in nominal GDP
D) An increase in depreciation
E) An increase in the GDP delator combined with a decrease in nominal GDP
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
47) Nominal GDP measures the value of goods and services produced in a given year
valued using
A) constant prices.
B) prices of the same year.
C) no prices.
D) future prices.
E) base year prices.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
41
48) Nominal GDP is GDP
A) using current market values.
B) during a recession.
C) minus depreciation.
D) after adjusting for any price changes.
E) that ignores depreciation.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
49) An increase in nominal GDP could result from an increase in
i. production.
ii. prices.
iii. subsidies.
A) i only
B) ii only
C) i and ii
D) i and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
50) Nominal GDP increases
A) only if total production increases.
B) only if prices increase.
C) if either prices and/or total production increase.
D) only if the productivity of resources increase.
E) only if depreciation decreases.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
42
51) When the value of nominal GDP increases from one year to the next, we know that one
or two things must have happened during that time:
A) The nation produced fewer goods and services and/or prices fell for goods and services.
B) Consumption expenditure increased and/or corporate proits increased.
C) Investment increased and/or payments to employees increased.
D) The nation produced more goods and services and/or prices rose for goods and services.
E) the value of real GDP must have increased and/or the price level must have decreased.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
52) If nominal GDP increases from one year to the next, then
A) production must have increased.
B) production could have increased, decreased, or stayed the same.
C) prices must have increased.
D) prices and production must both have increased.
E) prices and production must both have decreased.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
53) Which of the following statement is correct?
A) If nominal GDP increases, then real GDP must increase.
B) If nominal GDP decreases, then real GDP must increase.
C) If real GDP decreases, then nominal GDP must decrease.
D) Nominal and real GDP can change either in the same direction or the opposite direction.
E) If nominal GDP does not change, then real GDP cannot change.
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
43
54) If nominal GDP increases this year, then real GDP
A) must decrease.
B) must increase.
C) must not change.
D) could increase, decrease, or not change.
E) could either increase or not change but cannot decrease.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
55) Bobby was researching the economic growth of a country between 2006 and 2011.
Using 2006 as the base year, he calculated a twelve percent increase for real GDP and a
ten percent increase for nominal GDP. His results indicate that
A) he made an error when calculating nominal GDP.
B) the quantity of goods and services produced decreased over the period.
C) the quantity of goods and services produced increased and prices decreased over the
period.
D) the quantity of goods and services produced and prices both decreased over the period.
E) the quantity of goods and services produced did not change and prices decreased over
the period.
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
56) If real GDP is greater than nominal GDP for a particular year, then
A) production must have fallen between the current year and the base year.
B) production must have increased between the current year and the base year.
C) prices must have fallen between the current year and the base year.
D) prices must have risen between the current year and the base year.
E) prices must have fallen between the current year and the immediate past year.
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
44
57) During last year, a country produced 20,000 pizzas and 10,000 hamburgers and
nothing else. The pizzas sold for $10.00 each and the hamburgers for $3.00 each. Nominal
GDP was
A) $230,000.
B) $70,000.
C) $460,000.
D) $390,000.
E) $360,000.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
58) The base year is 2010. A country only produces MP3 players. The price of an MP3
player in 2008 was $50. The price of an MP3 player was $30 in 2010. The quantity of MP3
players produced in 2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in
2010 equals
A) $1,000,000.
B) $500,000.
C) $600,000.
D) $200,000.
E) an amount that cannot be determined without information about real GDP in 2010.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
59) The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray
player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of
Blu-ray players produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal
GDP in 2012 equals
A) $900,000.
B) $945,000.
C) $1,000,000.
D) $1,050,000.
E) an amount that cannot be determined without information about nominal GDP in 2008.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
45
60) The base year is 2012. A country only produces Blu-ray players. The price of a Blu-ray
player in 2012 was $100. The price of a Blu-ray player was $90 in 2013. The quantity of
Blu-ray players produced in 2012 was 10,000 units and in 2013 was 10,500 units. Real GDP
in 2012 equals
A) $900,000.
B) $945,000.
C) $1,000,000.
D) $1,050,000.
E) an amount that cannot be determined without information about real GDP in 2007 .
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
61) Assume that a small country produces only green peppers and red peppers. Last year, it
produced 100 green peppers and 50 red peppers and sold them at prices of $2 per green
pepper and $3 per red pepper. This year, it produced 150 green peppers and 60 red
peppers and sold them at prices of $2 per green pepper and $4 per red pepper. What is real
GDP this year if the base year is last year?
A) $540
B) $400
C) $480
D) $350
E) $890
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: New
AACSB: Analytical thinking
Data for 2009 Data for 2010
62) The table above gives the production and prices for a small nation that produces only
bread and soda. The base year is 2009. What is nominal GDP in 2009?
A) $410
B) $450
C) $900
D) $550
E) $460
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
63) The table above gives the production and prices for a small nation that produces only
bread and soda. The base year is 2010. What is real GDP in 2010?
A) $530
B) $1080
46
C) $510
D) $210
E) $300
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
64) When calculating real GDP, the reference base year
A) allows us to account for changes in GNP compared to GDP.
B) always reduces the value of GDP compared to GNP.
C) allows us to calculate the value of the goods and services in terms of prices of that base
year.
D) usually increases the value of GNP compared to GDP.
E) allows us to increase the value of goods and services.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
65) In calculating GDP, economists
A) measure total expenditure as the only true measure.
B) can measure either total expenditure or total income.
C) measure total income as the only true measure.
D) measure total income minus total expenditure.
E) measure total income plus total expenditure.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
47
66) The expenditure approach to measuring GDP is based on summing
A) wages, interest, rent, and proit.
B) each industry's production.
C) the total values of inal goods, intermediate goods and services, used goods, and
inancial assets.
D) consumption expenditure, investment, government expenditure on goods and services,
and net exports of goods and services.
E) consumption expenditure, investment, government expenditure on goods and services,
and net exports of goods and services minus wages, interest, rent, and proit.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
67) Which of the following is NOT included in the expenditure approach to calculating
GDP?
A) government expenditures on goods and services
B) investment
C) net exports of goods and services
D) wages
E) consumption expenditure
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
68) Suppose GDP is $10 billion, consumption expenditure is $7 billion, investment is $2
billion, and government expenditure on goods and services is $2 billion. Net exports of
goods and services must be
A) $1 billion.
B) -$1 billion.
C) $2 billion.
D) -$2 billion.
E) $10 billion.
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
48
69) According to the expenditure approach to measuring GDP, in the United States , the
largest component of GDP is
A) consumption expenditure.
B) investment.
C) government expenditure on goods and services.
D) net exports of goods and services.
E) wages.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
70) Expenditures in GDP do not include
A) used goods or inancial assets.
B) inancial assets or investment.
C) used goods or investment.
D) investment, stocks, or bonds.
E) government expenditures on goods and services.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
71) Which of the following is NOT part of the income used in the income approach to
measuring GDP?
A) wages
B) rent
C) interest
D) taxes paid by persons
E) proit
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
49
72) Which of the following is NOT included in the income approach to calculating GDP?
A) interest
B) wages
C) net exports of goods and services
D) proits
E) rent
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
73) The sum of the components of incomes is called
A) net domestic product at market prices.
B) gross domestic product at market prices.
C) gross domestic product at factor cost.
D) net domestic product at factor cost.
E) GNP.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
74) Nominal GDP can change
A) only if prices change.
B) only if the quantities of goods and services change.
C) only if prices increase.
D) if either prices or the quantities of goods and services change.
E) only if prices and the quantities of the goods and services change.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
50
