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1. 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.
goods and services must be selling at higher prices.
c.
either the economy must be producing a larger output of goods and services, or goods and services must be
selling at higher prices, or both.
d.
employment or productivity must be rising.
2. If total spending rises from one year to the next, then which of the following could not be true?
a.
the economy is producing a smaller output of goods and services, and goods and services are selling at higher
prices.
b.
the economy is producing a larger output of goods and services, and goods and services are selling at lower
prices.
c.
the economy is producing a larger output of goods and services, and goods and services are selling at higher
prices.
d.
the economy is producing a smaller output of goods and services, and goods and services are selling at lower
prices.
3. If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed
the same, which would rise?
a.
both real GDP and nominal GDP.
b.
real GDP but not nominal GDP.
c.
nominal GDP but not real GDP.
d.
neither nominal GDP nor real GDP.
4. When studying changes in the economy over time, economists want a measure of the total quantity of goods and
services the economy is producing that is not affected by changes in the prices of those goods and services. In other
words, economists want to study
a.
nominal GDP.
b.
real GDP.
c.
the GDP deflator.
d.
GNP.
5. Nominal GDP will definitely increase when
a.
prices increase and output increases.
b.
prices increase and output decreases.
c.
prices decrease and output increases.
d.
All of the above are correct.
6. Changes in nominal GDP reflect
a.
only changes in prices.
b.
only changes in the amounts being produced.
c.
both changes in prices and changes in the amounts being produced.
d.
neither changes in prices nor changes in the amounts being produced.
7. Real GDP will increase
a.
only when prices increase.
b.
only when output increases.
c.
when prices increase or output increases.
d.
All of the above are correct.
8. Changes in real GDP reflect
a.
only changes in prices.
b.
only changes in the amounts being produced.
c.
both changes in prices and changes in the amounts being produced.
d.
neither changes in prices nor changes in the amounts being produced.
9. Real GDP is the yearly production of final goods and services valued at
a.
current prices.
b.
constant prices.
c.
expected future prices.
d.
the ratio of current prices to constant prices.
10. Which of the following statements about GDP is correct?
a.
Nominal GDP values production at current prices, whereas real GDP values production at constant prices.
b.
Nominal GDP values production at constant prices, whereas real GDP values production at current prices.
c.
Nominal GDP values production at market prices, whereas real GDP values production at the cost of the
resources used in the production process.
d.
Nominal GDP values production at the cost of the resources used in the production process, whereas real GDP
values production at market prices.
11. Which of the following is always measured in prices from a base-year?
a.
both nominal and real GDP.
b.
nominal but not real GDP.
c.
real but not nominal GDP.
d.
neither nominal nor real GDP.
12. Which of the following always uses prices and quantities from the same period?
a.
both nominal and real GDP.
b.
nominal GDP but not real GDP.
c.
real GDP but not nominal GDP.
d.
neither nominal or real GDP.
13. Which of the following is correct?
a.
Nominal GDP is always less than real GDP.
b.
Nominal GDP is always greater than real GDP.
c.
Nominal GDP equals real GDP in the base year.
d.
Nominal GDP equals real GDP in all years but the base year.
14. Which of the following statements about nominal GDP and real GDP is correct?
a.
Nominal GDP is a better gauge of economic well-being than real GDP.
b.
Real GDP is a better gauge of economic well-being than nominal GDP.
c.
Real GDP and nominal GDP are equally good measures of economic well-being.
d.
Neither nominal nor real GDP provide a measure of economic well-being.
15. When economists talk about growth in the economy, they measure that growth as the
a.
absolute change in nominal GDP from one period to another.
b.
percentage change in nominal GDP from one period to another.
c.
absolute change in real GDP from one period to another.
d.
percentage change in real GDP from one period to another.
16. The GDP deflator is the ratio of
a.
real GDP to nominal GDP multiplied by 100.
b.
real GDP to the inflation rate multiplied by 100.
c.
nominal GDP to real GDP multiplied by 100.
d.
nominal GDP to the inflation rate multiplied by 100.
17. Which of the following is the correct formula for the GDP deflator?
a.
.
b.
.
c.
.
d.
.
18. Changes in the GDP deflator reflect
a.
only changes in prices.
b.
only changes in the amounts being produced.
c.
both changes in prices and changes in the amounts being produced.
d.
neither changes in prices nor changes in the amounts being produced.
19. The GDP deflator for years subsequent to the base year measures the change in
a.
nominal GDP from the base year that cannot be attributable to a change in real GDP.
b.
real GDP from the base year that cannot be attributable to a change in nominal GDP.
c.
nominal GDP from the base year that cannot be attributable to a change in prices.
d.
real GDP from the base year that cannot be attributable to a change in prices.
20. In the base year, the GDP deflator is always
a.
-1.
b.
0.
c.
1.
d.
100.
21. The term economists use to describe a situation in which the economy’s overall price level is rising is
a.
growth.
b.
inflation.
c.
recession.
d.
expansion.
22. The inflation rate is the
a.
absolute change in real GDP from one period to another.
b.
percentage change in real GDP from one period to another.
c.
absolute change in the price level from one period to another.
d.
percentage change in the price level from one period to another.
23. The percentage change in the price level from one period to another is called
a.
the growth rate.
b.
the inflation rate.
c.
the GDP deflator.
d.
the unemployment rate.
24. The inflation rate in year 2 equals
a.
.
b.
.
c.
.
d.
.
25. A country’s real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this
country’s inflation rate?
a.
16.7%.
b.
10.0%.
c.
15.0%.
d.
-9.1%.
26. If real GDP doubles and the GDP deflator doubles, then nominal GDP
a.
remains constant.
b.
doubles.
c.
triples.
d.
quadruples.
27. If nominal GDP doubles and the GDP deflator doubles, then real GDP
a.
remains constant.
b.
doubles.
c.
triples.
d.
quadruples.
28. If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is
a.
104.1 so prices are higher than in the base year.
b.
104.1 so prices are lower than in the base year.
c.
96.1 so prices are higher than in the base year.
d.
96.1 so prices are lower than in the base year.
29. If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?
a.
$2.5 trillion.
b.
$10 trillion.
c.
$40 trillion.
d.
$100 trillion.
30. If in some year real GDP was $25 billion and the GDP deflator was 68, what was nominal GDP?
a.
$2.72 billion.
b.
$17 billion.
c.
$36.8 billion.
d.
$43 billion.
31. If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
a.
$6.7 billion.
b.
$15 billion.
c.
$21.6 billion.
d.
$38 billion.
32. If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP?
a.
$2.5 billion.
b.
$10 billion.
c.
$40 billion.
d.
$100 billion.
33. If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator?
a.
25.
b.
40.
c.
250.
d.
400.
34. If in some year nominal GDP was $28 trillion and real GDP was $32 trillion, what was the GDP deflator?
a.
87.5.
b.
114.3.
c.
400.
d.
896.
35. An economy recently reported nominal GDP of 3 trillion euro and a GDP deflator of 200. What was real GDP?
a.
1.5 trillion euro, and real GDP is a better gauge of economic activity than nominal GDP.
b.
1.5 trillion euro, but nominal GDP is a better gauge of economic activity than real GDP.
c.
6 trillion euro, and real GDP is a better gauge of economic activity than nominal GDP.
d.
6 trillion euro, but nominal GDP is a better gauge of economic activity than real GDP.
36. If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is
a.
83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.
b.
83.33, and this indicates that the price level has increased by 83.33 percent since the base year.
c.
120, and this indicates that the price level has increased by 20 percent since the base year.
d.
120, and this indicates that the price level has increased by 120 percent since the base year.
