54)
Which of the following is not true about the composition of U.S. GDP in 2007?
54)
A)
Imports are greater than exports.
B)
Business fixed investment is the largest component of investment.
C)
The majority of consumer spending is on durable goods.
D)
Purchases made by state and local governments are greater than purchases made by the
federal government.
55)
To examine how the total production of an economy has changed over time, it would be best to
examine
55)
A)
the GDP deflator.
B)
nominal GDP.
C)
GDP at current prices.
D)
real GDP.
Scenario 11–1
CANOES–R–US makes canoes. It buys the shell of the canoe from another firm for $300 and uses its labor and intermediate
goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe
to a consumer for $1,200.
56)
Refer to Scenario 11–1. The value added of CANOES–R–US for each canoe equals
56)
A)
$400.
B)
$500.
C)
$800.
D)
$1,200.
Table 11–9
Year Nominal GDP Real GDP
1995 $7,400 $7,537
1996 $7,813 $7,813
1997 $8,301 $8,165
1998 $8,760 $8,516
57)
Refer to Table 11–9. Consider the following data for nominal GDP and real GDP (values are in
billions of dollars). The base year used in calculating real GDP is
57)
A)
1996.
B)
1997.
C)
1995.
D)
1998.
58)
Indirect business taxes are
58)
A)
corporate income taxes.
B)
sales taxes.
C)
personal taxes.
D)
payroll taxes.
Explanation:
59)
In the circular flow diagram the value of total income for an economy ________ the value of total
production.
59)
A)
is greater than
B)
is less than
C)
may be greater than or less than
D)
equals
Explanation:
60)
The real GDP of the U.S. in 2006 was approximately $13 trillion. This means that
60)
A)
total income in 2006 was around $13 trillion.
B)
the value of output in 2006 was around $13 trillion.
C)
total spending in 2006 was around $13 trillion.
D)
all of the above are true.
Explanation:
Explanation:
61)
If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be
61)
A)
equal to 100.
B)
less than 0.
C)
greater than 100.
D)
less than 100.
Table 11–5
Stage of Production Seller Buyer
Price
(Dollars)
1Steel Mill Auto Manufacturer $10,000
2Auto Manufacturer Auto Dealer 18,000
3Auto Dealer Consumer 25,000
Consider the table above showing three stages of production of an automobile.
62)
Refer to Table 11–5. The value added by the automobile dealer equals
62)
A)
$7,000.
B)
$15,000.
C)
$25,000.
D)
$18,000.
Table 11–8
Year
Guns
Produced
Price of Guns
(Dollars)
Butter
Produced
Price of Butter
(Dollars)
2000 80 $5 40 $4
2006 90 $6 60 $10
The data in Table 11–8 are for a fictional economy that produces only two products: guns and butter.
63)
Refer to Table 11–8. Real GDP for this economy in 2006 using 2000 as the base year equals
63)
A)
$880.
B)
$1,140.
C)
$690.
D)
$560.
64)
Investment, as defined by economists, would include the purchase of a
64)
A)
share of stock in ExxonMobil.
B)
computer by an accounting firm.
C)
government bond.
D)
corporate bond.
65)
The output of U.S. citizens who work in Canada would be included in the
65)
A)
gross national product of Canada.
B)
gross domestic product of Canada.
C)
gross domestic product of the United States.
D)
gross national product of Canada and the gross national product of the United States.
66)
Real GDP will increase
66)
A)
only if the quantity of final goods and services produced rises.
B)
only if the price level rises.
C)
if either the price level rises or the quantity of final goods and services produced rises.
D)
only if the price level falls.
67)
Nominal GDP is GDP in a given year
67)
A)
valued in the prices of the base year.
B)
adjusted for inflation.
C)
adjusted for anticipated inflation.
D)
valued in the prices of that year.
68)
The purchase of a new house is included in
68)
A)
net exports.
B)
investment expenditures.
C)
consumption expenditures.
D)
government purchases.
69)
Increases in real GDP would understate the well–being of a country over time if, over that time
period, the
69)
A)
average hours worked per week decreased.
B)
crime rate increased.
C)
amount of pollution increased.
D)
divorced rate increased.
Table 11–12
Year Nominal GDP Real GDP
1997 $8,318 $8,159
1998 $8,790 $8,516
1999 $9,299 $8,876
70)
Refer to Table 11–12. The GDP deflator for 1998 equals
70)
A)
105.7.
B)
103.2.
C)
96.9.
D)
104.2.
71)
Statistics on real GDP during World War II may give a misleading indication of whether World
War II was a period of prosperity because
71)
A)
inflation may have been considerably higher than estimated.
B)
government agents purposely inflated the production numbers to maintain American support
for the war.
C)
most of the increased production was for military goods, not consumption goods.
D)
government agencies were shorthanded and did a particularly poor job of collecting data.
C
72)
Which of the following is not directly counted in GDP?
72)
A)
consumer goods
B)
investment expenditures
C)
government purchases
D)
intermediate goods
D
73)
If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is
73)
A)
125.
B)
12.5.
C)
800.
D)
80.
A
B
74)
The GDP deflator is a measure of the
74)
A)
average level of prices of intermediate goods and services in the economy.
B)
total production of the economy adjusted for inflation.
C)
total production of the economy unadjusted for inflation.
D)
average level of prices of final goods and services in the economy.
75)
Real GDP is GDP in a given year
75)
A)
valued in the prices of the base year.
B)
adjusted for unanticipated inflation.
C)
valued in the prices of that year.
D)
adjusted for anticipated inflation.
76)
The GDP deflator is the
76)
A)
ratio of nominal GDP to real GDP multiplied by 100.
B)
ratio of real GDP to nominal GDP multiplied by 100.
C)
difference between real GDP and nominal GDP multiplied by 100.
D)
difference between nominal GDP and real GDP multiplied by 100.
77)
A country in which a significant fraction of domestic production takes place in foreign–owned
factories and facilities is most likely a country where
77)
A)
GDP is much larger than GNP.
B)
GDP is measured in units of foreign currency.
C)
GNP is much larger than GDP.
D)
GDP is equal to GNP.
78)
Which of the following transactions represents the purchase of a final good?
78)
A)
Apple computer buys computer processors from Intel
B)
your father buys a new John Deere riding lawn mower
C)
Delta buys a new European–made jetliner
D)
the purchase of coffee beans by Starbucks
Table 11–15
National Income $1000 billion
Retained earnings not paid as dividends $50 billion
Transfer payments $40 billion
Interest on government bonds $20 billion
Personal Taxes $30 billion
The components of national income for an economy are listed in Table 11–15.
79)
Refer to Table 11–15. What is the level of personal disposable income for this economy?
79)
A)
$860 billion
B)
$980 billion
C)
$1,080 billion
D)
$1,010 billion
80)
An example of business fixed investment spending is
80)
A)
a purchase of a home by a household.
B)
$200 million of unsold cars at a car dealership.
C)
a purchase of a bond by General Electric Corporation.
D)
a purchase of a computer by an accounting firm.
81)
Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of
81)
A)
employment in the economy.
B)
output of a specific industry.
C)
employment in a specific industry.
D)
output of a specific firm.
82)
If the quantity of goods and services produced in the economy decreases
82)
A)
nominal GDP would certainly increase.
B)
it may be possible for nominal GDP to increase.
C)
real GDP would certainly increase.
D)
it may be possible for real GDP to increase.
83)
In the circular flow model, the value of total production for an economy ________ the value of total
expenditures on final goods and services.
83)
A)
may be greater than or less than
B)
is greater than
C)
equals
D)
is less than
C
Explanation:
84)
Net national product equals gross national product minus
84)
A)
inventories.
B)
changes in inventories.
C)
depreciation.
D)
imports.
C
Explanation:
Table 11–5
Stage of Production Seller Buyer
Price
(Dollars)
1Steel Mill Auto Manufacturer $10,000
2Auto Manufacturer Auto Dealer 18,000
3Auto Dealer Consumer 25,000
Consider the table above showing three stages of production of an automobile.
85)
Refer to Table 11–5. The value of each automobile in gross domestic product equals
85)
A)
$15,000.
B)
$25,000.
C)
$18,000.
D)
$7,000.
B
Explanation:
B
Explanation:
86)
What is the largest component of GDP in the U.S?
86)
A)
consumption spending
B)
investment spending
C)
net investment spending
D)
government spending
87)
Which of the following statements is true?
87)
A)
Household production is counted in GDP as it amounts to real production.
B)
A decrease in the crime rate increases GDP as people will spend more on security.
C)
GDP growth distributes income equally to people in the economy.
D)
GDP accounting rules do not adjust for production that pollutes the economy.
D
88)
Which of the following is not a reason for the slowdown in the demand for ground–freight
transportation in the U.S. economy in the last quarter of 2006?
88)
A)
a decline in the demand for automobiles
B)
demand for trucking has become more cyclical
C)
a slowdown in the growth of goods portion of the U.S. economy
D)
a decline in the demand for housing
B
89)
Disposable personal income equals personal income
89)
A)
minus personal tax payments plus government transfer payments.
B)
plus government transfer payments.
C)
minus personal tax payments.
D)
minus government transfer payments plus personal tax payments.
C
A
90)
Gross national product, GNP, of the United States is the market value of all final goods and services
90)
A)
produced within the United States.
B)
produced by residents of the United States anywhere in the world.
C)
consumed within the United States.
D)
consumed by residents of the United States anywhere in the world.
91)
The largest income component of U.S. GDP is
91)
A)
compensation received by employees.
B)
interest received by households.
C)
corporate profits.
D)
proprietor’s income.
A
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
92)
If the GDP deflator for a given year is less than 100 which will be higher: nominal GDP or
real GDP for that year? Why?
92)
93)
Why do we not count the value of intermediate goods and services in gross domestic
product? Does the value of intermediate goods and services show up in gross domestic
product? If so, how?
93)
94)
In the term “real GDP” what does “GDP” stand for and what does it measure? What does
“real” indicate?
94)
B
95)
Japan experienced periods of deflation a declining price level during the 1990s.
During a deflationary period, which would be higher: nominal GDP or real GDP? Why?
Assume that the base year is prior to the deflationary period.
95)
96)
The underground economy– the informal sector – can be a significant drag on the
economies of developing countries. Why are firms in the informal sector often less efficient
than firms in the formal sector?
96)
Table 11–14
2000 2005 2006
Product Quantity Price Quantity Price Quantity Price
MP3s 40 $250 45 $255 50 $250
Tacos 2,000 2.00 2,200 2.25 2,300 2.40
Coats 300 50 310 52 350 55
97)
Refer to Table 11–14. Using 2000 as the base year calculate nominal GDP, real GDP and
the GDP deflator for 2006. Show your work.
97)
98)
Since real GDP is adjusted for inflation and nominal GDP is not, nominal GDP must
always be higher than real GDP. Do you agree or disagree? Why?
98)
Table 11–13
2000 2006
Product Quantity Price Quantity Price
Hats 200 $20 250 $21
French Fries 2,000 12,300 2
Digital Cameras 40 200 50 18
99)
Refer to Table 11–13. Calculate nominal GDP and real GDP for 2006 using 2000 as the base
year. Show your work.
99)
100)
Is nominal GDP measured in terms of quantity or in terms of dollars? If dollars, the value
of the dollar from what period? Is real GDP measured in terms of quantity or in terms of
dollars? If dollars, the value of the dollar from what period?
100)
TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.
101)
If prices rise on average in the U.S. economy, the purchasing power of a dollar declines.
101)
102)
In the circular flow of income the value of all the income in the economy is greater than the value of
goods and services produced in the economy.
102)
103)
Using “chain–weighted” prices to calculate real GDP remedies the distortions causes by changed in
relative prices over time.
103)
104)
Transfer payments are subtracted from national income to get to personal income.
104)
105)
Developing countries with large informal sectors tend to have firms that invest less in capital
equipment.
105)
106)
If income is unequally distributed in an economy, increases in GDP may not raise well–being in an
economy.
106)
107)
Real GDP per capita is calculated by dividing the value of real GDP for a country by the country’s
adult population.
107)
108)
For developed countries like the U.S., GDP will always exceed GNP.
108)