Chapter 10, 11, and 12

Random

100

For an economy as a whole, income must equal expenditure because a. the number of firms is equal to the number of households in an economy. b. individuals can only spend what they earn each period. c. every dollar of spending by some buyer is a dollar of income for some seller. d. every dollar of saving by some consumer is a dollar of spending by some other consumer.

c. every dollar of spending by some buyer is a dollar of income for some seller.

200

The consumption component of GDP includes spending on a. durable goods and nondurable goods, but not spending on services. b. durable goods and services, but not spending on nondurable goods. c. nondurable goods and services, but not spending on durable goods. d. durable goods, nondurable goods, and services.

d. durable goods, nondurable goods, and services.

300

Ryan lives in an apartment where he pays $7,000 a year in rent. Alexis lives in a house that could be rented for $14,000 a year. How much do these housing services contribute to GDP? a. $21,000 b. $14,000 c. $7,000 d. $0

a. $21,000

400

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP? a. $500 b. $700 c. $1200 d. $1700

c. $1200

500

If a country were to increase its saving rate, then in the long run it would also increase its a. level of income. b. growth rate of income. c. growth rate of productivity. d. All of the above are correct.

a. level of income.

Random

100

For the purpose of calculating GDP, investment is spending on a. stocks, bonds, and other financial assets. b. real estate and financial assets such as stocks and bonds. c. capital equipment, inventories, and structures, including household purchases of new housing. d. capital equipment, inventories, and structures, excluding household purchases of new housing.

c. capital equipment, inventories, and structures, including household purchases of new housing.

200

Which of the following items is counted as part of government purchases? a. The federal government pays the salary of a Navy officer. b. The state of Nevada pays a private firm to repair a Nevada state highway. c. The city of Las Vegas, Nevada pays a private firm to collect garbage in that city. d. All of the above are correct.

d. All of the above are correct.

300

The goal of the consumer price index is to measure changes in the a. costs of production. b. cost of living. c. relative prices of consumer goods. d. production of consumer goods.

b. cost of living.

400

In the economy of Ukzten in 2010, consumption was $4000, exports were $800, GDP was $9500, imports were $200, and investment was $1000. What were Ukzten’s government purchases in 2010? a. $3700 b. $3900 c. $5100 d. $5500

b. $3900

500

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.

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.

Random

100

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.

b. Real GDP is a better gauge of economic well-being than nominal GDP.

200

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is a. 80, and this indicates that the price level has decreased by 20 percent since the base year. b. 80, and this indicates that the price level has increased by 80 percent since the base year. c. 125, and this indicates that the price level has increased by 25 percent since the base year. d. 125, and this indicates that the price level has increased by 125 percent since the base year.

c. 125, and this indicates that the price level has increased by 25 percent since the base year.

300

A country reported a nominal GDP of $85 billion in 2010 and $100 billion in 2009. It also reported a GDP deflator of 100 in 2010 and 105 in 2009. Between 2009 and 2010, a. real output and the price level both rose. b. real output rose and the price level fell. c. real output fell and the price level rose. d. real output and the price level both fell.

d. real output and the price level both fell.

400

GDP is not a perfect measure of well-being; for example, a. GDP incorporates a large number of non-market goods and services that are of little value to society. b. GDP places too much emphasis on the value of leisure. c. GDP fails to account for the quality of the environment. d. All of the above are correct.

c. GDP fails to account for the quality of the environment.

500

When the consumer price index falls, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can save less because they do not need to offset the effects of rising prices.

b. can spend fewer dollars to maintain the same standard of living.

Random

100

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because a. the CPI is easier to measure. b. the CPI is calculated more often than the GDP deflator is. c. the CPI better reflects the goods and services bought by consumers. d. the GDP deflator cannot be used to gauge inflation.

c. the CPI better reflects the goods and services bought by consumers.

200

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170? a. 80 to 100 b. 100 to 120 c. 150 to 170 d. All of these changes produce the same rate of inflation.

a. 80 to 100

300

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant? a. substitution bias b. introduction of new goods c. unmeasured quality change d. income bias

b. introduction of new goods

400

An increase in the price of dairy products produced domestically will be reflected in a. both the GDP deflator and the consumer price index. b. neither the GDP deflator nor the consumer price index. c. the GDP deflator but not in the consumer price index. d. the consumer price index but not in the GDP deflator.

a. both the GDP deflator and the consumer price index.

500

The price of DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by a. more than 1 percent. b. less than 1 percent. c. 1 percent. d. None of the above is correct; this particular price increase will not affect the GDP deflator.

b. less than 1 percent.

Random

100

If the price of Italian shoes imported into the United States increases, then a. both the GDP deflator and the consumer price index will increase. b. neither the GDP deflator nor the consumer price index will increase. c. the GDP deflator will increase, but the consumer price index will not increase. d. the consumer price index will increase, but the GDP deflator will not increase.

d. the consumer price index will increase, but the GDP deflator will not increase.

200

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as a. $2.67 purchases today. b. $37.50 purchases today. c. $39.00 purchases today. d. $104.00 purchases today.

b. $37.50 purchases today.

300

In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 180 in 2009, then what is the price of the Firebird in 2009 dollars? a. $509.72 b. $6,866.49 c. $9,761.58 d. $12,261.58

d. $12,261.58

400

Which of the following countries had the highest level of real GDP per person in 2008? a. Germany b. United Kingdom c. United States d. Japan

c. United States

500

Historically, the market prices of most natural resources (adjusted for inflation) have a. increased. b. remained stable. c. remained stable or decreased. d. decreased.

c. remained stable or decreased.