Test bank for macroeconomics 5th edition paul krugman robin wells

Test Bank for Macroeconomics, 5th Edition, Paul Krugman, Robin Wells,

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy Multiple Choice 1. The national accounts do NOT keep track of: a. the spending of consumers and the government. b. the sales of producers. c. business investment. d. exchange rates.

ANSWER: d 2. The national income and product accounts keep track of: a. consumer spending. b. interest rates. c. rates of inflation. d. exchange rates.

ANSWER: a 3. The national income and product accounts keep track of: a. consumer debt. b. sales and investment spending by businesses. c. worker productivity. d. unemployment rates.

ANSWER: b 4. The national income and product accounts are calculated by the: a. Congressional Budget Office. b. Federal Reserve. c. Bureau of Economic Analysis. d. Office of Management and Budget.

ANSWER: c 5. The circular-flow diagram illustrates: a. the minimum wage state by state. b. fluctuations in exchange rates. c. changes in worker productivity. d. the key concepts in the national accounts.

ANSWER: d 6. In the U.S. economy, the circular-flow diagram does NOT illustrate: a. growing income inequality. b. flows of money. c. flows of goods and services. d. the purchase and sale of factors of production.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy ANSWER: a 7. The circular-flow diagram is important because it shows that the flow of money into each market or sector of

the economy is _____ the flow of money coming out of that sector. a. greater than b. equal to c. less than d. unrelated to ANSWER: b 8. In the circular-flow diagram, a person or a group of people who share income is a: a. government. b. factor. c. household. d. firm.

ANSWER: c 9. In the circular-flow diagram, an organization that produces goods and services for sale is a: a. government. b. factor. c. household. d. firm.

ANSWER: d 10. In the circular-flow diagram, the places where goods and services are bought and sold are the: a. product markets. b. factor markets. c. households. d. firms.

ANSWER: a 11. In the circular-flow diagram, the places where resources, especially capital and labor, are bought and sold

are the: a. product markets. b. factor markets. c. households. d. firms.

ANSWER: b 12. In the circular-flow diagram, households: a. supply goods. b. supply services.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. supply resources. d. buy resources.

ANSWER: c 13. In the circular-flow diagram, households: a. supply goods. b. supply services. c. buy resources. d. buy goods and services.

ANSWER: d 14. In the circular-flow diagram, firms: a. demand goods. b. demand services. c. supply resources. d. demand resources.

ANSWER: d 15. In the circular-flow diagram, firms: a. supply goods and services. b. demand goods. c. supply resources. d. demand services.

ANSWER: a 16. In the product markets: a. households supply goods and services. b. households demand goods and services. c. firms demand resources. d. firms supply resources.

ANSWER: b 17. In the product markets: a. households supply goods and services. b. households supply resources. c. firms demand goods and services. d. firms supply goods and services.

ANSWER: d 18. In the factor markets: a. households supply goods and services. b. households demand goods and services.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. firms demand resources. d. firms supply resources.

ANSWER: c 19. In the factor markets: a. households supply goods and services. b. households supply resources. c. firms demand goods and services. d. firms supply goods and services.

ANSWER: b 20. According to the circular-flow diagram, which economic agents engage in consumer spending? a. firms b. households c. factor markets d. financial markets ANSWER: b 21. A share in the ownership of a company is a(n): a. bond. b. stock. c. dividend. d. IOU. ANSWER: b 22. The portion of a firm's profit paid to the owner of one share of its stock would accurately be characterized

as: a. an interest payment. b. a dividend. c. a stock. d. a bond.

ANSWER: b 23. _____ is considered to be an IOU. a. A tock b. A bond c. Interest d. A dividend ANSWER: b 24. Households do NOT derive income from: a. wages or labor income.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. interest from lending. c. rent from allowing firms to use their land. d. imports.

ANSWER: d 25. The total income of households after taxes and government transfers is called: a. disposable income. b. private savings. c. aggregate spending. d. investment.

ANSWER: a 26. Private savings is equal to: a. disposable income less taxes. b. disposable income less consumption. c. wealth. d. wealth plus government transfer payments.

ANSWER: b 27. Stock in a company is: a. a share of ownership of the company. b. an IOU that pays interest. c. a portion of a firm's profits paid to shareholders. d. a component of private savings.

ANSWER: a 28. A bond is: a. a share of ownership of a company. b. an IOU that pays interest. c. a portion of a firm's profits paid to shareholders. d. a component of private savings.

ANSWER: b

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy

29. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What is the value of GDP in this

economy? a. $100 b. $400 c. $500 d. $600 ANSWER: c 30. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in consumer spending, holding everything else constant, which outcome is likely to occur? a. an increase in GDP b. a decrease in GDP c. an increase in the unemployment rate d. a decrease in the inflation rate ANSWER: a 31. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in consumer spending, holding everything else constant, which outcome is likely to occur? a. an increase in nominal GDP b. an increase in real GDP c. an increase in the unemployment rate d. an increase in the inflation rate ANSWER: c 32. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy

there is an increase in investment spending, holding everything else constant, which outcome is likely to occur? a. a decrease in GDP b. an increase in GDP c. an increase in the unemployment rate d. a decrease in the inflation rate ANSWER: b 33. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in investment spending, holding everything else constant, which outcome is likely to occur? a. an increase in the nominal GDP b. an increase in the real GDP c. an increase in the unemployment rate d. an increase in the inflation rate ANSWER: c 34. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in government spending, holding everything else constant, which outcome is likely to occur? a. an increase in the nominal GDP b. a decrease in the real GDP c. an increase in the unemployment rate d. a decrease in the inflation rate ANSWER: a 35. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in government spending, holding everything else constant, which outcome is likely to occur? a. an increase in the nominal GDP b. an increase in the real GDP c. an increase in the unemployment rate d. an increase in the inflation rate ANSWER: c 36. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in exports, holding everything else constant, which outcome is likely to occur? a. a decrease in the nominal GDP b. a decrease in the real GDP c. a decrease in the unemployment rate d. a decrease in the inflation rate Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy ANSWER: c 37. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in

equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in exports, holding everything else constant, which outcome is likely to occur? a. a decrease in the nominal GDP b. an increase in the real GDP c. a decrease in the unemployment rate d. an increase in the inflation rate ANSWER: a 38. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What are net exports? a. $0 b. $30 c. $60 d. $100 ANSWER: a 39. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What is disposable income? a. $0 b. $100 c. $400 d. $500 ANSWER: c 40. (Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. How does the government finance

its purchases of goods and services? a. by printing money b. by taxes c. by borrowing d. by taxes and borrowing ANSWER: b 41. In the circular-flow model, households: a. receive transfer payments from the government. b. buy resources in the factor markets. c. sell products in the market for goods and services. d. issue stocks and bonds to raise capital.

ANSWER: a 42. The indirect ownership of physical capital refers to households owning: a. cash.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. stocks. c. savings accounts. d. their house.

ANSWER: b 43. The money spent on domestically produced final goods and services is: a. equal to GDP. b. equal to exports minus imports. c. subtracted in the circular-flow model. d. equal to GDP, equal to exports minus imports, and subtracted in the circular-flow model.

ANSWER: a 44. Most households derive the bulk of their income from: a. wages. b. interest. c. profit. d. rent.

ANSWER: a 45. An example of a government transfer is a(n): a. expenditure on an interstate highway. b. bequest from a deceased relative. c. Social Security payment. d. salary for a member of the armed forces.

ANSWER: c 46. Which example is NOT a government transfer? a. unemployment compensation b. food stamps c. payments by the Defense Department for a new weapons system d. Social Security benefits paid to someone who is retired ANSWER: c 47. Disposable income equals: a. income plus government transfers minus taxes. b. income plus government spending minus taxes. c. income minus taxes plus government spending. d. income minus taxes minus government transfers.

ANSWER: a 48. Goods that are produced domestically but sold abroad are: a. imports.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. exports. c. part of domestic consumption. d. investment.

ANSWER: b 49. Investment spending is spending on: a. productive physical capital. b. stocks. c. mutual funds. d. corporate bonds.

ANSWER: a 50. Disposable income in a particular period is: a. total earned income. b. earned income plus government transfer payments. c. earned income plus government transfer payments less taxes. d. earned income plus government transfer payments less taxes and savings.

ANSWER: c 51. Domestically produced goods and services sold to people in other countries are known as: a. imports. b. investments. c. exports. d. transfer payments.

ANSWER: c 52. Investment spending is spending on: a. productive physical capital. b. bonds. c. shares of stock. d. productive physical capital, bonds, and shares of stock.

ANSWER: a 53. An example of investment spending is the purchase of a: a. bond by a banker. b. loaf of bread by your aunt. c. new tractor by a farmer. d. ticket to a football game by a student.

ANSWER: c 54. Government borrowing is: a. the amount of funds raised by government in financial markets.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. government spending on goods and services. c. government tax revenues. d. the amount of funds raised by government in the financial markets, government spending on goods

and services, and government tax revenues.

ANSWER: a 55. If we add up the consumer spending on goods and services, investment spending, government purchases of

goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's: a. disposable income. b. gross domestic product. c. trade deficit. d. budget deficit.

ANSWER: b 56. Which factor causes an outflow of funds from a domestic economy? a. household savings b. government tax collections c. government transfer payments d. imports ANSWER: d 57. Which transaction is included in a current year's GDP as investment spending? a. ABC company purchased 10,000 shares of IBM stock. b. Ronnie bought a new BMW. c. Anton purchased his friend's condo. d. Maggie bought a play-gym set for her day-care business.

ANSWER: d 58. Which example illustrates consumption expenditure? a. Samantha bought an oven for her cooking show on Food Network. b. Stephanie bought a laptop for her brother. c. Jim purchased 200 shares of Google stock. d. Herman Smith spent $1,500 to buy a used car for his son.

ANSWER: b 59. A transfer payment is a payment for: a. a military transfer to a war zone. b. which no services were rendered by the government. c. transfer of a debt to a different person. d. being transferred to a different city by your employer.

ANSWER: b Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 60. Purchases of foreign-produced goods and services are: a. net exports. b. exports. c. imports. d. transfer payments.

ANSWER: c 61. Goods that are produced in a particular period but NOT sold in that period: a. go into inventory and are called consumption. b. end up in inventory and are included in investment. c. are finally included in depreciation when they are sold. d. are classified as intermediate goods.

ANSWER: b 62. Which example illustrates consumption? a. a new computer purchased by Federal Express for one of its corporate executives b. a storage facility for a moving company c. a new car purchased for personal use d. a dump truck purchased by a demolition company ANSWER: c 63. Inventory is counted as investment because it: a. is used for future production. b. is a source of future sales. c. has no opportunity cost. d. is tax deductible.

ANSWER: b 64. Which factor is NOT included in investment spending in the national income accounts? a. new residential construction b. the purchase of machinery and other productive physical capital c. the purchase of stocks and bonds by a business d. spending on inventories ANSWER: c 65. A laptop computer that is purchased by an accounting firm is considered to be: a. consumption spending. b. investment spending. c. private saving. d. a pretax dividend.

ANSWER: b Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 66. An example of investment spending is the: a. amount of funds raised by the government in the financial markets. b. purchase of government bonds by a private household. c. purchase of a freezer by an ice-cream parlor. d. purchase of stock shares by a mutual fund.

ANSWER: c 67. A laptop computer purchased by a private individual for personal use is considered to be: a. consumption spending. b. investment spending. c. private saving. d. a transfer of income.

ANSWER: a 68. Households do NOT receive income in the form of: a. wages. b. dividends. c. interest and rent. d. investment spending.

ANSWER: d

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 69. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. What is

GDP? a. $200 b. $700 c. $1,000 d. $1,080 ANSWER: c 70. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model What is the

value of net exports? a. –$20 b. $20 c. $50 d. $130 ANSWER: a 71. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. What is the

value of disposable income? a. $1,020 b. $1,000 c. $870 d. $850 ANSWER: c 72. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model How much is

total government spending? a. $20 b. $220 c. $370 d. $200 ANSWER: b 73. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The

government has a budget: a. surplus of $150. b. surplus of $220. c. deficit of $70. d. deficit of $200.

ANSWER: c 74. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. How does

the government finance its spending?

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy a. taxes of $150 plus borrowing of $70 b. foreign borrowing and sales of stock of $110 c. investment spending of $120 d. net exports of $80 ANSWER: a 75. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of

funds into and out of financial markets is: a. $70. b. $110. c. $170. d. $300.

ANSWER: d 76. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of

funds into and out of households is: a. $1,020. b. $1,000. c. $850. d. $700.

ANSWER: a 77. (Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of

funds into and out of the rest of the world is: a. $30. b. $80. c. $160. d. $240.

ANSWER: c 78. The value, at current market prices, of the final goods and services produced within a country during a

particular period is: a. disposable personal product. b. gross foreign factor output. c. gross personal product. d. gross domestic product.

ANSWER: d 79. The total of the values added at every stage of production for a good leads to the: a. total cost of the labor used to produce the good. b. prices of the factors of production used to produce the good. c. final value of the good.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy d. intermediate value of the good.

ANSWER: c 80. Gross domestic product is defined as: a. consumer spending + government purchases of goods and services + financial spending + exports –

imports. b. consumer spending + government transfers + investment spending + exports – imports. c. disposable income + taxes + investment spending + exports + imports. d. consumer spending + government purchases of goods and services + investment spending + exports – imports.

ANSWER: d 81. Which definition BEST describes GDP? a. the total value of all final goods and services produced in the economy during a given year b. the total value of all goods and services produced in the economy during a given year c. the total value of all primary, intermediate, and final goods and services produced in the economy

during a given year d. the total value of all goods and services produced and sold in the economy during a given year ANSWER: a 82. GDP is the total dollar value of all: a. intermediate goods and services produced in the economy in a given period. b. wages paid to producing workers in a given period. c. final goods and services produced in the economy in a given period. d. government production in a given period.

ANSWER: c 83. GDP is the: a. total market value of all final goods and services produced in an economy in one year. b. total accumulated wealth of an economy. c. volume of all dollar transactions made in an economy in one year. d. dollar amount of all sales made in the economy in one year.

ANSWER: a 84. Gross domestic product is the economy's total production of _____ for a given period. a. goods and services b. final goods and services c. intermediate goods and services d. consumer goods and services ANSWER: b 85. Which statement about gross domestic product is FALSE? Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy a. It is aggregate output. b. It is the total production of final goods and services. c. It grows during an expansion. d. It is the total production of all final and intermediate goods and services.

ANSWER: d 86. Intermediate goods are NOT counted in GDP because: a. doing so would result in double counting. b. these goods are not produced for the market. c. these goods are produced in the underground economy. d. these goods involve financial transactions.

ANSWER: a 87. An intermediate good would be: a. a new boat to be used for vacations. b. lumber used to build a house. c. payments to military personnel. d. a professor's salary.

ANSWER: b 88. Which example illustrates an intermediate good? a. stocks and bonds purchased by a business executive b. a cellular telephone purchased by a college student c. a wedding ring purchased by an engineer for his fiancée d. tires General Motors purchased from Goodyear for new electric cars ANSWER: d 89. The equation that breaks GDP down by the four sources of aggregate spending is: a. GDP = C + I + G + X + IM. b. GDP = C + I + G – X – IM. c. GDP = C – I – G – X + IM. d. GDP = C + I + G + X – IM. ANSWER: d 90. GDP is the total: a. value of all transactions in a year. b. value of all final goods and services produced in a year. c. value of all final goods and services produced by Americans at home and abroad in a year. d. value of all goods produced in the economy in a year.

ANSWER: b

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy

91. According to the information in Table: Calculating GDP, what is GDP? a. $47,475 b. $12,200 c. $21,485 d. $34,085 ANSWER: b 92. GDP is the sum of: a. personal consumption, investment, government purchases of goods and services, exports, and

imports. b. personal consumption, investment, government purchases of goods and services, and net exports. c. personal consumption, investment, government purchases of goods and services, and net imports. d. value added, net imports, and government purchases of goods and services.

ANSWER: b

93. According to the information in Table: GDP. GDP in the table is: a. $94 billion.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. $188 billion. c. $168 billion. d. $139 billion.

ANSWER: a 94. The Arcadia Entertainment Co. produced 20,000 DVDs of the movie Thor in 2011. Only 4,000 copies

remained unsold at the end of 2011. As a result: a. only 16,000 DVDs should be included in GDP in 2011 as consumption expenditure. b. all 20,000 DVDs will be included in GDP in 2011, 16,000 as consumption expenditure and 4,000 as investment expenditure. c. only 16,000 DVDs are included in GDP of 2011; the remaining 4,000 are counted in GDP of 2012. d. all 20,000 DVDs are initially counted in 2011 GDP as consumption expenditure, but they will be subtracted and added to 2012 GDP as the merchandise gets sold.

ANSWER: b 95. In 2011, consumption spending is $7,000, government purchases of goods and services is $2,000, and

investment spending is $1,500. If GDP for 2011 is $10,300, exports are _____ and imports are _____. a. $400; $200 b. $100; $200 c. $600; $800 d. $500; $300 ANSWER: c 96. Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to

produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be: a. $630. b. $230. c. $200. d. $830.

ANSWER: a 97. Boeing buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1

million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model at $10 million. The value added by Boeing is equal to: a. $3.5 million. b. $16.5 million. c. $13 million. d. $15.5 million.

ANSWER: a 98. Which equation is CORRECT? Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy a. GDP = C + I + G + IM – X. b. GDP = C + I + G + X – IM. c. GDP = C + I + G + X + IM. d. GDP = C + I + G – T + TR. ANSWER: b 99. Don is a builder and in his free time he has built an addition to his own house. This transaction will: a. not be included in GDP because it is not produced for the marketplace. b. be included in GDP because Don is a professional builder. c. not be included in GDP because it is an intermediate good. d. be included in GDP because building is Don's hobby.

ANSWER: a 100. Which transaction will be included in the official measurement of GDP? a. Stan sold his 2015 Honda to his sister. b. Monica illegally downloaded movies to her laptop. c. Ben bought a textbook from his friend who took the class last semester. . d. Sean bought a new truck.

ANSWER: d 101. An example of an intermediate good is: a. wages paid to an employee. b. steel purchased by aircraft manufacturers. c. vegetables purchased for your dinner. d. electric bills for your house.

ANSWER: b 102. Which item would NOT be included in this year's GDP? a. the production of a television show b. the purchase of a new work truck c. the hiring of a new police officer d. your purchase of your neighbor's 2001 Toyota ANSWER: d 103. Which equation is the BEST one for GDP? a. GDP = C+ I + G – X + IM b. GDP = C + I + G + X – IM c. GDP = C + I + G + taxes – value added d. GDP = C + I + G + taxes + X + IM ANSWER: b 104. Which item would NOT be included in GDP? Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy a. the dollar value of a repair job done by your cousin on her own car b. the dollar value of a lawyer's service c. new car sales by a local dealer d. production of new cars that were not sold in the current year ANSWER: a 105. Goods that are produced in a particular period but NOT sold in that period: a. count as consumption in the next year. b. are included in investment. c. are treated like exports. d. are classified as purely financial transactions.

ANSWER: b 106. A country's exports minus its imports during a period are: a. net exports. b. gross exports. c. net imports. d. gross imports.

ANSWER: a 107. Net exports are calculated by subtracting: a. imports from exports. b. exports from imports. c. out all intermediate goods. d. I, G, and value added from GDP. ANSWER: a 108. A nation's exports minus its imports: a. equals its private investment. b. is net exports. c. is always a positive number. d. is equal to net transfer payments.

ANSWER: b 109. Which item would NOT be a part of GDP? a. used car sales b. new residential construction c. a new truck purchased by a building contractor d. cable TV service purchased for a home ANSWER: a 110. The total volume of business sales in the economy is much larger than GDP because: Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy a. GDP understates the value of total output. b. the output approach to measuring GDP excludes intermediate transactions. c. GDP includes transfer payments. d. GDP excludes exports.

ANSWER: b 111. Which item would NOT be included in this year's GDP? a. the production of a television show b. the purchase of a new hybrid truck c. the hiring of a new schoolteacher d. the purchase of your neighbor's house, which was built in 1994 ANSWER: d 112. Purchases of _____ are included in GDP. a. used goods b. newly issued stocks c. new foreign-produced investment goods d. new capital goods ANSWER: d 113. GDP counts the dollar value of only final goods and services because: a. we can measure only the value of final goods and services, not the value of inputs. b. if we counted the value of all goods, we would count inputs, such as the value of steel in a new

automobile, more than once. c. intermediate goods reduce GDP. d. only final goods and services matter for the economy.

ANSWER: b 114. The calculation of GDP does NOT include the value of: a. Firestone tires sold at your local garage. b. Bridgestone tires purchased by Ford Motor Co. c. Goodyear tires purchased by the United States Secret Service. d. Michelin tires purchased by Canadian car collectors.

ANSWER: b

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 115. (Table: Furniture Production Schedule) Use Table: Furniture Production Schedule. What is the total value

added of all stages of production of the furniture? a. $800 b. $1,200 c. $1,800 d. $2,000 ANSWER: b 116. Suppose that Mr. Green Jeans sells $5,000 of wheat to Big Ben Bakery. Big Ben uses the wheat to make

flour and then hamburger buns, which it sells to Hamburger Heaven for $11,000. Hamburger Heaven also buys $20,000 of beef from a rancher. Hamburger Heaven uses the beef and buns to make 10,000 hamburgers, which are sold for $5 each. How much do these transactions add to GDP? a. $86,000 b. $36,000 c. $31,000 d. $50,000 ANSWER: d 117. Value added in national income accounts refers to the: a. value added by labor to the production process. b. difference between the price and the value of inputs purchased. c. difference in profits at various stages of production. d. value of all inputs used by the final producer.

ANSWER: b 118. Which item is included in GDP? a. the purchase of 100 shares of Microsoft stock b. the purchase of a 1965 Ford Mustang c. Social Security payments from the U.S. government to retired people d. the purchase of a ticket to a Lady Gaga concert ANSWER: d 119. GDP does NOT exclude: a. the value of leisure. b. damage to the environment. c. the value of housework. d. the value of owner-occupied housing.

ANSWER: d 120. Which item is included in the calculation of GDP? a. expenditure on new construction b. a retiree's monthly Social Security check Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. buying a house built 10 years ago d. buying shares of Home Depot stock ANSWER: a 121. Included in GDP is the dollar value of: a. a used car sold during the period. b. a new car imported during the period. c. a new car exported during the period. d. 100 shares of General Motors stock bought by a retiree.

ANSWER: c 122. The value of _____ is counted in GDP. a. glass for windshields purchased by a car manufacturer b. a new car sold by a dealer c. a used car sold by a dealer d. a share of stock in a car manufacturer ANSWER: b 123. Which transaction is included in the nation's gross domestic product? a. A college student buys a used textbook from his roommate. b. A construction company purchases lumber to build a new house. c. A college student buys a pizza and has it delivered to her dorm room. d. A group of college students volunteer to rake leaves at an assisted living facility for senior citizens.

ANSWER: c 124. If, during 2010, the Republic of Sildavia recorded investment spending of $3 billion, government purchases

of $3 billion, consumer spending of $7 billion, imports of $5 billion, government transfers of $1 billion, and exports of $3 billion, Sildavia's GDP in 2010 was: a. $11 billion. b. $12 billion. c. $13 billion. d. $14 billion.

ANSWER: a 125. Suppose a consumer buys a Perfect Pizza frozen cheese pizza at the grocery store for $10. Perfect Pizza

purchased the dough and tomato sauce from a food-processing company for $2 and bought the cheese for $1. It sold the pizza to the store for $5. How much has GDP increased? a. $2 b. $5 c. $10 d. $18 ANSWER: c Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 126. Which transaction would NOT be counted in GDP? a. Nike builds a retail store. b. Your mother buys a pound of Washington-grown apples. c. Your mother buys 100 shares of Nike stock. d. The Indiana state government pays for repair of a damaged bridge over the Wabash River.

ANSWER: c 127. GDP may be calculated as the sum of: a. consumer spending, investment spending, government purchases of goods and services, and exports

minus imports. b. consumer spending, investment spending, government transfer payments, and exports minus imports. c. consumer spending, investment spending, government purchases of goods and services, and exports. d. exports and imports only.

ANSWER: a

128. (Table: Pizza Economy I) Use Table: Pizza Economy I. GDP in this economy is: a. $73,000. b. $65,000. c. $57,000. d. $51,000.

ANSWER: b

129. (Table: Pizza Economy II) Use Table: Pizza Economy II. GDP in this economy is: a. $74,000. b. $5,000. c. $29,000. d. $16,000.

ANSWER: b Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 130. If, during 2011, the Republic of Sildavia recorded a value added of $78 billion, wages of $40 billion,

profits of $8 billion, and total sales of all goods and services $90 billion, the value of intermediate goods purchased during 2011 in Sildavia was: a. $42 billion. b. $30 billion. c. $12 billion. d. $4 billion.

ANSWER: c 131. If, during 2011, the Republic of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion,

imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2011 in Sildavia were: a. $36 billion. b. $38 billion. c. $51 billion. d. $64 billion.

ANSWER: a 132. In the United States, consumer spending accounts for approximately _____% of GDP. a. 50 b. 60 c. 70 d. 80 ANSWER: c 133. The LARGEST component of U.S. GDP is value added in: a. household production. b. business production. c. government production. d. production of goods sold overseas.

ANSWER: b 134. In the United States, investment spending accounts for approximately _____% of GDP. a. 6 b. 16 c. 24 d. 33 ANSWER: b 135. In the United States, government spending accounts for approximately_____% of GDP. a. 5 b. 10 Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. 20 d. 30 ANSWER: c 136. Historically, _____ spending was the LARGEST component of U.S. GDP, at approximately 70% of

aggregate spending. a. government b. consumer c. investment d. net export ANSWER: b 137. The calculation of aggregate output does NOT include the value of: a. Firestone tires sold at your local auto shop. b. a new shower installed in a 1920s house. c. the six-CD player replacing the factory-mounted radio-cassette player in your car. d. the tires on brand-new Volvo station wagons.

ANSWER: d 138. In the United States: a. GNP is about twice GDP. b. GDP is about twice GNP. c. GDP exceeds GNP by depreciation plus indirect business taxes. d. GNP and GDP are about equal.

ANSWER: d 139. A country's GNP: a. must be larger than its GDP. b. is the total factor income earned by residents of a country. c. includes factor income earned by foreigners. d. excludes factor income earned abroad by Americans.

ANSWER: b 140. The MOST important use of GDP is as a measure of: a. the size of the economy. b. the level of unemployment. c. changes in the price level. d. rates of return in financial markets.

ANSWER: a 141. The scale MOST often used to compare economic performance in other years is: a. the circular-flow diagram.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. real GDP. c. the business cycle. d. fiscal policy.

ANSWER: b 142. An increase in the value of nominal GDP over time: a. is always due to an increase in prices. b. is always due to an increase in the production of goods and services. c. may be due to an increase in prices, in the production of goods and services, or both. d. may be due to a decrease in prices, in the production of goods and services, or both.

ANSWER: c 143. The Venezuela example illustrates: a. that the difference between nominal and real GDP is negligible in most cases. b. that there is no difference between nominal and real GDP in the real world. c. the importance of distinguishing between nominal and real GDP. d. that GNP, rather than GDP, is a better measure of a country's economic activity.

ANSWER: c

144. (Table: Measuring GDP) Use Table: Measuring GDP. GDP is equal to: a. $500 billion. b. $850 billion. c. $995 billion. d. $1,000 billion.

ANSWER: c 145. (Table: Measuring GDP) Use Table: Measuring GDP. Total expenditures on GDP by the household sector

are: a. $100 billion. b. $150 billion. c. $200 billion. d. $500 billion.

ANSWER: d 146. (Table: Measuring GDP) Use Table: Measuring GDP. Government purchases of goods and services are: Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy a. $50 billion. b. $100 billion. c. $200 billion. d. $300 billion.

ANSWER: d 147. (Table: Measuring GDP) Use Table: Measuring GDP. Exports are: a. –$5 billion. b. zero. c. $5 billion. d. $10 billion.

ANSWER: d 148. The inflation-adjusted measure of aggregate output typically used by economists is called: a. aggregate output. b. nominal gross national product. c. net domestic product. d. real gross domestic product.

ANSWER: d 149. Real GDP is nominal GDP adjusted for: a. double counting. b. changes in prices. c. population. d. imports.

ANSWER: b 150. If real GDP rises while nominal GDP falls, then prices on average have: a. risen. b. fallen. c. stayed the same. d. decreased and then been offset by an equal increase.

ANSWER: b 151. Aggregate output is: a. equal to consumer spending on goods and services. b. the value of new construction, changes in inventories, and the purchase of physical capital by

businesses. c. the total quantity of intermediate goods produced by an economy. d. the total quantity of final goods and services produced by an economy.

ANSWER: d Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 152. If real GDP falls while nominal GDP rises, then prices on average have: a. risen. b. fallen. c. stayed the same. d. Real GDP cannot rise when nominal GDP falls.

ANSWER: a 153. The total value of all final goods and services produced in a given year, calculated with the prices current in

the year in which the output is produced, is: a. real GDP. b. nominal GDP. c. net exports. d. consumption spending.

ANSWER: b 154. The total value of all final goods and services produced in a given year, calculated using the prices of a

selected base year, is: a. real GDP. b. nominal GDP. c. net exports. d. consumption spending.

ANSWER: a

155. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. Nominal GDP in 2013 was: a. $400. b. $420. c. $445. d. $820.

ANSWER: a 156. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. Nominal GDP in 2014 was: a. $400. b. $420. c. $445. d. $820.

ANSWER: c Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 157. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. The growth rate of nominal GDP from 2013 to 2014 was _____%. a. 5 b. 10 c. 11.25 d. 45 ANSWER: c 158. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. If 2013 is the base year, real GDP in 2013 was: a. $400. b. $420. c. $425. d. $445.

ANSWER: a 159. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. If 2013 is the base year, real GDP in 2014 was: a. $400. b. $420. c. $425. d. $445.

ANSWER: b 160. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. Assuming 2013 was the base year, the growth rate of real GDP from 2013 to 2014 was _____%. a. 5 b. 10 c. 11.25 d. 20 ANSWER: a 161. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. The growth of nominal GDP from 2013 to 2014 was due to approximately a _____% increase in prices and approximately a _____% increase in aggregate output. a. 11.25; 0 b. 0; 45 c. 5; 11.25 d. 6.25; 5 ANSWER: d Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 162. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. If 2014 is the base year, real GDP in 2014 was: a. $400. b. $420. c. $425. d. $445.

ANSWER: d 163. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. If 2014 is the base year, real GDP in 2013 was: a. $400. b. $420. c. $425. d. $445.

ANSWER: c 164. (Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces

only lemonade and cookies. Assuming that 2014 was the base year, the growth rate of real GDP from 2013 to 2014 was: a. –5%. b. 4.7%. c. 11.25%. d. 20%.

ANSWER: b 165. Consider an economy that produces only DVDs and DVD players. If 10 DVDs are sold at $20 each and 5

DVD players are sold at $100 each, then nominal GDP is: a. $100. b. $700. c. $1,100. d. $900.

ANSWER: b 166. Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20

each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Nominal GDP this year is: a. $100. b. $650. c. $700. d. $500.

ANSWER: b

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 167. Consider an economy that produces only DVDs and DVD players. Last year, 10 DVDs were sold at $20

each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD players were sold at $50 each. Real GDP this year using last year as the base year is: a. $100. b. $700. c. $1,300. d. $300 ANSWER: c 168. Suppose that nominal GDP is $1,000 in 2009 and $1,500 in 2010. If the overall price level increased by

_____% between 2009 and 2010, we could say that real GDP _____. a. 50; stayed constant b. less than 50; decreased c. more than 50; increased d. 50; increased ANSWER: a

169. (Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. In 2011, nominal

GDP was _____ and real GDP was _____. a. $450; $400 b. $525; $450 c. $525; $400 d. $450; $575 ANSWER: b 170. (Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. From 2010 to

2011 real GDP _____ by _____%. a. increased; 12.5 b. decreased; 50 c. increased; 43.75 d. decreased; 12.5 ANSWER: a 171. (Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Nominal GDP in

2010 was: a. $200. b. $400.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. $450. d. $525.

ANSWER: b 172. (Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Between 2010 and

2011, nominal GDP _____ by _____%. a. increased; 12.5 b. decreased; 12.5 c. increased; 16.67 d. increased; 31.25 ANSWER: d 173. (Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. How much of the

increase in nominal GDP between 2010 and 2011 was due to inflation? a. 31.25% b. 18.75% c. 12.5% d. 4% ANSWER: b 174. Chained dollars is: a. money that banks are required to keep in their vaults to back deposits. b. the measure of the value of intermediate goods. c. a method for calculating changes in real GDP using an early base year and a late base year. d. a method used to convert real to nominal GDP. ANSWER: c 175. Real GDP is: a. the value of the production of all final goods and services measured in current prices. b. the value of the production of all final goods and services adjusted for price changes. c. the projected future value of GDP. d. calculated by adding up only the real number of all items sold in the United States, regardless of their

prices.

ANSWER: b 176. Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for

$8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The value of nominal GDP in years 1 and 2, respectively, is: a. $900 and $1,077.50. b. $900 and $990. c. $180,000 and $257,400. d. $1,000 and $1,005.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy ANSWER: a 177. Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for

$8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, real GDP in year 2 is: a. $900. b. $970. c. $1,000. d. $1,077.50.

ANSWER: b 178. Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for

$8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The growth rate of nominal GDP from year 1 to year 2 is _____%. a. 10 b. 7.8 c. 19.7 d. 8.8 ANSWER: c 179. Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for

$8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is _____%. a. 10 b. 7.8 c. 19.7 d. 8.8 ANSWER: b 180. Nominal GDP: a. has not been adjusted for changes in prices over time. b. has been adjusted for changes in prices over time. c. is a small or nominal amount of output. d. excludes the international sector.

ANSWER: a 181. If both aggregate output and the aggregate price level increase: a. real GDP will increase faster than nominal GDP will. b. nominal GDP will increase faster than real GDP will. c. it makes no difference to real or nominal GDP. d. real GDP and nominal GDP will increase faster than the price level will.

ANSWER: b Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy 182. If nominal GDP increases from one year to the next, _____ must have risen. a. prices b. real GDP c. prices and real GDP d. real GDP or prices or both ANSWER: d 183. If nominal GDP decreases from one year to the next, _____ must have fallen. a. prices b. real GDP c. prices and real GDP d. Real GDP or prices or both ANSWER: d 184. If the price level and nominal GDP both doubled, then real GDP would: a. also double. b. increase by half. c. remain unchanged. d. decrease by half.

ANSWER: c 185. Real GDP is the same as _____ GDP. a. current-dollar b. inflation-adjusted c. nominal d. value-added ANSWER: b 186. Nominal GDP is: a. inflation-adjusted GDP. b. real GDP minus depreciation. c. current-dollar GDP. d. constant-dollar GDP. ANSWER: c 187. Government economists have adopted the _____ method of calculating the change in real GDP, which

averages the GDP growth rate according to both an early base year and a late base year. a. cost indexation b. straight-line depreciation c. chain-linking d. fixed base year Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy ANSWER: c 188. Assume that, in the base year (2011), a country's nominal GDP is $10,000 billion. The country has had 5%

inflation each year since 2006. Real GDP of 2011 is equal to: a. $10,500 billion. b. $11,025 billion. c. $10,000 billion. d. $9,500 billion.

ANSWER: c 189. Real GDP tends to understate our economic well-being because it: a. includes the value of services produced in the home. b. excludes the value of leisure. c. includes expenditures on crime prevention equipment. d. includes health care costs related to the consumption of cigarettes.

ANSWER: b 190. Choose the best answer. Real GDP tends to overstate our economic well-being by including: a. expenditures on crime prevention. b. payments for cleaning up the environment. c. repairs to structures destroyed by storms. d. expenditures on crime prevention, payments for cleaning up the environment, and repairs to

structures destroyed by storms.

ANSWER: d 191. A country's living standard is BEST measured by: a. per capita nominal GDP. b. real GDP. c. nominal GDP. d. per capita real GDP. ANSWER: d 192. Economists frequently use GDP per capita to reflect: a. the impact of prices on GDP. b. differences in living standards across countries. c. people who are employed. d. both people who are employed and those who are unemployed.

ANSWER: b 193. Real GDP per capita is: a. a perfect measure of a country's standard of living. b. the only way to measure living standards among different countries.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. an incomplete measure of a country's standard of living. d. used only by the United Nations to compare nations based on measures of welfare.

ANSWER: c 194. The BEST available common measure of a nation's standard of living is: a. nominal GDP. b. market GDP. c. real GDP per capita. d. nominal GDP per capita.

ANSWER: c 195. Dividing real GDP by the population: a. results in consumption per capita. b. results in nominal GDP per capita. c. results in real GDP per capita. d. results in a measure of happiness.

ANSWER: c 196. Assume that the real GDP of the United States is approximately $12 trillion and the population of the

United States is approximately 300 million. What is per capita real GDP? a. $4,000 b. $36,000 c. $40,000 d. Real per capita GDP can't be determined without more information.

ANSWER: c

197. (Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of nominal GDP from 2011 to 2014

was _____%. a. 37.5 b. 60 c. 62.5 d. 166.7 ANSWER: d 198. (Table: Per Capita GDP) Per capita nominal GDP in 2011 was: a. $600. b. $400. c. $300.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy d. $30.

ANSWER: a 199. (Table: Per Capita GDP) Use Table: Per Capita GDP. Per capita nominal GDP in 2014 was: a. $600. b. $800. c. $300. d. $1,600.

ANSWER: b 200. (Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of per capita nominal GDP was: a. 10%. b. 20%. c. 25%. d. 33%.

ANSWER: d 201. (Table: Per Capita GDP) Use Table: Per Capita GDP. If 2011 is the base year, real GDP in 2011 was: a. $500. b. $3,000. c. $4,000. d. $300,000.

ANSWER: b 202. (Table: Per Capita GDP) Use Table: Per Capita GDP. If 2011 is the base year, real GDP in 2014 was: a. $400. b. $3,000. c. $4,000. d. $80,000.

ANSWER: c 203. (Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of real GDP from 2011 to 2014 was: a. 10%. b. 20%. c. 25%. d. 33%.

ANSWER: d 204. (Table: Per Capita GDP) Use Table: Per Capita GDP. Per capita real GDP in 2011 was: a. $600. b. $400. c. $300.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy d. $30.

ANSWER: a 205. (Table: Per Capita GDP) Use Table: Per Capita GDP. Per capita real GDP in 2014 was: a. $600. b. $800. c. $300. d. $400.

ANSWER: d 206. (Table: Per Capita GDP) Use Table: Per Capita GDP. The growth rate of per capita real GDP from 2011 to

2014 was: a. 200%. b. 50%. c. –50%. d. –33%.

ANSWER: d

207. (Table: Pizza Economy III) Use Table: Pizza Economy III. Considering 2010 as the base year, nominal

GDP in 2011 was: a. $47,000. b. $69,000. c. $72,000. d. $114,000.

ANSWER: a 208. (Table: Pizza Economy III) Use Table: Pizza Economy III. Considering 2010 as the base year, real GDP in

2011 was: a. $47,000. b. $69,000. c. $72,000. d. $114,000.

ANSWER: b 209. (Table: Pizza Economy III) Use Table: Pizza Economy III. Considering 2010 as the base year, real GDP Copyright Macmillan Learning. Powered by Cognero.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy

between 2010 and 2011 grew at a rate of: a. 53.19%. b. 39.47%. c. –39.47%. d. –58.67%.

ANSWER: c 210. (Table: Pizza Economy III) Use Table: Pizza Economy III. Considering 2010 as the base year, given that

total population was 1,140 in 2010 and 1,380 in 2011, real GDP per capita in 2010 was: a. $80. b. $53. c. $60. d. $100.

ANSWER: d 211. (Table: Pizza Economy III) Use Table: Pizza Economy III. Considering 2010 as the base year, given that

total population was 1,140 in 2010 and 1,380 in 2011, real GDP per capita between 2010 and 2011 grew at a rate of _____%. a. –50 b. –25 c. 50 d. 75 ANSWER: a 212. (Table: Pizza Economy III) Use Table: Pizza Economy III. Using 2010 as the base year, nominal GDP in

2010 was: a. $47,000. b. $69,000. c. $72,000. d. $114,000.

ANSWER: d 213. (Table: Pizza Economy III) Use Table: Pizza Economy III. Using 2010 as the base year, real GDP in 2010

was: a. $47,000. b. $69,000. c. $72,000. d. $114,000.

ANSWER: d 214. The aggregate price level is the: a. average price of shares on the stock market.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy b. average price of commodities. c. overall level of prices. d. same as the average price of gasoline.

ANSWER: c 215. Inflation is a(n): a. rising aggregate price level. b. expansion of output. c. rise in wages. d. rise in the unemployment rate.

ANSWER: a 216. Choose the best answer. A price index: a. always includes a base year. b. measures the cost of purchasing a market basket of output across different years. c. is normalized to 100 for the base year. d. always includes a base year, measures the cost of purchasing a market basket of output across

different years, and is normalized to 100 for the base year.

ANSWER: d 217. In a market basket of goods: a. the quantities stay constant and the prices may change. b. the quantities may change and the prices are held constant. c. both the prices and the quantities are held constant. d. both the prices and the quantities may change.

ANSWER: a 218. Suppose that, in the base period, a college student buys 20 gallons of gasoline at $2 per gallon, 2 CDs for

$13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50. The price index for the second month is: a. 94. b. 106.4. c. 100. d. 101.1.

ANSWER: b 219. Suppose that, in the base period, a college student buys 20 gallons of gasoline at $2 per gallon, 2 CDs for

$13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50. The change in the price level from the first to the second month is: a. 1.1%. b. 94%.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy c. 6.4%. d. –6%.

ANSWER: c 220. In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and

$160 in 2011. Based on this information and considering 2009 to be the base year, the price index in 2011 was: a. 100. b. 107.69. c. 123.07. d. 130.

ANSWER: c 221. In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and

$160 in 2011. Based on this information and considering 2009 as the base year, inflation from 2009 to 2011 was: a. 7.14%. b. 7.69%. c. 14.28%. d. 23.07%.

ANSWER: d

222. (Table: Market Basket of School Supplies) Use Table: Market Basket of School Supplies. It shows the

prices of three common school supplies in 2010 and 2011 and the quantities of each school supply that consumers bought in 2010, the base year. A school supply price index for 2011 would be: a. 81.8. b. 100. c. 122.2. d. 124.

ANSWER: c 223. (Table: Market Basket of School Supplies) Use Table: Market Basket of School Supplies. It shows the

prices of three common school supplies in 2010 and 2011 and the quantities of each school supply that consumers bought in 2010, the base year. A school supply index used to measure the rate at which average school supply prices have changed would show an inflation rate of: a. 22%. b. 122%. c. 82%.

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Chapter 07(22): GDP and the Consumer Price Index: Tracking the Macroeconomy d. 18%.

ANSWER: a 224. If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as

the base is: a. 100. b. 115. c. 130. d. 200.

ANSWER: b 225. If the cost of a market basket is $150 in year 1 and $200 in year 2, the price index for year 1 using year 2 as

the base is: a. 75. b. 100. c. 133. d. 150.

ANSWER: a 226. Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and

100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gasoline costs $1 per gallon. In 2011, textbooks cost $80 each and gasoline costs $3 per gallon. The USPI for 2011 is: a. 100. b. 150. c. 200. d. 250.

ANSWER: c 227. Suppose that the market basket for the university student price index (USPI) consists of 4 textbooks and

100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gasoline costs $1 per gallon. In 2011, textbooks still cost $50 each and gasoline costs $4 per gallon. The USPI for 2011 is: a. 250. b. 200. c. 150. d. 100.

ANSWER: b 228. The inflation or deflation rate is: a. the change in a price index divided by the initial value of the index. b. the change in a price index divided by the new index number. c. the difference between the initial price index number and the new price index number. d. computed by dividing the old price index number by the new price index number.

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