Deck 11: Measuring Macroeconomic Activity

Question 1

Which of the following is not included in GDP?

A) Unpaid maintenance of your house by your spouse.
B) Services such as those provided by lawyers and dentists.
C) The estimated rental imputed) value of owner-occupied housing.
D) Production by foreign citizens in the U.S.

Answer 1

A

Question 2

Prostitution is made legal in the United States, what is the impact on GDP?

A) GDP increases.
B) GDP decreases.
C) GDP is unchanged.
D) None of the above.

Answer 2

A

Question 3

An economy with both a private and public sector is called:

A) a mixed economy.
B) a private economy.
C) a command economy.
D) none of the above.

Answer 3

A

Question 4

Over time Americans have chosen to cook less at home and dine out more. This change in behavior:

A) increases GDP.
B) reduces GDP.
C) does not affect GDP.
D) none of the above

Question 5

In a circular-flow diagram, total income and total expenditures in an economy are:

A) equal because firms are ultimately owned by households.
B) equal only if there is no saving.
C) equal because every transaction has a buyer and a seller.
D) always equal because some people's income is not for production.

Question 6

Macroeconomics studies the following topics:

A) national output, the inflation rate, and the trade deficit.
B) the price of Cisco stock and wage differences.
C) differences in market structure.
D) all of the above.

Question 7

In a closed economy firms sell goods and services to:

A) households and foreigners.
B) households and the government.
C) just the government.
D) none of the above.

Question 8

An economy with only a domestic sector is called:

A) a mixed economy.
B) an open economy.
C) a closed economy.
D) a command economy.

Question 9

The market value of all currently produced final goods and services within a county in a given period of time by domestic and foreign supplied resources is called:

A) GNP.
B) GDP.
C) NNP.
D) none of the above.

Question 10

The payments to the factors of production are:

A) wages.
B) rent.
C) rent and interest.
D) wages, rent, interest, and profits.

Question 11

In an open economy firms sell goods and services to:

A) households, government, and foreigners.
B) just households.
C) just the government.
D) none of the above.

Question 12

The circular-flow diagram illustrates that:

A) production generates income so that income and production are the same.
B) the economy's income is less than its production.
C) the economy's income is exceeds its production.
D) none of the above are necessarily correct.

Question 13

Zoran, a Croatian citizen, only works in the United States. The value added to production from his employment is:

A) included in Croatian GDP.
B) included only in U.S. GDP.
C) included only in U.S. GNP.
D) not included in either U.S. GDP or U.S. GNP.

Question 14

An economy that has a domestic and a foreign sector is called:

A) a mixed economy.
B) an open economy.
C) a closed economy.
D) a command economy.

Question 15

Which of the following statistics is the best single measure of overall economic activity?

A) The labor force participation rate.
B) The inflation rate.
C) GDP.
D) The trade surplus.

Question 16

If GDP falls,

A) income and production must both fall.
B) income and production must both rise.
C) income must rise, but production may rise or fall.
D) none of the above.

Question 17

To compute GDP:

A) simply sum the number of final goods and services.
B) sum the cost of producing final goods and services.
C) use a weighted average by a survey regarding how much people value different goods and services.
D) sum the market values of final goods and services.

Question 18

An economy with only the household and firm sectors is called:

A) a mixed economy.
B) a private economy.
C) a command economy.
D) none of the above.

Question 19

Suppose an apartment complex is converted to an owner occupied condominium. Suppose that the estimated value of the condominium owners' housing services is now the same as their former rent.

A) GDP increases.
B) GDP decreases.
C) GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP.
D) None of the above.

Question 20

If GDP rises,

A) income and production must both fall.
B) income and production must both rise.
C) income must rise, but production may rise or fall.
D) none of the above.

Question 21

Table 11.1
$\begin{array}{|l|r|}\hline \text { Durable Goods Consumption Expenditures } & \$ 350 \\\hline \text { Nondurable Goods Consumption Expenditures } & \$ 1,000 \\\hline \text { Services Consumption Expenditures } & \$ 3,000 \\\hline \text { Business Fixed Investment } & \$ 1,500 \\\hline \text { Change in Inventories } & -\$ 100 \\\hline \text { GovernmentConsumption Expenditures and } & \\\text { Gross Investment } & \$ 2,000 \\\hline \text { Exports } & \$ 700 \\\hline \text { Imports } & \$ 1,000 \\\hline\end{array}$

-Refer to Table 11.1. What is the value of personal consumption expenditures?

A) $3,000.
B) $1,000.
C) $4,350.
D) $2,350.

Question 22

In year one, the GDP deflator is 100 and in year two 110. If nominal GDP in year two is $300 billion, what is real GDP for year two?

A) $200 billion.
B) $100 billion.
C) $272.73 billion.
D) $220 billion.

Question 23

The rising phase of a business cycle measured by an increase in real GDP is called:

A) trough.
B) expansion.
C) recession.
D) contraction.

Question 24

The falling phase of a business cycle measured by a decrease in real GDP is called:

A) hyperinflation.
B) expansion.
C) recession.
D) peak.

Question 25

The system of accounts for each country, based on the circular flow, whose purpose is to measure the level of economic activity is called:

A) the underground economy.
B) national income accounting.
C) bookkeeping.
D) none of the above.

Question 26

The largest compoent of national income is:

A) compensation of employees
B) proprietor's income
C) rental income
D) corporate profits

Question 27

Business cycles are officially dated by:

A) National Bureau of Economic Research, NBER.
B) Bureau of Economic Analysis, BEA.
C) Bureau of Labor Statistics, BLS.
D) none of the above.

Question 28

Spending on the structures, equipment, and software that provide the industrial capacity to produce goods and services for all sectors of the economy is called:

A) inventory investment
B) business fixed investment
C) residential fixed investment
D) consumption

Question 29

Commodities that typically last three years or more are called:

A) durable goods.
B) nondurable goods.
C) services.
D) none of the above.

Question 30

GDP can increase from one year to the next by:

A) increases in prices while quantities of goods and services are constant.
B) increases in the quantities of goods and services produced while prices remain constant.
C) both prices and quantities of goods and services increase.
D) all of the above.

Question 31

The GDP deflator:

A) measures the price changes of a fixed basket of goods and services.
B) measures the price changes of all final goods and services produced.
C) measures the price changes of just goods consumed by the household sector.
D) none of the above.

Question 32

Table 11.1
$\begin{array}{|l|r|}\hline \text { Durable Goods Consumption Expenditures } & \$ 350 \\\hline \text { Nondurable Goods Consumption Expenditures } & \$ 1,000 \\\hline \text { Services Consumption Expenditures } & \$ 3,000 \\\hline \text { Business Fixed Investment } & \$ 1,500 \\\hline \text { Change in Inventories } & -\$ 100 \\\hline \text { GovernmentConsumption Expenditures and } & \\\text { Gross Investment } & \$ 2,000 \\\hline \text { Exports } & \$ 700 \\\hline \text { Imports } & \$ 1,000 \\\hline\end{array}$

-Refer to Table 11.1. What is the value of gross private domestic investment?

A) $1,500.
B) $1,400.
C) $1,600.
D) $2,000.

Question 33

The value of currently produced final goods and services measured in current year prices is called:

A) real GDP.
B) nominal GDP.
C) imputed values.
D) inflation.

Question 34

Transfer payments are:

A) included in GDP.
B) not included in GDP.
C) included in both GDP and GNP.
D) none of the above.

Question 35

The value of currently produced final goods and services measured in constant prices is called:

A) real GDP.
B) nominal GDP.
C) imputed values.
D) inflation.

Question 36

The difference between personal income and disposable income is:

A) corporate taxes
B) personal taxes
C) savings
D) none of the above

Question 37

Table 11.1
$\begin{array}{|l|r|}\hline \text { Durable Goods Consumption Expenditures } & \$ 350 \\\hline \text { Nondurable Goods Consumption Expenditures } & \$ 1,000 \\\hline \text { Services Consumption Expenditures } & \$ 3,000 \\\hline \text { Business Fixed Investment } & \$ 1,500 \\\hline \text { Change in Inventories } & -\$ 100 \\\hline \text { GovernmentConsumption Expenditures and } & \\\text { Gross Investment } & \$ 2,000 \\\hline \text { Exports } & \$ 700 \\\hline \text { Imports } & \$ 1,000 \\\hline\end{array}$

-Refer to Table 11.1. What is the value of net exports or the trade balance?

A) $300.
B) -$300.
C) $1,700.
D) -$1,700.

Question 38

Jim, a U.S. citizen, works only in Croatia. The value added to production from his employment is:

A) included in only Croatian GNP.
B) included only in U.S. GDP.
C) included only in U.S. GNP.
D) not included in either U.S. GDP or U.S. GNP.

Question 39

Changes in the amount of goods produced, but not sold in a given year is called:

A) inventory investment
B) business fixed investment
C) residential fixed investment
D) consumption

Question 40

Commodities that last less than three years and may be consumed very quickly are called:

A) durable goods
B) nondurable goods
C) services
D) none of the above

Question 41

Compared to the GDP deflator, the consumer price index measures:

A) the price of all the goods and services produced in the economy.
B) the price of a fixed market basket of goods and services.
C) the price of exported goods and services.
D) the price of wholesale goods and services.

Question 42

The income generated from the sale of the goods and services produced in the economy and paid to the individuals and businesses who supply the factors of production is called:

A) GDP.
B) GNP.
C) national income.
D) NNP.

Question 43

The level of aggregate output and income where there is a balance between spending and production decisions and where the economy moves toward is called:

A) disequilibrium level of output and income.
B) equilibrium level of output and income.
C) disequilibrium level of employment.
D) none of the above.

Question 44

Balance of payments issues are related to the relative value of different countries' currencies and the flow of goods, services, and financial assets among countries. The rate at which one country's currency can be traded for another is called:

A) the trade balance.
B) capital inflows.
C) capital outflows.
D) the exchange rate.

Question 45

Table 11.1
$\begin{array}{|l|r|}\hline \text { Durable Goods Consumption Expenditures } & \$ 350 \\\hline \text { Nondurable Goods Consumption Expenditures } & \$ 1,000 \\\hline \text { Services Consumption Expenditures } & \$ 3,000 \\\hline \text { Business Fixed Investment } & \$ 1,500 \\\hline \text { Change in Inventories } & -\$ 100 \\\hline \text { GovernmentConsumption Expenditures and } & \\\text { Gross Investment } & \$ 2,000 \\\hline \text { Exports } & \$ 700 \\\hline \text { Imports } & \$ 1,000 \\\hline\end{array}$

-Refer to Table 11.1. What is the value of GDP?

A) $7,450.
B) $7,250.
C) $7,150.
D) $7,350.

Question 46

A measure of absolute price changes that excludes changes in energy and food prices is called:

A) fringe rate of inflation
B) core rate of inflation
C) overall inflation
D) none of the above

Question 47

The natural rate of unemployment is also called:

A) non-accelerating inflation rate of unemployment.
B) accelerating inflation rate of unemployment.
C) accelerating deflation rate of unemployment.
D) none of the above.

Question 48

A trade balance where exports exceed imports is called:

A) trade surplus.
B) trade deficit.
C) budget deficit.
D) none of the above.

Question 49

Personal income less personal taxes is called:

A) personal disposable income.
B) national income.
C) compensation of employees.
D) savings.

Question 50

The legislation passed in 1946 that requires governmental institutions to promote "maximum employment, production, and purchasing power" is called:

A) Full Employment and Balanced Growth Act.
B) Federal Reserve Act.
C) Employment Act.
D) Unemployment Act.

Question 51

Policies adopted by a country's central bank that influence interest rates and credit conditions, which in turn influence consumer and business spending are called:

A) monetary policy.
B) fiscal policy.
C) foreign policy.
D) exchange rate policy.

Question 52

Capital flows deal with:

A) buying and selling of newly produced final goods and services among countries.
B) buying and selling of existing real and financial assets among countries.
C) buying and selling of only domestic final goods and services.
D) none of the above.

Question 53

The unemployment rate is calculated as follows:

A) labor force/number of unemployed.
B) labor force participation rate/number of unemployed.
C) number of unemployed/labor force.
D) number of employed/labor force.

Question 54

Those individuals 16 years of age and over who are working in a job or actively seeking employment are called:

A) the labor force.
B) the employed.
C) the unemployed.
D) none of the above.

Question 55

What is the difference between inflation and deflation?

A) Inflation is a sustained decrease in the price level whereas deflation is a sustained increase in the price level.
B) Inflation is a sustained increase in the price level whereas deflation is a sustained decrease in the price level.
C) Inflation is a measure of relative prices whereas deflation is a sustained increase in the price level.
D) None of the above.

Question 56

The price of one good in relation to the price of another good is called:

A) absolute prices
B) exchange rate
C) relative prices
D) none of the above

Question 57

GDP may be computed using the expenditure or value-added approaches.

Question 58

Changes in taxes and spending by the executive and legislative branches of a country's government that can be used to either stimulate or restrain the economy are called:

A) monetary policy.
B) fiscal policy.
C) foreign policy.
D) exchange rate policy.

Question 59

The labor force is 100 million and the unemployment rate is 5 percent. One million people quit looking for a job. What is it called when an individual leaves the labor force, and in this case what is the new unemployment rate?

A) Encouraged worker, 5 percent.
B) Discouraged worker, 5.05 percent.
C) Discouraged worker, 3 percent.
D) Discouraged worker, 4.04 percent.

Question 60

The producer price index measures:

A) the prices consumers pay for final goods and services.
B) the prices firms pay for crude and intermediate materials as well as finished goods.
C) the prices the government pays for final goods and services.
D) none of the above.

Question 61

The purchase of a Boeing airplane by the U.S. government is considered part of government consumption expenditures and gross investment.

Question 62

The BLS obtains employment information from a monthly survey of a sample of approximately 60,000 households.

Question 63

An increase in nominal GDP implies that the country is producing a greater quantity of goods and services.

Question 64

The expenditure approach to calculating GDP for an open economy entails adding consumption, investment, and government purchases.

Question 65

A French citizen lives in Detroit, but works in Windsor, Canada; his income is counted in U.S. GDP.

Question 66

Once households pay taxes, they have two options with their disposable income: consume or save.

Question 67

In recent years, U.S. exports have exceeded U.S. imports.

Question 68

In the value added approach to calculating GDP, counting both the intermediate good and the final product would understate the contribution to GDP.

Question 69

Declining real GDP for two quarters in a row is often called a recession.

Question 70

If nominal GDP is 100,000 and real GDP is 80,000, the GDP deflator is 115.

Question 71

A problem with the CPI is the presence of a substitution bias on the behalf of consumers.

Question 72

The core rate of inflation is a measure of the relative price changes that excludes changes in energy and food prices.

Question 73

A German tourist visits Disney World in Orlando; the expenditures made by the German tourist are included in U.S. GDP.

Question 74

Changes in business inventories are not considered part of gross private domestic investment spending.

Question 75

The largest expenditure component in the U.S. is investment expenditures.

Question 76

Proprietor's income is not considered part of national income.

Question 77

When shopping the consumer is interested in absolute prices.

Question 78

The producer price index focuses on price changes of domestically produced goods and includes services, construction, and imported goods.

Question 79

U.S. GDP excludes underground activities.

Question 80

Intermediate goods and services are excluded in the calculation of GDP.