Deck 6: Introduction to Macroeconomics and Gross Domestic Product

Question 1

Gross domestic product GDP) is defined as the total of all final goods and services produced during a fixed period of time.

A) by a nation's public sector
B) by a nation's private sector
C) within a nation's borders
D) for export by a nation
E) for domestic consumption

Answer 1

C

Question 2

Gross domestic product GDP) is best defined as the total market value of all

A) goods and services produced within a country within a given time.
B) final goods and services produced within a country within a given time.
C) services produced within a country within a given time.
D) goods produced within a country within a given time.
E) final goods produced within a country within a given time.

Answer 2

B

Question 3

Economists measure the total output of an economy in order to

A) estimate the economy's consumption of resources.
B) measure the overall level of prices.
C) know how to adjust gross domestic product GDP) for inflation.
D) prevent the appearance of business cycles.
E) gauge the economy's overall health.

Answer 3

E

Question 4

The country of Aqua has an economy that is based entirely on lobsters. When it produces and sells ______lobsters in a given day, income earned will______ .

A) more; stay the same
B) more; increase
C) more; decrease
D) fewer; stay the same
E) fewer; increase

Question 5

Gross domestic product GDP) per capita is a good, but imperfect, measure of

A) the percentage change in the overall level of prices.
B) income inequality.
C) changes in average living standards.
D) environmental quality.
E) the cost of living.

Question 6

To determine living standards for the average person, we calculate

A) GDP.
B) per capita GDP.
C) the average level of prices in the country.
D) the length of time the average person is unemployed.
E) the growth rate of GDP.

Question 7

Macroeconomics includes the study of

A) individual markets.
B) the behavior of the firm.
C) the behavior of the consumer.
D) changes in national income.
E) changes in commodity prices.

Question 8

Which of the following is a topic of microeconomics?

A) the level of national income
B) the level of employment in the country
C) the prices of all goods in the country
D) the profit of firms in the banking industry
E) the level of national output

Question 9

The difference between microeconomics and macroeconomics is a matter of

A) scale.
B) time.
C) demographics.
D) politics.
E) cost.

Question 10

The market price of a gallon of gasoline is a

A) macroeconomic topic, because the market in gasoline is nationwide.
B) microeconomic topic, because it involves the price of a single good.
C) macroeconomic topic because of the large volume of gasoline bought and sold each day.
D) microeconomic topic, because the price of a gallon of gasoline is less than $10.
E) macroeconomic topic, because the price of gasoline has implications for the whole economy.

Question 11

A country with a small per capita gross domestic product GDP) is

A) efficient.
B) poor.
C) economically healthy.
D) isolated.
E) too productive.

Question 12

Gross domestic product GDP) is most often measured by the

A) year.
B) month.
C) week.
D) day.
E) quarter.

Question 13

In macroeconomics

A) output and income are very different concepts.
B) output and income are essentially identical.
C) output is less than income.
D) output is greater than income.
E) income is measured in dollars but output is not.

Question 14

To evaluate the change in average living standards over time, it is best to use

A) the inflation rate.
B) GDP.
C) the literacy rate.
D) real GDP per capita.
E) the employment rate.

Question 15

Which of the following is a topic of macroeconomics?

A) the income earned by a person
B) the profit earned by a firm
C) production in the computer industry
D) the price of ice cream
E) the number of unemployed people in the economy

Question 16

When gross domestic product GDP) increases, national income______ and national output ______.

A) is unaffected; is unaffected
B) increases; increases
C) decreases; decreases
D) increases; is unaffected
E) is unaffected; decreases

Question 17

Which of the following is a sign that an economy is in poor health?

A) a prolonged decline in total output
B) failure of total output to equal total income
C) failure of output to remain constant over time
D) a shift in production, from goods to services
E) a prolonged rise in total income

Question 18

Microeconomics includes the study of

A) the unemployment rate.
B) the overall level of prices in an economy.
C) changes in the price of commercial real estate.
D) expansions and contractions of the economy.
E) measures of the standard of living.

Question 19

Suppose a particular model of smartphone contains $150 worth of raw materials and requires $175 worth of labor to produce. One day, one of these phones sells for $400. The seller would have been willing to sell it for as little as $375, whereas the buyer would have been willing to pay as much as $425. Which dollar amount would be used to calculate this transaction's contribution to gross domestic product GDP)?

A) $150
B) $175
C) $375
D) $400
E) $425

Question 20

"'One U.S. dollar is worth eighteen Mexican pesos.' That statement is part of microeconomics, because we are talking about the cost in pesos of a single good, namely a dollar." Why is this reasoning INCORRECT?

A) An exchange of dollars for pesos is, implicitly, an exchange across international borders. Any such exchange is by definition macroeconomic.
B) What makes the statement about dollars and pesos microeconomic is the fact that individual consumers can perform currency exchange transactions.
C) Mexico and the United States, together with Canada, form a single trade zone, within which exchange rates between currencies are not micro- or macro-) economically significant.
D) A dollar is not a "single good" in the required sense. It is a medium by which goods-all goods-are exchanged, and so changes in exchange rates between the dollar and other currencies affect the prices of all goods.
E) Microeconomics is about incomes, outputs, employment, and prices. Since an exchange rate does not fall under any of those topics, it is not part of microeconomics.

Question 21

The business cycle measures

A) fluctuations in the long-run trend growth rate of GDP.
B) fluctuations in the profit of businesses.
C) fluctuations in consumption.
D) short-run fluctuations in economic activity.
E) fluctuations in the average tax rate paid by businesses.

Question 22

Consider the following figure to answer the next questions:


-During which period was the economy in a contraction?

A) 2001-2005
B) 2008-2009
C) 2004-2008
D) 2005-2008
E) 2000-2004

Question 23

Country A has a gross domestic product GDP) of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true?

A) The value of output is higher in country A.
B) The value of income is higher in country A.
C) The value of GDP per capita is higher in country A.
D) The value of GDP per capita is higher in country B.
E) The average living standard is higher in country B.

Question 24

The phase of the business cycle where the economy is growing faster than usual is called

A) an economic trough.
B) the long-run trend of gross domestic product GDP).
C) an economic expansion.
D) an economic contraction.
E) an economic peak.

Question 25

The phase of the business cycle where economic activity is decreasing is called

A) an economic trough.
B) the long-run trend of gross domestic product GDP).
C) an economic expansion.
D) an economic contraction.
E) an economic peak.

Question 26

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called

A) business cycles.
B) economic contractions.
C) economic expansions.
D) economic peaks.
E) economic troughs.

Question 27

Consider the following figure to answer the next questions:


-In which year was the economy growing at the long-run average growth rate?

A) 2001
B) 2004
C) 2005
D) 2009
E) 2013

Question 28

Consider the following figure to answer the next questions:


-During which period was the economy in an expansion?

A) 2005-2009
B) 2000-2004
C) 2009-2013
D) 2004-2008
E) 2000-2012

Question 29

Real income for people in the United States was between two and three times as much in 2015 as it was in

A) 1915.
B) 1925.
C) 1935.
D) 1955.
E) 1965.

Question 30

Which country has seen a decline in per capita gross domestic product GDP) since the 1970s?

A) India
B) Mexico
C) Nicaragua
D) Poland
E) Turkey

Question 31

The expansion phase of a business cycle is best described as the time

A) elapsed from a trough to a peak.
B) elapsed from a peak to a trough.
C) elapsed from a peak to a peak.
D) elapsed from a trough to a trough.
E) spent producing above the long-run trend of GDP.

Question 32

Consider the following data to answer the next questions:
$$\begin{array} { l l r } \hline \text { Country } & \text { GDP } & \text { Population } \\\hline \text { A } & \$ 32,000 & 1,500 \\\text { B } & \$ 20,000 & 1,000 \\\text { C } & \$ 10,000 & 500 \\\text { D } & \$ 10,000 & 2,000 \\\text { E } & \$ 8,000 & 800 \\\hline\end{array}$$

-Although countries C and D have the same level of gross domestic product GDP), country C has a level of per capita GDP that is ______times that of country D.

A) two
B) three
C) four
D) five
E) ten

Question 33

Consider the following data to answer the next questions:
$$\begin{array} { l l r } \hline \text { Country } & \text { GDP } & \text { Population } \\\hline \text { A } & \$ 32,000 & 1,500 \\\text { B } & \$ 20,000 & 1,000 \\\text { C } & \$ 10,000 & 500 \\\text { D } & \$ 10,000 & 2,000 \\\text { E } & \$ 8,000 & 800 \\\hline\end{array}$$

-Which country has the lowest average living standard?

A) A
B) B
C) C
D) D
E) E

Question 34

The best measure of the average living standards of people in the country is the

A) dollar value of final goods and services produced.
B) dollar value of final goods and services produced per person.
C) amount of final goods and services produced.
D) amount of final goods and services produced per person.
E) average price of final goods and services produced.

Question 35

Which country has had a recent surge in per capita gross domestic product GDP) after many years where it remained low?

A) India
B) Nicaragua
C) Somalia
D) Poland
E) Turkey

Question 36

Consider the following data to answer the next questions:
$$\begin{array} { l l r } \hline \text { Country } & \text { GDP } & \text { Population } \\\hline \text { A } & \$ 32,000 & 1,500 \\\text { B } & \$ 20,000 & 1,000 \\\text { C } & \$ 10,000 & 500 \\\text { D } & \$ 10,000 & 2,000 \\\text { E } & \$ 8,000 & 800 \\\hline\end{array}$$

-If these are the only five countries in the world, then country B produces______ of world gross domestic product( GDP).

A) 50 percent
B) 25 percent
C) 20 percent
D) 62.5 percent
E) 30 percent

Question 37

The long-run average growth rate of real gross domestic product GDP) in the U.S. economy is about

A) 2 percent.
B) 3 percent.
C) 5 percent.
D) 10 percent.
E) 1 percent.

Question 38

Consider the following data to answer the next questions:
$$\begin{array} { l l r } \hline \text { Country } & \text { GDP } & \text { Population } \\\hline \text { A } & \$ 32,000 & 1,500 \\\text { B } & \$ 20,000 & 1,000 \\\text { C } & \$ 10,000 & 500 \\\text { D } & \$ 10,000 & 2,000 \\\text { E } & \$ 8,000 & 800 \\\hline\end{array}$$

-Which country has the highest level of gross domestic product GDP) per capita?

A) A
B) B
C) C
D) D
E) E

Question 39

Consider the following data to answer the next questions:
$$\begin{array} { l l r } \hline \text { Country } & \text { GDP } & \text { Population } \\\hline \text { A } & \$ 32,000 & 1,500 \\\text { B } & \$ 20,000 & 1,000 \\\text { C } & \$ 10,000 & 500 \\\text { D } & \$ 10,000 & 2,000 \\\text { E } & \$ 8,000 & 800 \\\hline\end{array}$$

-Which two countries have the same average living standard?

A) B and C
B) C and D
C) A and B
D) C and E
E) A and E

Question 40

The contraction phase of a business cycle is best described as the time

A) elapsed from a trough to a peak.
B) elapsed from a peak to a trough.
C) elapsed from a peak to a peak.
D) elapsed from a trough to a trough.
E) spent producing below the long-run trend of GDP.

Question 41

Which of the following is a service?

A) a visit to your local beach
B) a visit to your doctor
C) a trip to the store to buy a T-shirt
D) a delivery pizza
E) having to write a check to pay your taxes

Question 42

Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to gross domestic product GDP) is

A) $240,000.
B) $180,000.
C) $60,000.
D) $120,000.
E) $30,000.

Question 43

Consider the following data, which shows the quantities and prices of two goods produced in theeconomy, to answer the next questions:
$$\begin{array} { l c l } \hline & \text { Quantity produced } & \text { Price } \\\hline \text { Cell phones } & 5 \text { million } & \$ 100 / \text { cell phone } \\\text { Pizza } & 25 \text { million } & \$ 10 / \text { pizza } \\\hline\end{array}$$


-The market value of cell phones is

A) $5 million.
B) $100 million.
C) $500 million.
D) $20 million.
E) $750 million.

Question 44

A doctor receives $50,000 per month from her patients and their insurance companies) as payment for her services. Each month she buys medical supplies for $10,000 and she pays a lab $15,000 for analyzing slides. The total contribution to gross domestic product GDP) this month is

A) $50,000.
B) $65,000.
C) $75,000.
D) $25,000.
E) $55,000.

Question 45

A company produces a computer. It pays $100 for the keyboard and outer case, $200 for the internal hardware, and $100 for the software. It sells the computer to a consumer for $500. The contribution to gross domestic product GDP) is

A) $400.
B) $500.
C) $100.
D) $900.
E) $800.

Question 46

When John buys new tires for his car it ______, and when Ford buys tires to put on new cars it_____.

A) does not count toward GDP; does not count toward GDP
B) does not count toward GDP; counts toward investment
C) counts toward consumption; counts toward investment
D) counts toward consumption; does not count toward GDP
E) counts toward investment; counts toward investment

Question 47

Consider the following figure to answer the next questions:


-During which year was average income climbing the most rapidly?

A) 2000
B) 2001
C) 2004
D) 2005
E) 2009

Question 48

To determine a value for gross domestic product GDP), you would add up the

A) quantities of the final goods and services produced.
B) dollar value of the final goods and services produced.
C) dollar value of the final goods and services produced minus the dollar value of the intermediate goods and services produced.
D) dollar value of all goods and services produced.
E) quantities of all goods and services produced.

Question 49

Consider the following data, which shows the quantities and prices of two goods produced in theeconomy, to answer the next questions:
$$\begin{array} { l c l } \hline & \text { Quantity produced } & \text { Price } \\\hline \text { Cell phones } & 5 \text { million } & \$ 100 / \text { cell phone } \\\text { Pizza } & 25 \text { million } & \$ 10 / \text { pizza } \\\hline\end{array}$$


-The market value of pizza is

A) $25 million.
B) $10 million.
C) $2.5 million.
D) $250 million.
E) $750 million.

Question 50

For the next questions, suppose a country has the following quarterly growth data for the last
three years:
$$\begin{array} { l l l l l } \hline \text { Year } & \text { Q1 } & \text { Q2 } & \text { Q3 } & \text { Q4 } \\\hline 2010 & \text { 3.1 percent } & \text { 3.2 percent } & \text { 2.2 percent } & \text { 1.2 percent } \\2011 & \text { 3.1 percent } & \text {-4.1 percent } & - 2.2 \text { percent } & \text { 1.5 percent } \\\text { 2012 } & \text { 1.3 percent } & \text { 1.2 percent } & \text { 3.2 percent } & \text { 3.3 percent } \\\hline\end{array}$$

-The country's long-run average growth rate is 3 percent. How many quarters were spent in recession?

A) six
B) five
C) four
D) three
E) two

Question 51

Farmer John produces oranges. He sells half of his inventory to people at his roadside stand for $20,000 and sells the other half to Tropicali for $15,000. Tropicali uses the oranges to make orange juice, which it sells to consumers for $25,000. The impact of these transactions on gross domestic product GDP) is

A) $20,000.
B) $45,000.
C) $60,000.
D) $30,000.
E) $25,000.

Question 52

The percent change in the overall level of prices in the economy is called

A) the inflation rate.
B) the growth rate of GDP.
C) GDP.
D) GDP per capita.
E) the interest rate.

Question 53

To avoid double counting when calculating gross domestic product GDP), it is best to count

A) the value of goods and services produced at every stage of production.
B) the value added at each stage of production.
C) used goods.
D) stocks and bonds.
E) all goods and services purchased by consumers, firms, and the government.

Question 54

Consider the following data, which shows the quantities and prices of two goods produced in theeconomy, to answer the next questions:
$$\begin{array} { l c l } \hline & \text { Quantity produced } & \text { Price } \\\hline \text { Cell phones } & 5 \text { million } & \$ 100 / \text { cell phone } \\\text { Pizza } & 25 \text { million } & \$ 10 / \text { pizza } \\\hline\end{array}$$


-Assuming these are the only two goods produced in the economy, what is the value of the gross domestic product GDP)?

A) $110 million
B) $750 million
C) $2 million
D) $250 million
E) $500 million

Question 55

For the next questions, suppose a country has the following quarterly growth data for the last
three years:
$$\begin{array} { l l l l l } \hline \text { Year } & \text { Q1 } & \text { Q2 } & \text { Q3 } & \text { Q4 } \\\hline 2010 & \text { 3.1 percent } & \text { 3.2 percent } & \text { 2.2 percent } & \text { 1.2 percent } \\2011 & \text { 3.1 percent } & \text {-4.1 percent } & - 2.2 \text { percent } & \text { 1.5 percent } \\\text { 2012 } & \text { 1.3 percent } & \text { 1.2 percent } & \text { 3.2 percent } & \text { 3.3 percent } \\\hline\end{array}$$

-The country's long-run average growth rate is 3 percent. In how many of these quarters did gross domestic product GDP) contract?

A) two
B) six
C) five
D) four
E) three

Question 56

Company X sells sugar to company Y for $50,000. Company Y uses the sugar to make chocolate bars, selling them to consumers for $150,000. The total contribution to gross domestic product GDP) is

A) $200,000.
B) $100,000.
C) $30,000.
D) $150,000.
E) $50,000.

Question 57

Farmer Bill grows wheat and sells it to the miller for $50,000. The miller turns it into flour and sells it to the bakery for $75,000. The bakery uses the flour in the bread that it sells to people for $90,000. The total contribution to gross domestic product GDP) is

A) $90,000.
B) $75,000.
C) $50,000.
D) $25,000.
E) $215,000.

Question 58

An accurate measure of gross domestic product GDP) is derived by adding the

A) dollar value of all goods and services produced.
B) value added at each stage of the production process.
C) value of all materials used to make the final goods and services.
D) profit earned from the sale of the final goods and services.
E) value of the intermediate goods used to produce the final goods and services.

Question 59

Which of the following represents the largest share of U.S. gross domestic product GDP)?

A) services
B) agricultural production
C) the production of manufactured goods
D) the production of physical goods
E) the production of capital goods

Question 60

Company X sells paper to company Y for $100,000. Company Y uses the paper to make textbooks, selling them to consumers for $500,000. The total contribution to gross domestic product GDP) is

A) $500,000.
B) $400,000.
C) $600,000.
D) $550,000.
E) $450,000.

Question 61

The investment spending category of gross domestic product GDP) does NOT include

A) purchases of new equipment.
B) purchases of stocks and bonds.
C) purchases of new homes.
D) the value of changes to business inventory.
E) purchases of computer software.

Question 62

Consumption is approximately of _______gross domestic product (GDP).

A) 50 percent
B) 90 percent
C) 70 percent
D) 80 percent
E) 40 percent

Question 63

Goods that firms repackage with other goods for sale at a later stage are

A) inventory.
B) final goods.
C) intermediate goods.
D) used goods.
E) value-added goods.

Question 64

You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $50. This adds______ to gross domestic product GDP) when the store sells the game to the consumer.

A) nothing
B) $30
C) $50
D) $20
E) $25

Question 65

Ford produces 100,000 cars this year and only sells 95,000. The 5,000 cars that are not sold_____ listed in_____ category of gross domestic product (GDP).

A) are not; any
B) are; the consumption
C) are; the investment
D) are; the unsold good
E) are; the excess production

Question 66

The consumption category of gross domestic product GDP) includes all purchases of final goods and services by households EXCEPT

A) new appliances.
B) new houses.
C) landscaping work.
D) new cars.
E) food.

Question 67

An example of an intermediate good would be

A) lumber used by a consumer to build a fence in his or her yard.
B) pencils purchased by a restaurant to be used to take orders.
C) a new stove purchased by a consumer.
D) an airplane purchased by the government.
E) Social Security payments made by the government.

Question 68

You bought stock in 2010 for $100 and you sold it in 2012 for $200. You used a broker to sell the stock for you, and he charged you $20. This transaction contributed_______ to gross domestic product GDP).

A) $200
B) $20
C) $220
D) $100
E) $120

Question 69

Which is the largest component of U.S. gross domestic product GDP)?

A) consumption
B) investment
C) government purchases
D) exports
E) imports

Question 70

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

A) It is impossible to sell more than is produced.
B) Inventory investment must be negative.
C) The price of the chocolate must have gone up.
D) The firm must have acquired the extra 10 boxes from another company.
E) The firm sold the chocolate but must have given 10 people an IOU.

Question 71

When people in the United States buy clothing made in China, this counts as

A) consumption.
B) consumption and exports.
C) consumption and imports.
D) imports.
E) investment.

Question 72

When George buys a new computer for his business, it is included in gross domestic product GDP) as ______, and when he buys a new computer for use at home, it counts as______ .

A) investment; investment
B) consumption; consumption
C) consumption; investment
D) investment; consumption
E) investment; services

Question 73

You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $40. When you sell your game to the store, how is this included in gross domestic product GDP)?

A) as consumption
B) as investment
C) as government purchases
D) as net exports
E) This does not count in GDP.

Question 74

Joe sells the house he has lived in for 10 years to the Smith family for $300,000. He receives $50,000 more than his original purchase price 10 years ago. Joe pays his real estate agent a 5 percent sales commission. This transaction will increase gross domestic product GDP) by

A) $0.
B) $50,000.
C) $15,000.
D) $65,000.
E) $300,000.

Question 75

Bob wins the lottery. This ______included in ______category of gross domestic product GDP).

A) is; the consumption
B) is; the investment
C) is; the government purchases
D) is; the net export
E) is not; any

Question 76

Bob sells his car to Stan's Used Car Lot for $5,000. Stan's Used Car Lot sells the car to Bill for $5,500. This transaction contributes ______to gross domestic product GDP).

A) nothing
B) $500
C) $5,500
D) $5,000
E) $10,500

Question 77

The four major expenditure categories of gross domestic product GDP) are

A) consumption, imports, exports, and government purchases.
B) consumption, government purchases, taxes, and investment.
C) consumption, investment, government purchases, and net exports.
D) consumption, investment, government purchases, and stocks.
E) consumption, investment, taxes, and net exports.

Question 78

When you buy a new car built by Ford, it is included in the ______category of gross domestic product (GDP).

A) consumption
B) investment
C) government purchases
D) export
E) import

Question 79

The consumption category includes all purchases

A) made by consumers.
B) of goods and services made by consumers.
C) of final goods and services made by consumers.
D) of final goods and services made by consumers except new houses.
E) of final goods and services made by consumers except new houses and new cars.

Question 80

A computer company builds a new factory. This is included in the _____category of gross domestic product (GDP).

A) consumption
B) investment
C) government purchases
D) net export
E) services