Deck 5: The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Question 1

Which of the following questions can be answered using the concepts of macroeconomics?

A) Why does the rate of economic growth fluctuate from year to year?
B) What is the difference between demand and quantity demanded?
C) What is the effect of an increase in price on the supply of a good?
D) Why do some firms produce differentiated goods?

Answer 1

Why does the rate of economic growth fluctuate from year to year?

Question 2

How much did the U.S.stock market drop from September 1929 to July 1932?

A) 30 percent
B) 52 percent
C) 73 percent
D) 87 percent

Answer 2

87 percent

Question 3

The following table contains statistics for the country of Caddyville in 2013.

Refer to the table above.What is the size of the labor force in Caddyville for 2013?

A) 62,200
B) 67,000
C) 74,000
D) 88,000

Answer 3

67,000

Question 4

The following table contains statistics for the country of Caddyville in 2013.

Refer to the table above.What is the unemployment rate in Caddyville for 2013?

A) 5.5 percent
B) 6.5 percent
C) 7.2 percent
D) 7.7 percent

Question 5

An macroeconomics class is likely to discuss ________.

A) the relationship between the price of a good and its quantity demanded
B) the annual growth rate of an economy's output
C) the average revenue and cost curves of a firm
D) the relationship between the utility derived from a good and the number of units consumed

Question 6

Which of the following is not a component of macroeconomics?

A) Unemployment rate
B) The profits of a large corporation
C) Inflation rates
D) Gross domestic product

Question 7

Which of the following questions have a macroeconomic focus?

A) How does a monopolist decide how much to produce?
B) What is the unemployment rate in your country?
C) How does the demand for a good change when there is an increase in a consumer's income?
D) How does a consumer choose which goods to consume given his or her income?

Question 8

Which of the following would a macroeconomist study?

A) The total cost incurred by a firm
B) The income earned by a household
C) The annual inflation rate in an economy
D) The profit earned by an entrepreneur

Question 9

A person is officially unemployed if three conditions are satisfied: he or she ________.

A) does not have a job
B) has actively looked for work in the prior 4 weeks
C) is currently available for work
D) meets all the above conditions

Question 10

The following table contains statistics for the country of Caddyville in 2013.

Refer to the table above.What will the labor force be in 2014 for Caddyville if 3,000 people turn 65,2,000 students graduate from college,4,000 children turn 18 and don't go to college,and the number of unemployed changes to 4,950? All else remains unchanged.

A) 65,200
B) 67,000
C) 70,000
D) 74,150

Question 11

Which of the following is an example of a macroeconomic aggregate?

A) The total cost incurred by a firm
B) The income earned by a household
C) The annual inflation rate in an economy
D) The profit earned by an entrepreneur

Question 12

Which of the following is a macroeconomic concept?

A) The income per capita of a country
B) The average revenue earned by a firm
C) The degree of responsiveness of the quantity supplied of a good to its price
D) The total satisfaction derived from the consumption of a good

Question 13

The following table contains statistics for the country of Caddyville in 2013.

Refer to the table above.What is Caddyville's per capita income for 2013?

A) $52,935
B) $61,067
C) $71,429
D) $87,532

Question 14

Which of the following questions cannot be answered using the concepts of macroeconomics?

A) What will interest rates do over the next year?
B) Why does the rate of economic growth fluctuate from year to year?
C) What is the unemployment rate in a country?
D) How does the inflation rate relate to economic growth?

Question 15

Macroeconomics is the study of ________.

A) the choices made by individuals in an economy
B) various political groups within an economy
C) economic aggregates and the economy as a whole
D) the statistical methods used in economics

Question 16

How is income per capita calculated?

A) Dividing a nation's aggregate income by the number of people in the country
B) Averaging the individual incomes of all working people
C) Dividing GDP by the number of households
D) None of the above

Question 17

What framework is used to measure the level of aggregate economic activity in a country?

A) National economic index
B) Measure of economic efficiency
C) Aggregate income totals
D) National income accounts

Question 18

National income accounts measure the ________.

A) level of aggregate economic activity in a country
B) labor force participation rate in a country
C) total amount of capital goods available in a country
D) total money supply in a country

Question 19

The following table contains statistics for the country of Caddyville in 2013.

Refer to the table above.What is the unemployment rate in 2014 for Caddyville if 3,000 people turn 65,2,000 students graduate college,4,000 children turn 18 and don't go to college,and the number of unemployed changes to 4,950? All else remains unchanged.

A) 5.8 percent
B) 6.7 percent
C) 6.9 percent
D) 7.1 percent

Question 20

What is necessary for an economic downturn to be classified as a recession?

A) The unemployment rate reaches 10 percent
B) Negative inflation for one year
C) Negative economic growth for one year
D) Aggregate economic output falls for two consecutive quarters

Question 21

How does the income approach to measuring GDP compare to the production and expenditure approach to measuring GDP?

A) It is lower, because some of the revenue from selling goods goes back into the production of more goods.
B) It is the same, because all revenues are either payed to workers at the company or to the owners of the company.
C) It is higher, because there are multiple stages along the production process where income is earned.
D) It is higher if the economy is in a time of strong economic growth, and it is lower in times of recession.

Question 22

Which of the following holds true in a circular flow diagram?

A) Factor flows are represented by drawing arrows from the firm sector to the household sector.
B) Income flows are represented by drawing arrows from the household sector to firms.
C) Production flows are represented by drawing arrows from the firm sector to the household sector.
D) Expenditure flows are represented by drawing arrows from the firm sector to the household sector.

Question 23

Which of the following is likely to be included in a country's GDP for a particular year?

A) The total amount of steel used in the production of automobiles in that year
B) An unsold inventory of automobiles produced in that year
C) An unused stock of goods produced in the previous year
D) The total amount of flour used by bakeries to make bread in that year

Question 24

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the labor force if 5,000 of those actively looking for a job find one?

A) 72,000
B) 62,000
C) 76,000
D) Not enough information provided

Question 25

________ is the market value of the final goods and services produced in a country during a particular period of time.

A) GNP
B) GDP
C) Net product value
D) Total product

Question 26

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the labor force participation rate?

A) 51.4 percent
B) 44.3 percent
C) 54.3 percent
D) Not enough information provided

Question 27

GDP is a measure of ________,not a measure of ________.

A) sales to consumers; production
B) production; sales to consumers
C) sales to consumers; consumption
D) income; production

Question 28

Which of the following is an example of physical capital?

A) A stock
B) A bond
C) A factory
D) A worker

Question 29

There is only one firm in a small island country.The firm produced 1,000 units of Good X during a particular year,out of which it could sell 900 units.If each unit of the good sells for $500,what is the GDP of the country?

A) $40,000
B) $450,000
C) $500,000
D) $150,000

Question 30

A factory in Techland could not sell 20 percent of its output during a certain year due to a decrease in the demand for its product.Which of the following would be true if it produced 20 percent less?

A) Techland's GDP for that year would have been higher.
B) Techland's GDP would have remained the same.
C) Techland's GDP for that year would have been lower.
D) Techland's income per capita for that year would have been higher.

Question 31

The circular flow diagram implies that if accounting is done correctly,the market value of ________ the market value of ________.

A) production must exceed; expenditure
B) income must exceed; production
C) expenditure must equal; income
D) expenditure must exceed; income

Question 32

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the number of unemployed?

A) 10,000
B) 14,000
C) 24,000
D) 78,000

Question 33

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the labor force?

A) 72,000
B) 62,000
C) 76,000
D) Not enough information provided

Question 34

Double counting occurs when ________ included in the calculation of the GDP.

A) inputs are
B) unsold inventories are
C) depreciation is
D) household production is

Question 35

Two variables are related by an identity when ________.

A) the two variables have a positive relationship
B) the two variables are mathematically identical
C) the two variables have a negative relationship
D) the values of the variables are always equal but have opposite signs

Question 36

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the labor force participation if 5,000 of those actively looking for a job find one?

A) 51.4 percent
B) 44.3 percent
C) 54.3 percent
D) Not enough information provided

Question 37

The total value of inputs used in the production of 100,000 units of a good manufactured in a country is $150,000.Assume that the country produces only this good and each unit of the good sells for $10.What is the GDP of the country?

A) $1,000,000
B) $1,150,000
C) $150,000
D) $250,000

Question 38

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the unemployment rate if 5,000 of those actively looking for a job find one?

A) 6.9 percent
B) 13.9 percent
C) 19.4 percent
D) 86.1 percent

Question 39

Which equality is not guaranteed by the circular flow diagram?

A) The market value of production must equal the market value of expenditure.
B) The market value of expenditure must equal the market value of income.
C) The income paid to factors of production must equal the market value of expenditure.
D) All of the above are guaranteed by the circular flow diagram.

Question 40

The following table contains statistics for the country of Gregorville in 2017, a country in which all must either attend school, be available for work, or be retired.

Refer to the table above.What is the unemployment rate?

A) 13.9 percent
B) 19.4 percent
C) 33.3 percent
D) 108.3 percent

Question 41

How are inventories included in the calculation of the expenditure measure of GDP?

A) They are not included until they are purchased by a consumer.
B) They are counted as soon as they are produced.
C) They are counted as being purchased and owned by the firm if they are not sold to a consumer.
D) The value of the inputs to create the inventory is used until the inventories are purchased.

Question 42

Scenario: Infi Corp. is a leading manufacturer of smart phones. Every year, customers spend $31 billion on smart phones manufactured by Infi Corp. A leading retailer generates $10 billion worth of total sales, while the remaining is generated directly from consumers. The retailer pays 70 percent of its revenue to Infi Corp., and Infi Corp. pays $19 billion to its suppliers.
Refer to the scenario above.Infi Corp.adds a value of ________ to the production process.

A) $31 billion
B) $9 billion
C) $21 billion
D) $12 billion

Question 43

Which of the following would not be included in the calculation of GDP?

A) The purchase of ice cream by a student at a store
B) The purchase of a new car by a family
C) The purchase of a steak by a customer at a restaurant
D) The purchase of a cow by a restaurant to turn into steaks

Question 44

What does a circular flow diagram show?

Question 45

Which of the following is true of the expenditure-based method of national accounting?

A) It does not track the purchase of services by households.
B) It does not track the purchase of goods and services by the government.
C) It tracks the purchase of investment goods by firms and households.
D) It only tracks the purchase of goods and services by the government.

Question 46

If Dell buys a computer from a foreign producer for $500 and sells it to Best Buy for $800,who then sells it to a consumer for $1,200,what is Dell's value added,Best Buy's value added,and the computer's contribution to GDP?

A) $300, $400, and $1,200
B) $300, $700, and $1,000
C) $300, $400, and $700
D) $800, $1,200, and $400

Question 47

A retailer buys goods worth $15,000 from a manufacturer and sells them for $18,250.The retailer adds a value of ________ to the production process.

A) $18,250
B) $15,000
C) $3,250
D) $33,250

Question 48

Why is the value added by each producer included in the calculation of GDP instead of its sales revenue?

Question 49

The expenditure-based method of national accounting ________.

A) tracks the purchase of goods and services by firms only
B) tracks the purchase of goods and services by the government only
C) does not track the purchase of investment goods by firms and households
D) tracks the purchase of all goods produced in the domestic economy only

Question 50

How does the expenditures measure of GDP differ from the production measure?

A) It doesn't. The final value is the same.
B) It is lower, because only purchased items are counted.
C) It is higher due to the higher cost of a final good than of the inputs.
D) It depends on the amount of inventories held at the beginning and end of the year.

Question 51

An apparel manufacturer bought raw materials worth $60,000 in a particular year and earned a total revenue of $90,000.If the manufacturer had no other expenditure,it added a value of ________ to the production process.

A) $12,000
B) $30,000
C) $90,000
D) $150,000

Question 52

Which of the following will be included in the calculation of GDP using the expenditure method?

A) A worker's wage
B) A foreign consumer's purchase of domestic goods
C) A firm's payment of employee bonuses
D) A bank's payment of interest to its customers

Question 53

Which of the following transactions will be included in the calculation of GDP using the expenditure method?

A) The sale of a used car by a consumer
B) The purchase of a private jet by the CEO of a company
C) The purchase of a treasury bond by an investor
D) The payment made to a construction worker

Question 54

One bag of flour is sold for $1.00 to a bakery,which uses the flour to bake two loaves of bread that are sold for $3.00 each to consumers.A second bag of flour is sold for $1.00 to a grocery store,which sells it to a consumer for $2.00.Taking these transactions into account,what is the effect on GDP?

A) GDP increases by $5.00.
B) GDP increases by $7.00.
C) GDP increases by $8.00.
D) GDP increases by $9.00.

Question 55

Which of the following will be included in the calculation of GDP using the expenditure method?

A) Interest earned on money loaned out
B) Investments in machinery
C) Dividend earned on shares
D) Value added in the production of a good

Question 56

In early 2010,Molly paid $200,000 for a house built in 2000.She spent $30,000 on new materials to remodel the house.Although Molly lived in the house after she remodeled it,its rental value rose.Which of the following contributed to real GDP in 2010?

A) The price of the house, the cost of remodeling materials, and the increase in rental value
B) The price of the house and the cost of remodeling materials, but not the increase in rental value
C) The cost of the remodeling materials and the increase in rent, but not the price of the house
D) Only the costs of the remodeling materials, not the price of the house or increase in rental value

Question 57

Scenario: Infi Corp. is a leading manufacturer of smart phones. Every year, customers spend $31 billion on smart phones manufactured by Infi Corp. A leading retailer generates $10 billion worth of total sales, while the remaining is generated directly from consumers. The retailer pays 70 percent of its revenue to Infi Corp., and Infi Corp. pays $19 billion to its suppliers.
Refer to the scenario above.The retailer adds a value of ________ to the production process.

A) $5 billion
B) $10 billion
C) $3 billion
D) $1 billion

Question 58

Which of the following is considered a final good or service?

A) An airline ticket purchased to go on a business trip
B) The flour used by a baker to make bread
C) The bread purchased by a sub shop to make sandwiches
D) The steel used to make a car

Question 59

Which of the following will be included in the calculation of GDP using the expenditure method?

A) Dividends paid by firms to shareholders
B) Wages paid to labor by firms
C) Services purchased by the government
D) Interest paid by households for loans

Question 60

The production-based method of national accounting sums up the ________.

A) expenditure incurred by domestic and foreign economic agents on domestic products
B) value that is added by each domestic firm in the production process
C) income earned by each factor of production by participating in the production process
D) total revenue earned by all the firms in the economy

Question 61

A ________ occurs when a country's exports exceed its imports.

A) trade deficit
B) trade surplus
C) budget surplus
D) fiscal deficit

Question 62

The table below shows the values of various economic variables of a country during a particular year.

Refer to the table above.The GDP of the country is ________.

A) $452,000
B) $402,000
C) $554,000
D) $352,000

Question 63

The table below shows the values of various economic variables of a country during a particular year.

Refer to the table above.If a trade deficit of $23,000 occurs in the next year,GDP will ________,all other variables remaining unchanged.

A) fall to $325,000
B) increase by $2,000
C) fall by $2,000
D) increase to $531,000

Question 64

The table below shows the values of various economic variables of a country during a particular year.

Refer to the table above.If imports falls to $45,000 in the next year,GDP will ________,all other variables remaining unchanged.

A) increase by $5,000
B) increase by $10,000
C) fall by $5,000
D) fall by $10,000

Question 65

The market value of domestic production is equal to the total expenditure on domestic agents plus ________.

A) the expenditure of foreign agents on exports minus gross investment by foreign firms
B) domestic expenditure on imports
C) the expenditure of foreign agents on exports minus domestic expenditure on imports
D) domestic expenditure on imports minus the expenditure of foreign agents on exports

Question 66

Which of the following will lead to a decrease in the GDP of a country?

A) An increase in exports
B) A decrease in imports
C) A decrease in the expenditure incurred by the government
D) An increase in the expenditure on investment

Question 67

________ will lead to a decrease in the GDP of a country,all other variables remaining unchanged.

A) An increase in exports
B) A decrease in imports
C) A decrease in the expenditure on investment
D) An increase in the expenditure on investment

Question 68

Which of the following will lead to a decrease in the GDP of a country,all other variables remaining unchanged?

A) An increase in exports
B) An increase in imports
C) An increase in the expenditure on consumption
D) An increase in the expenditure on investment

Question 69

Machinery used in a factory is a(n)________ good.

A) inferior
B) public
C) club
D) capital

Question 70

The difference between ________ is known as the trade balance.

A) exports and imports
B) production and exports
C) consumption and imports
D) investment and consumption

Question 71

The table below shows the values of various economic variables of a country during a particular year.

Refer to the table above.The trade balance of the country during that particular year was ________.

A) −$104,000
B) $50,000
C) −$6,000
D) $4,000

Question 72

The table below contains data for the country of Wandalian for the year 2017.

Refer to the above table.What was Wandalian's GDP in 2017?

A) $3,623
B) $4,721
C) $5,037
D) $5,839

Question 73

The table below shows the values of various economic variables of a country during a particular year.

Refer to the table above.If consumption expenditure increases to $200,000 in the next year,GDP will ________,all other variables remaining unchanged.

A) increase to $367,000
B) increase to $400,000
C) fall to $367,000
D) fall to $400,000

Question 74

________ will lead to an increase in the GDP of a country,all other variables remaining unchanged.

A) An increase in imports
B) An increase in expenditure incurred by the government
C) A fall in the expenditure on consumption
D) A fall in the expenditure on investment goods

Question 75

The value of a country's exports during a particular year was $120,000 and the value of its imports was $85,000.Which of the following is true?

A) The country ran a trade deficit of $35,000 during that year.
B) The country ran a trade surplus of $35,000 during that year.
C) The country ran a budget surplus of $205,000 during that year.
D) The country ran a fiscal deficit of $205,000 during that year.

Question 76

A ________ occurs when a country's imports exceed its exports.

A) fiscal deficit
B) budget surplus
C) trade surplus
D) trade deficit

Question 77

Which of the following will lead to an increase in the GDP of a country,all other variables remaining unchanged?

A) An increase in imports
B) An increase in consumption expenditure
C) A fall in the expenditure on investment goods
D) A fall in the expenditure incurred by the government

Question 78

The table below shows the values of various economic variables of a country during a particular year.

Refer to the table above.What will be the value of the GDP of the country if the country runs a trade surplus of $30,000 next year,everything else remaining unchanged?

A) $524,000
B) $378,000
C) $372,000
D) $407,000

Question 79

________ will lead to an increase in the GDP of a country,all other variables remaining constant.

A) An increase in imports
B) An increase in exports
C) A fall in the expenditure on investment goods
D) A fall in the expenditure incurred by the government

Question 80

Which of the following will lead to an increase in the GDP of a country?

A) An increase in imports
B) An increase in expenditure on investment goods
C) A fall in the expenditure on consumption
D) A fall in the expenditure incurred by the government