Deck 11: Measuring the Macroeconomy, Inflation, and Unemployment

Question 1

To avoid double-counting when calculating GDP,it is best to count:

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

Answer 1

the value of the final good.

Question 2

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 GDP is:

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

Answer 2

$45,000.

Question 3

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 trip to your favorite restaurant for dinner
E) having to write a check to pay your taxes

Answer 3

a visit to your doctor

Question 4

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% sales commission.This transaction will increase GDP by:

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

Question 5

You bought a signed Ray Lewis football jersey in 2010 for $100 and you sold it in 2012 for $200.You used a broker to sell the jersey for you,and he charged you $20.This transaction contributed ________ to GDP.

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

Question 6

To determine a value for 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 7

Which of the following represents the largest share of U.S.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 8

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 9

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 it to a consumer for $500.The contribution to GDP is:

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

Question 10

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 GDP?

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

Question 11

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 GDP is:

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

Question 12

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 GDP is:

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

Question 13

An accurate measure of 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 14

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 GDP is:

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

Question 15

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 16

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 GDP this month is:

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

Question 17

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 GDP.

A) $0
B) $500
C) $5,500
D) $5,000
E) $10,500

Question 18

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 GDP is:

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

Question 19

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 restaurant.
D) an airplane purchased by the government.
E) Social Security payments made by the government.

Question 20

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 GDP when the store sells the game to the consumer.

A) $0
B) $30
C) $50
D) $20
E) $25

Question 21

When George buys a new computer for his business,it is included in 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 22

Consumption is approximately ________ of GDP.

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

Question 23

The sale of American-grown corn to China is included in the ________ category of GDP.

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

Question 24

The consumption category of 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 25

The government-purchases category of GDP includes spending by:

A) federal, state, and local government.
B) federal and state government.
C) state and local government.
D) local government only.
E) the federal government only.

Question 26

Which is the largest component of U.S.GDP?

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

Question 27

The difference between nominal GDP and real GDP is:

A) real output growth.
B) inflation.
C) nominal output growth.
D) long-run trend GDP.
E) average output growth.

Question 28

A problem of interpreting nominal GDP is that:

A) an increase in nominal GDP can be caused by changes in either price or quantity.
B) it does not measure changes in employment.
C) it does not measure changes in price.
D) it does not include net exports.
E) it does not include the value obtained through purchases of stocks and bonds.

Question 29

Government salaries paid to soldiers in the military are included in the ________ category of GDP.

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

Question 30

When you buy a new car built by Ford,it is included in the ________ category of GDP.

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

Question 31

Hollister Co.stocks up on T-shirts for the holiday season.This inventory is included in the _______ category of GDP.

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

Question 32

Net exports can be defined as:

A) exports plus imports.
B) exports minus imports.
C) exports divided by imports.
D) imports minus exports.
E) imports divided by exports.

Question 33

The investment spending category of 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 34

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 35

When an unemployed worker receives a payment from the government as a result of being unemployed,it is:

A) included in the consumption category of GDP.
B) included in the investment category of GDP.
C) included in the government purchases category of GDP.
D) included in the net export category of GDP.
E) not included in any of the expenditure categories.

Question 36

The four major expenditure categories of 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 37

A computer company builds a new factory.This is included in the ________ category of GDP.

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

Question 38

The state of Florida spends $3 million to repave highways.This is included in the ______ category of GDP.

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

Question 39

Between two given years,if real GDP and nominal GDP grow at the same rate,then:

A) the price level increased.
B) prices must have remained constant between the two years.
C) quantities must have remained constant between the two years.
D) prices and quantities must have remained constant between the two years.
E) prices and quantities must have grown at the same rate between the two years.

Question 40

Which of the following is included in the government purchases category of GDP?

A) Social Security payments
B) welfare payments
C) payments to people in the military
D) interest on the national debt
E) payments to unemployed workers

Question 41

If nominal GDP changed by 6% and the price level changed by 2%,then real GDP changed by:

A) 4%.
B) 3%.
C) 8%.
D) 12%.
E) 6%.

Question 42

Does the value of cleaning your house count toward the value of GDP?

A) Yes, this value counts in GDP, if you clean your house yourself.
B) No, not if you clean your house yourself.
C) Yes, if you pay a person or company to clean your house.
D) No, because people who clean houses for a living do not pay taxes.
E) No, this is a leisure activity.

Question 43

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

Between quarter 2 and quarter 3,real GDP grew by what percentage?

A) 4%
B) 3%
C) 1%
D) 2%
E) -2%

Question 44

Nominal GDP increased from $15.62 trillion to $16.09 trillion,and the price level increased from 120.0 to 122.4.The growth rate of real GDP was approximately: (Round to the nearest second decimal.)

A) 2.92%.
B) 3.01%.
C) 1.87%.
D) 1.00%.
E) 2.00%.

Question 45

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

Between quarter 7 and quarter 8,real GDP grew by what percentage?

A) -2%
B) 3%
C) 1%
D) 6%
E) 2%

Question 46

If real GDP grew by 4% and nominal GDP grew by 3%,then the inflation rate was:

A) 1%.
B) -1%.
C) 7%.
D) 12%.
E) 0%.

Question 47

Real GDP is GDP adjusted for changes in:

A) overall employment levels.
B) overall price levels.
C) overall output levels.
D) the level of the interest rate.
E) the level of unemployment.

Question 48

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

Between quarter 10 and quarter 11,real GDP grew by what percentage?

A) 6%
B) 3%
C) 4%
D) 5%
E) -5%

Question 49

Nominal GDP increased from $14.0 trillion to $14.7 trillion,and the price level increased from 120 to 126.Which of the following is true?

A) Output grew faster than the price level.
B) Output grew slower than the price level.
C) Real GDP grew faster than nominal GDP.
D) Output grew at the same rate as the price level.
E) Real GDP grew at the same rate as nominal GDP.

Question 50

Nominal GDP increased from $15.62 trillion to $16.09 trillion,and the price level increased from 120.0 to 122.4.The rate of inflation was: (Round to the nearest first decimal.)

A) 3.0%.
B) 1.0%.
C) 2.4%.
D) 20.0%.
E) 2.0%.

Question 51

If nominal GDP is declining,then it must be the case that:

A) fewer goods and services are being produced.
B) prices must be lower on average.
C) prices must be increasing more rapidly than production.
D) prices are falling at a greater rate than production is rising.
E) production is rising at a greater rate than prices are falling.

Question 52

Economic growth is best measured by changes in:

A) nominal GDP.
B) real GDP.
C) the inflation rate.
D) the unemployment rate.
E) the number of jobs.

Question 53

Consider the following data that identifies real GDP to answer the questions that follow.

Between quarter 2 and quarter 3,real GDP grew by what percentage?

A) 4%
B) 3%
C) 1%
D) 2%
E) -2%

Question 54

Consider the following data that identifies real GDP to answer the questions that follow.

Between quarter 10 and quarter 11,real GDP grew by what percentage?

A) 6%
B) 3%
C) 4%
D) 5%
E) -5%

Question 55

Nominal GDP increased from $15.44 trillion to $15.75 trillion,and the price level increased from 116.5 to 122.3.Which of the following is true?

A) Output grew faster than the price level.
B) Output grew slower than the price level.
C) Real GDP grew faster than nominal GDP.
D) Output grew at the same rate as the price level.
E) Real GDP grew at the same rate as nominal GDP.

Question 56

GDP increases if prices decrease by ________ and quantities produced increase by ________.

A) 2%; 4%
B) 2%; 2%
C) 4%; 2%
D) 3%; 1%
E) 3%; 3%

Question 57

If nominal GDP is increasing,which of the following is true?

A) More final goods and services are being produced.
B) Prices on average are rising at a slower rate than the decline in the quantity of final goods and services produced.
C) Less is being produced, and prices on average are falling.
D) Production of final goods and services is increasing at a faster rate than prices are falling.
E) Prices and the amount of final goods and services produced on average are constant.

Question 58

Consider the following data that identifies real GDP to answer the questions that follow.

Between quarter 7 and quarter 8,real GDP grew by what percentage?

A) -2%
B) 3%
C) 1%
D) 6%
E) 2%

Question 59

If real GDP grew by 2% and the inflation rate was 2%,then nominal GDP grew by:

A) 2%.
B) 4%.
C) 0%.
D) 1%.
E) 3%.

Question 60

Nominal GDP increased from $15.76 trillion to $16.39 trillion,and the price level increased from 112.6 to 114.8.Which of the following is true?

A) Output grew faster than the price level.
B) Output grew slower than the price level.
C) Real GDP grew faster than nominal GDP.
D) Output grew at the same rate as the price level.
E) Real GDP grew at the same rate as nominal GDP.

Question 61

GDP is an important indicator because it is used as a measure of all of the following EXCEPT:

A) economic growth.
B) average living standards.
C) GDP fluctuations.
D) average income levels.
E) environmental quality.

Question 62

A shortcoming of using real GDP as a measure of economic well-being is that it does NOT measure changes in:

A) production.
B) environmental quality.
C) prices.
D) unemployment.
E) interest rates.

Question 63

Joe has a full-time construction job and also does odd jobs for people on the weekends.You have purchased the materials needed to construct a fence at your house and you pay Joe $500 in cash to build the fence.Does the payment to Joe count toward the value of GDP?

A) Yes, the fence increases the value of your house.
B) Yes, all income earned counts in GDP.
C) No, his is a non-market activity.
D) Only if this income is reported to the government.
E) No, this is a leisure activity.

Question 64

Real GDP would be a better measure of economic well-being if it included the value of:

A) stocks and bonds purchases.
B) intermediate goods.
C) used goods.
D) leisure time.
E) Social Security payments.

Question 65

Use the following table to answer the questions that follow.

According to the table,the labor-force participation rate is:

A) 64.2%.
B) 68.4%.
C) 35.8%.
D) 31.6%.
E) 6.1%.

Question 66

What are the two types of unemployment that are consistent with a dynamic,growing economy?

A) cyclical and structural
B) real and nominal
C) frictional and cyclical
D) frictional and structural
E) natural and cyclical

Question 67

Use the following table to answer the questions that follow.

According to the table,the number of employed in this economy is equal to:

A) 95 million.
B) 161 million.
C) 84 million.
D) 18 million.
E) 179 million.

Question 68

Use the following table to answer the questions that follow.

According to the table,the relevant population is equal to:

A) 95 million.
B) 161 million.
C) 274 million.
D) 84 million.
E) 179 million.

Question 69

A shortcoming of real GDP is it:

A) does not include the underground economy.
B) includes non-market goods.
C) does not measure changes in employment.
D) does not include the value obtained through purchases of stocks and bonds.
E) does not account for changes in the prices of goods and services.

Question 70

Which of the following conditions might cause the unemployment rate to be less than the natural rate of unemployment?

A) Demand for products starts to decrease, so firms keep their factories open for additional hours of production to make up the difference.
B) Demand for products is so high that firms keep their factories open for additional hours of production and pay their workers overtime.
C) Demand for products is so high that firms raise their prices to take advantage of extra profits.
D) The economy enters a recession, so firms start to produce more to help boost the economy.
E) The government decreases unemployment benefits.

Question 71

Use the following table to answer the questions that follow.

According to the table,the labor force is:

A) 138 million.
B) 215 million.
C) 77 million.
D) 147 million.
E) 68 million.

Question 72

The unemployment rate is the percentage of the:

A) population that is unemployed.
B) adult population that is unemployed.
C) labor force that is unemployed.
D) adult population that is in the labor force.
E) labor force that is employed.

Question 73

Which of the following statements is true about the natural rate of unemployment?

A) The actual unemployment rate can never be above the natural rate.
B) The actual unemployment rate can never be at the natural rate.
C) The natural rate of unemployment consists of both cyclical and structural unemployment.
D) Sometimes the actual unemployment rate is below the natural rate.
E) The natural rate of unemployment consists of both cyclical and frictional unemployment.

Question 74

The natural rate of unemployment is:

A) the average unemployment rate during a recession.
B) equal to 0%.
C) constant over time.
D) the typical rate of unemployment when the economy is growing normally.
E) equal to the rate of cyclical unemployment.

Question 75

Use the following table to answer the questions that follow.

According to the table,the number of people NOT in the labor force is equal to:

A) 138 million.
B) 215 million.
C) 77 million.
D) 147 million.
E) 68 million.

Question 76

The sum of the number of unemployed and the number of employed is the:

A) labor-force participation rate.
B) labor force.
C) unemployment rate.
D) employment rate.
E) number of discouraged workers.

Question 77

Use the following table to answer the questions that follow.

According to the table,the unemployment rate in this economy is equal to:

A) 18.9%.
B) 36.9%.
C) 63.4%.
D) 10.1%.
E) 8.5%.

Question 78

Daniel,Steven,and Chris work as engineers in Connecticut.The demand for engineers starts to decline as their company's profits start to decrease during a recession.As a result,Daniel and Steven are laid off from their jobs.Daniel and Steven would be classified as:

A) frictionally unemployed.
B) discouraged workers.
C) structurally unemployed.
D) overemployed.
E) cyclically unemployed.

Question 79

The root cause of cyclical unemployment is:

A) unemployment insurance.
B) labor market regulations.
C) delays in matching available workers with open jobs.
D) recessions.
E) changes in the industrial makeup of the economy.

Question 80

Use the following table to answer the questions that follow.

According to the table,the labor-force participation rate in this economy is equal to:

A) 18.9%.
B) 36.9%.
C) 65.3%.
D) 10.1%.
E) 8.5%.