Question 1

Aneta has owned an Italian sports car for several years and now she wants to sell it.She paid $8,500 for it in 1993 and she has just sold it for $39,000 in 2015.How is this sale included in the GDP for 2015?
A) $8,500 is included in 2015 GDP
B) $39,000 is included in 2015 GDP
C) The increase in value of $10,500 is included in 2015 GDP
D) It is not included in 2015 GDP

Accepted Answer

The sale of Aneta's Italian sports car is not included in the GDP for 2015. GDP only measures the value of final goods and services produced in a given year, and the car was produced in 1993. The increase in value is also not included because it is not a new production of goods or services.

Question 2

E&S Cooling Co.installs air conditioning systems in new houses for homebuilders,and replacement systems for homeowners.Sales of which systems are included in this year's GDP?
A) Sales of replacement systems
B) Sales of both systems
C) Sales of systems in new houses
D) Neither system would be included,because they are always intermediate goods.

Accepted Answer

The answer of E&S Cooling Co.installs air conditioning systems in...

Question 3

In 2015,you buy a beautiful vintage 1965 Thunderbird convertible.This purchase would
A) be included in the GDP for 2015.
B) not be included in the GDP for 2015.
C) be included in both the GDP for 1965 and 2015.
D) be in the GDP for 2015 at a depreciated value.

Accepted Answer

The purchase of a vintage car is not included in the GDP because GDP only includes the value of newly produced goods and services in the current year. The vintage car was already produced in 1965 and is being resold, so it does not contribute to current production.

Question 4

Inflation refers to an increase in the
A) price level.
B) rate of inflation.
C) total income.
D) real GDP.

Accepted Answer

Inflation is typically measured by an increase in the price level, meaning that the average costs of goods and services in an economy are rising. Option B is incorrect because the rate of inflation is simply the percentage change in the price level over time, not the cause of inflation. Option C is incorrect because total income can rise or fall independent of the inflation rate. Option D is incorrect because real GDP is adjusted for inflation, so an increase in real GDP would not necessarily imply an increase in the price level.

Question 5

If Honda (a Japan-based firm)produces a car in Ohio and exports it to Japan,in which country's GDP will the car be counted?
A) Japan's,because Honda is a Japanese company
B) Japan's because that is where the car is purchased
C) The GDP of the United States because that is where it was built
D) Both Japan and the United States

Accepted Answer

According to the territorial principle of GDP accounting, the car will be counted in the GDP of the country where it was produced, in this case, the United States.

Question 6

You are a collector of antique coins.You purchase a silver dollar minted in 1898.Is this sale included in GDP for the current year?
A) Yes,provided the coin is in mint condition.
B) No,it is not.
C) No,unless the coin has been in circulation.
D) Yes,it is.
E) Only if it is part of the current money supply.

Accepted Answer

The sale of an antique coin does not represent current production and therefore is not included in GDP. GDP only includes current production of goods and services during a specific time period. The sale of an antique coin represents the transfer of ownership of an existing asset and does not add to current production.

Question 7

Suppose that in 2015 you paid $150,000 for a house that was built in 2005 and sold that year for $210,000.The amount this transaction would add to the GDP in 2015 is
A) $0.
B) $60,000.
C) $210,000.
D) −$60,000

Accepted Answer

The answer of Suppose that in 2015 you paid $150,000...

Question 8

Which of the following transactions would be included in GDP for 2015?
A) On January 5,2015,Chris Carter sold 100 shares of stock in IBM Corporation.
B) Bonita Delgado purchases a new 2015 Chevrolet on March 10,2015.
C) Nadav Daniel buys a used desk from the "Struggling Students Used Furniture" store on May 9,2015.
D) Levi Lathan purchases a 75-year-old penthouse on Lake Shore Drive in Chicago,Illinois,on June 23,2015.

Accepted Answer

Only the purchase of a new car (or any new final good) would be included in GDP for 2015 as it represents a current production. The sale of stock, purchase of used furniture, and purchase of an old penthouse are not included as they do not represent current production of goods and services.

Question 9

If hot dogs cost $2 this year and $3 next year,then 100 hotdogs will contribute
A) $200 to this year's nominal GDP and $166 to next year's nominal GDP.
B) $200 to this year's real GDP and $300 to next year's real GDP.
C) the same dollar amount to each year's nominal GDP because hotdogs are intermediate goods.
D) $200 to this year's nominal GDP and $300 to next year's nominal GDP.

Accepted Answer

Nominal GDP measures the monetary value of all final goods and services produced in an economy within a given period, without adjusting for inflation. Real GDP adjusts nominal GDP for inflation. Since the hot dogs are final goods (meaning they are sold to the end consumer), we can include them in nominal GDP for both years. Therefore, the total contribution of 100 hot dogs would be $200 to this year's nominal GDP and $300 to next year's nominal GDP (100 hot dogs x $2 each = $200 for this year, and 100 hot dogs x $3 each = $300 for next year).

Question 10

In periods of generally rising prices,
A) real GDP will grow faster than nominal GDP.
B) nominal GDP will grow slower than real GDP.
C) real GDP will grow slower than nominal GDP.
D) real GDP and nominal GDP will grow at the same rate.

Accepted Answer

In periods of generally rising prices, nominal GDP will include an increase in prices as well, while real GDP adjusts for inflation by using constant prices. Therefore, real GDP will grow slower than nominal GDP.

Question 11

Real GDP is another term for
A) current dollar GDP.
B) actual GDP.
C) constant dollar GDP.
D) tangible GDP.

Accepted Answer

Real GDP refers to constant dollar GDP, which is adjusted for inflation. This allows for a more accurate comparison of economic growth over time. Current dollar GDP (choice A) refers to the nominal value of GDP, which does not take into account changes in prices. Actual GDP (choice B) is not a commonly used term, and tangible GDP (choice D) is not a correct term.

Question 12

An example of an intermediate good would be a(n)
A) new car.
B) used car.
C) new tire for a used car.
D) tire for a new car.
E) All of the above.

Accepted Answer

An intermediate good is a good that is used in the production of a final good. In this case, the tire is being used to produce a new car, which is the final good. A new or used car could both be considered final goods, as they are sold to consumers for their final use. However, the new tire for a used car is still an intermediate good, as it is not the final product being sold to consumers.

Question 13

Real GDP differs from nominal GDP in that nominal GDP measures
A) output adjusted for inflation.
B) real output of goods and services.
C) output of goods and services at current prices.
D) real income adjusted for changes in the price level.

Accepted Answer

Nominal GDP measures the output of goods and services at current market prices, without adjusting for inflation. Real GDP, on the other hand, measures the output of goods and services adjusted for inflation, providing a more accurate picture of the economy's true growth over time.

Question 14

Gross Domestic Product is a monetary measure of
A) total consumption in the economy.
B) the total value of all final goods and services.
C) total industrial output.
D) the total value of all foreign sales and purchases.

Accepted Answer

Gross Domestic Product (GDP) is a measure of the total value of all final goods and services produced within a country's borders in a given time period (usually a year). It includes consumption, investment, government spending, and net exports, but it only counts the final goods and services produced, not intermediate goods or services used in the production process. Therefore, choice B is the correct answer.

Question 15

The major difference between nominal GDP and real GDP is that
A) real GDP is the absolute value of goods and services and nominal GDP is a relative value.
B) real GDP refers to products made in the United States and nominal GDP refers to both exports and imports.
C) nominal GDP is the market value and real GDP has been adjusted for inflation.
D) real GDP is a relative value and nominal GDP is an absolute value.

Accepted Answer

Nominal GDP is the market value of goods and services produced in an economy, while real GDP is adjusted for inflation and represents the economy's output at constant prices. Therefore, real GDP provides a more accurate picture of the growth or contraction of an economy over time, as it takes inflation into account.

Question 16

General Motors Corporation (a U.S.-based firm)produces a Saab vehicle in Sweden,and sells it in the United States.In which country's GDP is it included?
A) Sweden and the United States
B) The United States because it was sold there
C) The United States because GM is a U.S.company
D) Sweden because it was produced there

Accepted Answer

The answer of General Motors Corporation (a U.S.-based firm)produces a...

Question 17

Macroeconomic models use abstract concepts such as "price level" and "national income" that are calculated by combining many markets into one.This process is known as
A) analysis and synthesis.
B) integration and derivation.
C) conceptualization.
D) aggregation.

Accepted Answer

The process of combining many markets into one is known as aggregation. Macroeconomic models use aggregation to simplify the analysis of the economy as a whole by combining multiple markets into single variables such as the price level and national income.

Question 18

A real estate salesperson sells a house in 2015 that was built in 2005.How does this transaction get counted in the GDP statistics?
A) The price of the house and the real estate salesperson's commission are both included in 2015's GDP.
B) Neither the price of the house or the commission is included in 2015's GDP.
C) The real estate salesperson's commission but not the price of the house is included in 2015's GDP.
D) The price of the house would be included in both 2005's GDP and the GDP for 2015.

Accepted Answer

The answer of A real estate salesperson sells a house...

Question 19

Which of the following would tend to increase the value of officially measured GDP?
A) decriminalization of drugs such as marijuana and cocaine
B) decriminalization of prostitution
C) decriminalization of gambling on basketball and football
D) all of the above

Accepted Answer

The answer of Which of the following would tend to...

Question 20

Intermediate goods,like milk sold by a farmer to a supermarket,are
A) included in GDP.
B) included in GDP at market value.
C) included if it is imported.
D) are not included in GDP.

Accepted Answer

Intermediate goods are not included in GDP because they are not final products sold to the end consumer. Instead, they are used as inputs in the production of final goods and services. Only final goods and services are included in GDP.

Quiz 5: An Introduction To Macroeconomics

Aneta has owned an Italian sports car for several years and now she wants to sell it.She paid $8,500 for it in 1993 and she has just sold it for $39,000 in 2015.How is this sale included in the GDP for 2015?

E&S Cooling Co.installs air conditioning systems in new houses for homebuilders,and replacement systems for homeowners.Sales of which systems are included in this year's GDP?

In 2015,you buy a beautiful vintage 1965 Thunderbird convertible.This purchase would

Inflation refers to an increase in the

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan,in which country's GDP will the car be counted?

You are a collector of antique coins.You purchase a silver dollar minted in 1898.Is this sale included in GDP for the current year?

Suppose that in 2015 you paid $150,000 for a house that was built in 2005 and sold that year for $210,000.The amount this transaction would add to the GDP in 2015 is

Which of the following transactions would be included in GDP for 2015?

If hot dogs cost $2 this year and $3 next year,then 100 hotdogs will contribute

In periods of generally rising prices,

Real GDP is another term for

An example of an intermediate good would be a(n)

Real GDP differs from nominal GDP in that nominal GDP measures

Gross Domestic Product is a monetary measure of

The major difference between nominal GDP and real GDP is that

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden,and sells it in the United States.In which country's GDP is it included?

Macroeconomic models use abstract concepts such as "price level" and "national income" that are calculated by combining many markets into one.This process is known as

A real estate salesperson sells a house in 2015 that was built in 2005.How does this transaction get counted in the GDP statistics?

Which of the following would tend to increase the value of officially measured GDP?

Intermediate goods,like milk sold by a farmer to a supermarket,are