Question 1

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

Accepted Answer

Inflation refers to an increase in the general price level of goods and services in an economy. It is the rate at which the price of goods and services is increasing over time.

Question 2

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 3

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 the value of goods and services produced in an economy adjusted for inflation, which is measured using a base year. The use of constant dollars ensures that changes in nominal GDP are due to changes in production rather than changes in price levels. Current dollar GDP refers to the value of goods and services produced in an economy using the current market prices, without adjusting for inflation. Actual GDP and tangible GDP are not commonly used terms in economics.

Question 4

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...

Question 5

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 6

Which of the following transactions would be included in GDP for 2011?
A) On January 5, 2011, Chris Carter sold 100 shares of stock in IBM Corporation.
B) Bonita Delgado purchases a new 2011 Chevrolet on March 10, 2011.
C) Nadav Daniel buys a used desk from the "Struggling Students Used Furniture" store on May 9, 2011.
D) Levi Lathan purchases a 75-year-old penthouse on Lake Shore Drive in Chicago, Illinois, on June 23, 2011.

Accepted Answer

The purchase of a new 2011 Chevrolet would be considered a final good or service and therefore would be included in GDP for 2011.

None of the other transactions listed would be included in GDP for 2011 as they don't represent current production of goods or services. A sale of stock (A) does not represent production, but merely a transfer of ownership. Similarly, the purchase of a used desk (C) or a 75-year-old penthouse (D) do not represent current production and therefore are not included in GDP.

Question 7

Suppose that in 2011 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 2011 is
A) $0.
B) $60,000.
C) $210,000.
D) -$60,000

Accepted Answer

The sale of a used house does not add to GDP because GDP only includes the value of new goods and services produced within the year. The transaction of a house built in 2005 does not contribute to the GDP of 2011.

Question 8

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 monetary measure of the total value of all final goods and services produced within a country's borders in a specific time period. It includes consumer spending, government spending, investment, and net exports. The other options, such as total consumption or total industrial output, do not encompass all the components of GDP. Foreign sales and purchases are only included in the calculation of net exports in the GDP formula.

Question 9

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 2011.How is this sale included in the GDP for 2011?
A) $8,500 is included in 2011 GDP
B) $39,000 is included in 2011 GDP
C) The increase in value of $10,500 is included in 2011 GDP
D) It is not included in 2011 GDP

Accepted Answer

The sale of a used item, such as Aneta's Italian sports car, is not included in GDP as it does not represent current production or income. GDP only includes the value of final goods and services that are produced within a current period of time.

Question 10

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 is considered a transfer of existing assets and is not included in GDP for the current year. GDP measures the production of new goods and services within a country over a specific time period, not the sale or transfer of existing assets.

Question 11

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 prices, without adjusting for inflation. Real GDP, on the other hand, takes into account changes in the price level and measures output adjusted for inflation.

Question 12

Nominal GDP is another term for
A) current dollar GDP.
B) constant dollar GDP.
C) adjusted dollar GDP.
D) relative value GDP.

Accepted Answer

Nominal GDP refers to the value of all goods and services produced in an economy at current market prices. Therefore, it is also known as current dollar GDP.

Question 13

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

The car was produced in Ohio, which means it contributed to the GDP of the United States, regardless of which country it is ultimately sold in.

Question 14

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 already included in the final goods sold to the consumers. Only final goods and services are included in GDP.

Question 15

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 the effects of price increases, while real GDP will adjust for inflation and account for changes in quantity produced. Thus, real GDP will grow slower than nominal GDP.

Question 16

The definition of Gross Domestic Product is
A) the total value of all sales in the economy.
B) the total value of production in the domestic economy plus the production of domestic firms in foreign countries.
C) the total value of all sales of final and intermediate goods in the domestic economy.
D) the total of the money values of all final goods and services produced in the domestic economy within a specific time period.

Accepted Answer

Gross Domestic Product (GDP) is the total monetary value of all final goods and services produced within a country's borders in a specific time period (usually a year). It includes all goods and services (final) that are sold in the market and used for consumption, investment or government spending. It does not include intermediate goods (those used to produce final goods) to avoid double-counting.

Question 17

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 production of goods and services at current market prices. So, the contribution of 100 hot dogs will be $200 to this year's nominal GDP ($2 x 100 hot dogs) and $300 to next year's nominal GDP ($3 x 100 hot dogs).

Question 18

Does GDP for a particular year include items produced in a previous year?
A) Nominal GDP will not and real GDP will
B) Real GDP will and nominal GDP will not
C) Yes for both nominal and real GDP
D) No for both nominal and real GDP

Accepted Answer

GDP measures the value of goods and services produced in a particular year. Therefore, it only includes items produced in that year, not items produced in previous years.

Question 19

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 a country without adjusting for inflation, whereas real GDP is the market value of goods and services produced in a country that has been adjusted for inflation. Real GDP gives a more accurate picture of a country's economic growth because it takes into account changes in the price level and therefore represents the actual increase in production.

Question 20

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

A tire for a new car is an intermediate good because it is a component that is used in the production of the final good (the new car). The other options listed either do not fit the definition of an intermediate good or do not provide the same level of specificity as the example of a tire for a new car.

Quiz 22: An Introduction to Macroeconomics

Inflation refers to an increase in the

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

Real GDP is another term for

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?

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?

Which of the following transactions would be included in GDP for 2011?

Suppose that in 2011 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 2011 is

Gross Domestic Product is a monetary measure of

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 2011.How is this sale included in the GDP for 2011?

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?

Real GDP differs from nominal GDP in that nominal GDP measures

Nominal GDP is another term for

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?

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

In periods of generally rising prices,

The definition of Gross Domestic Product is

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

Does GDP for a particular year include items produced in a previous year?

The major difference between nominal GDP and real GDP is that

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