Question 1

Which of the following would be measured in GDP?
A)The time you spend vacationing off the coast of California
B)The purchase of illegal drugs
C)The money you use to buy into a Fantasy Football league with your friends
D)The medical care expenses you incur as a result of the car accident you were in last week.

Accepted Answer

Only D would be counted in GDP as it represents a final good or service, specifically medical care expenses. A, B, and C do not represent final goods or services provided in the market economy and are therefore not included in GDP.

Question 2

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 multiple markets into one to calculate abstract concepts such as price level and national income is known as aggregation. Therefore, the correct answer is D) aggregation.

Question 3

You won the lottery in 2006 for $22 million and gave your sister $500,000.Your winning contributed how much to GDP?
A)$500,000
B)$22 million
C)$0
D)$21.5 million

Accepted Answer

Winning the lottery and giving a portion of it to your sister does not contribute to the Gross Domestic Product (GDP) because these transactions do not involve the production of new goods or services. GDP measures the value of goods and services produced within a country's borders in a specific time period.

Question 4

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 the new car, a final good, would be included in GDP for 2015. The sale of stock (A) and the purchase of a used desk (C) are not included in GDP because they involve the transfer of existing assets and do not represent new production. The purchase of the penthouse (D) is not included in GDP because it is also the transfer of an existing asset, and it is not a final good.

Question 5

In 2008, you buy a 1967 Shelby cobra.This purchase would
A)be included in the GDP for 2008.
B)not be included in the GDP for 2008.
C)be included in both the GDP for 1967 and 2008.
D)be in the GDP for 2008 at a depreciated value.

Accepted Answer

The purchase of a used car, like a 1967 Shelby cobra, is not included in the GDP because it does not represent a new production of goods and services within the economy. The GDP only measures the value of final goods and services produced within a given time period. Therefore, the purchase of a previously produced car is not included in the GDP.

Question 6

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 as they do not represent final goods or services produced for the ultimate user. They are only used as inputs in the production of other goods or services.

Question 7

You are a collector of baseball cards.In 2018, you purchase a Madison Baumgartner baseball card printed in 2012.This baseball card
A)is included in the 2012 GDP.
B)is in the 2012 and 2018 GDP.
C)excluded from the 2012 GDP.
D)included in the 2018 GDP.

Accepted Answer

The answer of You are a collector of baseball cards.In...

Question 8

If hotdogs 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 is calculated using current prices, so the 100 hotdogs purchased this year will contribute $200 to this year's nominal GDP ($2 per hotdog x 100 hotdogs). Next year, when the price increases to $3 per hotdog, the 100 hotdogs purchased will contribute $300 to next year's nominal GDP ($3 per hotdog x 100 hotdogs).

Question 9

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 total output of goods and services at current market prices, whereas real GDP measures the total output of goods and services adjusted for inflation. Real GDP is a more accurate measure of an economy's growth because it takes into account the effects of inflation.

Question 10

An example of an intermediate good would be a(n)
A)paper used in this edition of the textbook.
B)the appliance you use to heat up your lunch..
C)the used car you purchase.
D)the suit you purchased on Black Friday and wore for New Year's Eve.

Accepted Answer

An intermediate good is a good that is used in the production of another good, rather than being sold directly to the consumer. The paper used in this edition of the textbook is an intermediate good because it is used to produce the textbook, rather than being sold directly to the consumer. The other three choices are all final goods that are sold directly to the consumer.

Question 11

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 the total value of all final goods and services produced within a country's borders in a specific period of time, usually a year. It includes all goods and services, both public and private, and serves as a measure of a country's economic output. Options A, C, and D do not fully capture the definition of GDP.

Question 12

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

Accepted Answer

GDP measures the value of goods and services produced within a country's borders. Since the car was produced in the United States, it contributes to the U.S. GDP, regardless of the nationality of the company or where the car is eventually sold.

Question 13

If the price of pizza is $10 this year and $15 next year, then 200 pizzas would contribute
A)$2,000 to this year's GDP and $2,000 to next year's nominal GDP.
B)$3,000 to this year's nominal GDP and $3,000 to next year's nominal GDP.
C)$2,000 to this year's nominal GDP and $3,000 to next year's nominal GDP.
D)$3,000 to this year's GDP and $2,000 to next year's GDP.

Accepted Answer

Nominal GDP counts the current market value of all final goods and services produced within a country's borders during a given period of time. Therefore, the current year's nominal GDP will be $2,000 for the 200 pizzas produced ($10 per pizza x 200 pizzas). Next year's nominal GDP will be calculated with the price of $15 per pizza, meaning the 200 pizzas will contribute $3,000 to next year's nominal GDP.

Question 14

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 the Italian sports car is not included in the GDP for 2015 because GDP only measures the value of final goods and services produced in the current year. The car was already counted in GDP in the year it was produced, and the sale of a used car does not represent current production or income.

Question 15

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 nor 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

GDP only includes the value of new goods and services produced within a country in a given year. The house, built in 2005, was already included in GDP in the year it was constructed. The real estate salesperson's commission in 2015 is a service provided in that year, so it is included in 2015's GDP.

Question 16

Toyota (a Japanese-based company) produces Tundras in the state of Texas.In which country's GDP is it included?
A)Japan and the United States
B)Japan because Toyota is a Japanese company
C)The United States because that is where it was produced
D)Neither country because it is sold internationally

Accepted Answer

The Tundras are produced in the state of Texas, which is in the United States. Therefore, the value of the Tundras produced is included in the United States GDP. While Toyota is a Japanese-based company, the location of production and sale determines which country's GDP it contributes to.

Question 17

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 calculated using current market prices, while real GDP is adjusted for inflation to reflect the true purchasing power of a currency. Therefore, nominal GDP does not take into account the effects of inflation, whereas real GDP does.

Question 18

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 19

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

Sales of replacement systems are included in GDP because they are final goods sold to end users, whereas systems installed in new houses are considered part of the investment in residential construction and not counted separately.

Question 20

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 price level of goods and services in an economy over time. This means that the same amount of money can buy fewer goods and services than before, leading to a decrease in purchasing power.

Quiz 21: An Introduction to Macroeconomics

Which of the following would be measured in GDP?

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

You won the lottery in 2006 for $22 million and gave your sister $500,000.Your winning contributed how much to GDP?

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

In 2008, you buy a 1967 Shelby cobra.This purchase would

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

You are a collector of baseball cards.In 2018, you purchase a Madison Baumgartner baseball card printed in 2012.This baseball card

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

Real GDP differs from nominal GDP in that nominal GDP measures

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

Gross domestic product is a monetary measure of

If Volkswagen (a German-based firm) produces a car in Tennessee and exports it to Mexico, in which country's GDP will the car be counted?

If the price of pizza is $10 this year and $15 next year, then 200 pizzas would contribute

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

Toyota (a Japanese-based company) produces Tundras in the state of Texas.In which country's GDP is it included?

The major difference between nominal GDP and real GDP is that

Real GDP is another term for

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?

Inflation refers to an increase in the