Question 1

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 that represents the total value of all final goods and services produced within the borders of a country during a specific period of time, usually a year. It includes all private and public consumption, government outlays, investments, and exports, but excludes imports, intermediate goods, and transfer payments.

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

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

Selling a used item, such as Aneta's car, does not contribute to GDP as it is not a new production of goods or services. Therefore, the sale of her car is not included in the 2015 GDP.

Question 4

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 in 2015 is not included in the GDP for 2015, as GDP only counts the production of new goods and services. Since the vintage car was produced in 1965, it does not contribute to the current production of goods and services.

Question 5

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, whereas real GDP is adjusted for inflation. Real GDP reflects the true growth of an economy, as it measures the value of goods and services produced in a given year using constant prices. Therefore, the major difference between nominal and real GDP is that real GDP provides a more accurate measure of economic growth, whereas nominal GDP does not take inflation into account.

Question 6

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

All of the listed activities would tend to increase the value of officially measured GDP because they would bring previously unreported economic activity into the formal economy.

Question 7

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, whereas real GDP adjusts for inflation and measures the output of goods and services in constant prices.

Question 8

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. This allows macroeconomic models to analyze the overall performance of an economy based on broad concepts such as price level and national income.

Question 9

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 sale of existing homes does not contribute to GDP, as GDP only includes the value of new goods and services produced within a given year.

Question 10

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

The contribution of 100 hot dogs to this year's nominal GDP is $200 (100 hot dogs x $2 each). The contribution of 100 hot dogs to next year's nominal GDP is $300 (100 hot dogs x $3 each). Therefore, the correct answer is D, which states that the 100 hot dogs will contribute $200 to this year's nominal GDP and $300 to next year's nominal GDP.

Question 11

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.

Question 12

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, by definition, are goods used in the production of final goods and services. Therefore, they are not included in GDP to avoid double-counting. Only final goods and services are included in GDP, which are goods produced for final use and not for further processing.

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, a part of the United States; hence it will be included in the GDP of the United States.

Question 14

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 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 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 commission is included in GDP as it is a payment for a service provided in 2015, but the house itself was produced in 2005, so its sale price is not included in 2015's GDP.

Question 16

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 GDP adjusted for inflation, meaning it is measured in constant (or inflation-adjusted) dollars. Choice A (current dollar GDP) refers to the value of GDP measured in the prices of the current year, without adjusting for inflation. Choice B (actual GDP) and Choice D (tangible GDP) are not commonly used terms in economics.

Question 17

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, such as a silver dollar minted in 1898, is not included in GDP for the current year. GDP only measures the production of goods and services in the current year, and the sale of an antique coin does not represent current production.

Question 18

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 (in this case, a 2015 Chevrolet) would be included in GDP for the current year. Selling stock (A) and buying used items (C) or old real estate (D) do not contribute to the current year's production of goods and services.

Question 19

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 increase due to higher prices. However, real GDP, which is adjusted for inflation, will not increase as much because the increase in prices means that each unit of output is producing less real value. Therefore, real GDP will grow slower than nominal GDP.

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 the rise in the general price level of goods and services in an economy over a period of time. This means that the same amount of money can buy fewer goods and services than before, indicating an increase in prices.

Quiz 22: An Introduction to Macroeconomics

Gross Domestic Product is a monetary measure of

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?

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?

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

The major difference between nominal GDP and real GDP is that

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

Real GDP differs from nominal GDP in that nominal GDP measures

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

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

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

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

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

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?

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

Real GDP is another term for

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?

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

In periods of generally rising prices,

Inflation refers to an increase in the