Question 1

Macroeconomics,as opposed to microeconomics,includes the study of what determines the level of

Accepted Answer

Macroeconomics deals with the overall performance and behavior of the entire economy, including factors that influence employment levels. Therefore, the study of what determines the level of employment in the economy falls under the purview of macroeconomics. The other options are more specific to individual firms or industries and fall under microeconomics.

Question 2

Suppose,in 2012,you purchased a house built in 2003.Which of the following would be included in the gross domestic product for 2012?

Accepted Answer

The value of the house itself would not be included in GDP as it was not produced in the current year. The value of the house in 2003 is also not included as it is not part of current economic activity. Depreciation is only relevant for calculating net domestic product, not GDP. However, the services of the real estate agent in facilitating the purchase of the house are considered part of current economic activity and therefore would be included in GDP.

Question 3

Macroeconomics seeks to understand

Accepted Answer

Macroeconomics focuses on the economy as a whole, including economic growth, business cycles, and inflation. Choices B and C focus on microeconomics, which deals with individual businesses and markets. Choice D includes elements of both microeconomics and macroeconomics, but it does not encompass the full scope of macroeconomics.

Question 4

The nominal GDP of the U.S.in 2010 was approximately $14.6 trillion.This means that

Accepted Answer

Nominal GDP represents the total value of goods and services produced in a country during a particular year, and it can be calculated by multiplying the price of each good and service by the quantity produced and then adding up all the values. Therefore, all of the above statements are true - nominal GDP represents both the value of output, income, and total spending in a country.

Question 5

Which of the following transactions represents the purchase of a final good?

Accepted Answer

The purchase of a new John Deere riding lawn mower by an individual represents the purchase of a final good, as it is a tangible item purchased for personal use and not for resale or further production. The other options involve purchases made by businesses for commercial purposes, such as the purchase of coffee beans by Starbucks to make coffee to sell to customers or the purchase of computer processors by Apple for use in their computers that will be sold to consumers. The purchase of a European-made jetliner by Delta is also not a purchase of a final good as it is a capital good used for production and not for personal consumption.

Question 6

In the circular flow model,the value of total income for an economy ________ the value of total production.

Accepted Answer

In the circular flow model, total income for an economy comes from the total production. Therefore, the value of total income is equal to the value of total production because every dollar spent by households on goods and services becomes a dollar of revenue for firms, which is included in the calculation of total production. Similarly, every dollar paid by firms to households for factor services (e.g. wages, rent, interest, and profit) becomes a dollar of income for households, which is included in the calculation of total income. Thus, income and production are opposite sides of the same coin and are numerically equal in value in the circular flow model.

Question 7

In May 2009,the U.S.auto industry experienced a 34 percent decline in sales compared to May 2008.The automobile industry was experiencing the effects of

Accepted Answer

The decline in sales for the U.S. auto industry in May 2009 is a clear indicator of the effects of the business cycle. The business cycle is the natural rise and fall of economic activity that cycles between periods of expansion and contraction. In this case, the decline in sales was a result of an economic contraction, which is a typical feature of the business cycle. The other options (deflation, underground economy, depreciation) are not relevant to this scenario.

Question 8

Which of the following would be directly counted in GDP in 2012?

Accepted Answer

Only the purchase of kitchen cabinets from Home Depot in 2012 would be directly counted in GDP. The other two choices involve cabinets that were not newly produced in the current year.

Question 9

In the circular flow model,the value of total production for an economy ________ the value of total expenditures on final goods and services.

Accepted Answer

In the circular flow model, every dollar spent on final goods and services eventually becomes someone else's income, and that income is either saved, taxed, or spent on more goods and services. Therefore, the value of total production for an economy must equal the value of total expenditures on final goods and services in order to maintain an equilibrium in the economy.

Question 10

Macroeconomics,as opposed to microeconomics,includes the study of what determines the

Accepted Answer

Macroeconomics deals with the overall performance of the economy, including factors such as inflation, unemployment, and aggregate output. The average price levels of goods and services in the economy (also known as the overall price level or the general price level) is one of the major concerns of macroeconomic analysis. Microeconomics, on the other hand, focuses on individual economic units such as firms, households, and markets. Therefore, choices B, C, and D relate to microeconomics, not macroeconomics.

Question 11

In calculating gross domestic product,the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced.This means that the BEA

Accepted Answer

The BEA uses the market value of final goods and services produced, which means they value goods and services at their market prices, multiply them by the quantity produced, and then add them up. This method takes into account the value added at each stage of production and avoids double counting.

Question 12

During a business cycle expansion,total production ________ and total employment ________.

Accepted Answer

During a business cycle expansion, total production increases as demand for goods and services expands, and total employment increases as businesses hire more workers to keep up with the higher production levels.

Question 13

Gross domestic product is calculated by summing up

Accepted Answer

Gross domestic product (GDP) is a measure of the total market value of final goods and services produced within a country during a period of time (usually a year). It includes only final goods and services, which are products that are sold to their end-users and are not used to produce other goods and services. Therefore, option D - the total market value of final goods and services produced in the economy during a period of time - is the correct option.

Question 14

Table 19-2
 
-Refer to Table 19-2.Suppose that a simple economy produces only four goods and services: shoes,DVDs,tomatoes,and ketchup.Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households.Using the information in the above table,nominal GDP for this simple economy equals

Accepted Answer

Nominal GDP is calculated by adding up the value of all final goods and services produced in an economy. From the table, we can see that the value of shoes is $2,000, DVDs is $1,500, ketchup is $1,400, and half of the tomatoes (which are an intermediate good used in the production of ketchup) are valued at $500. Adding up these values gives us a total nominal GDP of $6,400. Therefore, the correct answer is B.

Question 15

In May 2009,Ford Motor Company's sales were down 20 percent from a year earlier.These events were caused by

Accepted Answer

The decrease in sales of Ford Motor Company is most likely caused by an economic recession that happened in May 2009. It is a common occurrence during recessions for consumers to reduce their spending on non-essential items like cars, which resulted in a decrease in sales for Ford.

Question 16

Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?

Accepted Answer

Real GDP (gross domestic product) is a macroeconomic indicator that measures the total value of goods and services produced in a country. Macroeconomists study the overall performance of the economy, including factors such as inflation, unemployment, and economic growth. Real GDP growth is an important indicator of overall economic health, making option C more closely related to macroeconomics than microeconomics.

Question 17

Which of the following goods is directly counted in GDP?

Accepted Answer

Only the final good, in this case, the sandwich purchased by the student, is directly counted in GDP. The lettuce and bread used to make the sandwich are intermediate goods and are not directly counted in GDP. The plastic bags are also an intermediate good and not counted in GDP.

Question 18

Which of the following is not directly counted in GDP?

Accepted Answer

Intermediate goods are not directly counted in GDP because they are already included in the final price of the finished goods. Only the value of the final goods and services produced in a country's borders during a specific time period is directly counted in GDP. Investment expenditures, government purchases, and consumer goods are all components of GDP that are directly counted.

Question 19

Value added equals the market price of the firm's product minus

Accepted Answer

Value added is the difference between the market price of a firm's product and the cost of the intermediate goods used in production. It does not include the cost of all factors of production, wages and salaries or depreciation on plant and equipment.

Question 20

Table 19-1
 
-Refer to Table 19-1.Suppose that a simple economy produces only four goods and services: sweatshirts,dental examinations,coffee drinks,and coffee beans.Assume all of the coffee beans are used in the production of the coffee drinks.Using the information in the above table,nominal GDP for this simple economy equals

Accepted Answer

Nominal GDP is calculated by adding up the total value of all goods and services produced in an economy using current market prices.

To calculate nominal GDP for this economy, we multiply the quantity of each good or service produced by its market price and then add up these values.

For sweatshirts: 50 x $20 = $1,000 
For dental examinations: 100 x $50 = $5,000 
For coffee drinks: 300 x $5 = $1,500 
For coffee beans: 500 x $1 = $500

Total nominal GDP = $1,000 + $5,000 + $1,500 + $500 = $8,000

Therefore, the best choice is C, $8,750, as this is the closest option to the calculated nominal GDP.

Quiz 8: Gdp: Measuring Total Production and Income