Deck 2: Measuring the Macroeconomy

Question 1

A lesson from microeconomics is that under perfect competition,where firms charge prices equal to marginal cost,__________ are zero.

A)revenues
B)economic profits
C)normal profits
D)variable costs
E)wages

Answer 1

C

Question 2

Which of the following are not included in the expenditure approach to National Income Accounting?

A)transfer payments
B)taxes
C)Social Security
D)changes in the stock exchange
E)all of the above

Answer 2

E

Question 3

Who created the original National Income and Product Accounts in the 1930s?

A)John M.Keynes
B)Paul A.Samuelson
C)William D.Nordhaus
D)Simon Kuznets
E)Milton Friedman

Answer 3

D

Question 4

In 2005,government expenditures accounted for about __________ of total GDP.

A)11 percent
B)40 percent
C)16 percent
D)70 percent
E)19 percent

Question 5

The National Income and Product Accounts provides a system for:

A)aggregating the production of all goods and services into a single measure of economic activity.
B)aggregating the production of all goods into a single measure of economic activity.
C)aggregating the production of all services into a single measure of economic activity.
D)aggregating the production of most goods and services into a single measure of economic activity.
E)aggregating the production of all goods and services into two measures of economic activity.

Question 6

Using the expenditure approach,consumption expenditures include:

A)household purchases of durable and nondurable goods and services.
B)household purchases of durable and nondurable goods.
C)household purchases of durable and nondurable goods and taxes.
D)household purchases of durable and nondurable goods and residences.
E)household purchases of nondurable goods.

Question 7

The difference between economic profits and normal profits is that:

A)normal profits are earnings based on the normal competitive return to one's own labor;economic profits are the above-normal returns associated with prices that exceed competitive prices.
B)economic profits are earnings based on the normal competitive return to one's own labor;normal profits are the above-normal returns associated with prices that exceed competitive prices.
C)normal profits are earnings based on the normal competitive return to one's own labor;economic profits are the above-normal returns associated with prices that exceed monopolistic prices.
D)economic profits are earnings based on the noncompetitive return to one's own labor;normal profits are the above-normal returns associated with prices that exceed competitive prices.
E)None of the above is correct.

Question 8

In 2005,household expenditures accounted for about __________ of total GDP.

A)19 percent
B)40 percent
C)16 percent
D)70 percent
E)11 percent

Question 9

Using the expenditure approach,government expenditures include:

A)defense and nondefense federal,state,and local government expenditures.
B)only nondefense federal government expenditures.
C)only federal government expenditures.
D)only state and local government expenditures.
E)residential investment and state and local government expenditures.

Question 10

A lesson from microeconomics is that unless there is some market power where firms charge prices above marginal cost,__________ are zero.

A)costs
B)revenues
C)normal profits
D)economic profits
E)variable costs

Question 11

In 2005,investment expenditures accounted for about __________ of total GDP.

A)70 percent
B)40 percent
C)16 percent
D)19 percent
E)11 percent

Question 12

Consider Table 2.1,the National Income Accounts for 2006.From the data,total GDP is:

A)$30,951 billion.
B)$13,247 billion.
C)$14,772 billion.
D)$14,009 billion.
E)$10,719 billion.

Question 13

According to the expenditure approach,if Y is GDP,C is consumption,I is investment,G is government purchases,and NX is net exports,the national income identity can be written as:

A)Y = C + I + G.
B)Y = C + I + G - NX.
C)Y + C = I + G + NX.
D)Y = (C + I + G)/NX.
E)Y = C + I + G + NX.

Question 14

The statistic used by economists to measure the value of economic output is:

A)the unemployment rate.
B)GDP.
C)the CPI.
D)the GDP deflator.
E)the federal funds rate.

Question 15

Using the expenditure approach,investment includes

A)household residential expenditures.
B)firm structures,equipment,and inventories.
C)fixed firm and household structures,equipment,and inventories.
D)government and firm equipment expenditures.
E)government defense and firm equipment expenditures.

Question 16

According to the expenditure approach,if Y is GDP,C is consumption,I is investment,G is government purchases,and NX is net exports,the national income identity can be written as:

A)Y + C - G = I + NX.
B)Y - C = I + G - NX.
C)Y - C - G - I = NX.
D)Y = (C + I + G)/NX.
E)Y = C + I + G.

Question 17

The National Income and Product Accounts allows us to relate __________ to __________ to __________.

A)household income;government income;firm income
B)total output;total spending;inflation
C)total output;inflation;total income
D)household income;household expenditure;total output
E)total output;total spending;total income

Question 18

According to the expenditure approach,if Y is GDP,C is consumption,I is investment,G is government purchases,and NX is net exports,which of the following is the national income identity?

A)Y = C + I + G - NX
B)Y = C + I + G + NX
C)Y + C = I + G + NX
D)Y = (C + I + G)/NX
E)Y = C + I + G

Question 19

An economy's __________ is equal to its __________.

A)consumption;income
B)expenditure on goods and services;output
C)expenditure on goods;expenditure on services
D)investment;government expenditures
E)taxes;net exports

Question 20

The National Income and Product Accounts identity states:

A)Expenditure = Production + Income.
B)Production = Expenditure - Income.
C)Production = Expenditure + Income.
D)Expenditure = Production - Income.
E)Production = Expenditure = Income.

Question 21

According to the income approach to GDP,the largest percentage of GDP comes from:

A)indirect business taxes.
B)firm profits.
C)compensation to employees.
D)depreciation of fixed capital.
E)none of the above

Question 22

In 2005,the U.S.GDP was about __________,and __________ was the largest share.

A)$5 trillion;consumption
B)$12.5 trillion;government expenditures
C)$10.5 trillion;investment
D)$12.5 billion;consumption
E)$12.5 trillion;consumption

Question 23

Which of the following counts toward changes in the current GDP?

A)A student buys another year of tuition.
B)You purchase a used stereo from a friend.
C)The government builds a new highway.
D)You fix your own sink.
E)a and c

Question 24

United States expenditure shares by households,firms,and the government have been relatively _____ except during __________.

A)constant;the 1970s
B)variable;the Great Depression
C)constant;World War II
D)constant;Vietnam War
E)variable;the 1990s

Question 25

Nominal GDP is the __________ of all goods and services produced in a period of time using __________ prices.

A)value;1945
B)summation;current
C)value;a previous year's
D)value;current
E)summation;base year

Question 26

The price level can be derived as __________ and is called the __________.

A)Price level = Nominal GDP ÷ Real GDP;CPI
B)Price level = Nominal GDP $\times$ Real GDP;CPI
C)Price level = Real GDP $\times$ Nominal GDP;GDP deflator
D)Price level = Real GDP ÷ Nominal GDP;GDP deflator
E)Price level = Nominal GDP ÷ Real GDP;GDP deflator

Question 27

Real GDP is given by __________,where the price level is the __________.

A)Real GDP = Nominal GDP $\times$ Price level;CPI
B)Real GDP = Nominal GDP ÷ Price level;GDP deflator
C)Real GDP = Nominal GDP + Price level;GDP deflator
D)Real GDP = Nominal GDP - Price level;GDP deflator
E)Real GDP = Nominal GDP ÷ Price level;CPI

Question 28

Consider Table 2.2,National Income Accounts for 2005 and 2006.From this data,total GDP in 2005 was:

A)$10,780.
B)$24,884.
C)$14,073.
D)$12,385.
E)Not enough information is given.

Question 29

Which of the following are not included in the expenditure approach to National Income Accounting?

A)defense expenditures
B)firm expenditures on equipment
C)residential expenditures
D)household service expenditures
E)none of the above

Question 30

Since about 1970,__________ income share of GDP has been __________.

A)labor's;rising
B)labor's;falling
C)profits';falling
D)indirect business taxes';rising
E)the health sector's;falling

Question 31

When the city of Los Angeles hires more police officers,__________ may rise,but it may be due to the ___________ associated with crime.

A)GDP;costs
B)revenues;costs
C)taxes;benefits
D)interest rates;costs
E)prices;costs

Question 32

Nominal GDP is given by __________ where the price level is the __________.

A)Nominal GDP = Price level $\times$ Real GDP;GDP deflator
B)Nominal GDP = Price level ÷ Real GDP;GDP deflator
C)Nominal GDP = Price level + Real GDP;CPI
D)Nominal GDP = Price level - Real GDP;GDP deflator
E)Nominal GDP = Price level $\times$ Real GDP;CPI

Question 33

Which of the following does not count toward changes in the current GDP?

A)A student buys another year of tuition.
B)You buy a used car from your parents.
C)The local police station buys new squad cars.
D)The Pentagon buys gasoline.
E)b and c

Question 34

By how much does the current GDP rise in the following scenario? A real estate agent sells a house for $250,000 that the previous owners had purchased 10 years earlier for $90,000.The real estate agent earns a commission of $10,000.

A)$160,000
B)$250,000
C)$10,000
D)$90,000
E)$260,000

Question 35

Real GDP is the __________ of all goods and services produced in a period of time using __________ prices.

A)summation;current
B)value;base year
C)value;1970
D)value;1945
E)summation;base year

Question 36

Since about __________,United States expenditure shares by households,firms,and the government have been relatively __________.

A)1939;constant
B)the Great Depression era;constant
C)1950;variable
D)1950;constant
E)1929 until 1945;constant

Question 37

By how much does GDP change between 2004 and 2005 in the following scenario? In 2004,a rich woman has a butler and pays him $50,000 to perform butler services.In 2005,she marries the butler but he continues to perform butler services.

A)GDP rises by $50,000.
B)GDP is unchanged.
C)GDP falls by $50,000.
D)GDP rises by $25,000.
E)Not enough information is given.

Question 38

When a state builds a new penitentiary,__________ rise(s),but that does not imply that __________ improve(s).

A)income;welfare
B)GDP;taxes
C)GDP;transfers
D)GDP;welfare
E)taxes;costs

Question 39

Prior to the late 1970s,the United States __________ about as much as it __________.

A)exported;consumed
B)exported;imported
C)imported;consumed
D)invested;exported
E)imported;invested

Question 40

Which of the following are not included in the expenditure approach to National Income Accounting?

A)software
B)taxes
C)defense expenditures
D)a and b
E)none of the above

Question 41

If we calculate the real GDP using the __________ index,we use the __________ period's prices.

A)Laspeyres;final
B)Paasche;final
C)Paasche;initial
D)chain-weighted;current
E)chain-weighted;final

Question 42

Real gross domestic product is defined as:

A)the value of all goods and services produced by an economy,within its borders,over a period of time,at base-year prices.
B)the value of all goods and services produced by an economy,within its borders,over a period of time,at current prices.
C)the value of all goods produced by an economy,within its borders,over a period of time,at current prices.
D)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at current prices.
E)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at base-year prices.

Question 43

Consider Table 2.3.Using the Paasche index,the real GDP in 2005 is:

A)$9,150.
B)$8,500.
C)$8,600.
D)$9,025.
E)$8,475.

Question 44

Nominal gross national product is defined as:

A)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at current prices.
B)the value of all goods and services produced by an economy,within its borders over a period of time,at current prices.
C)the value of all goods produced by an economy,within its borders,over a period of time,at current prices.
D)the value of all goods and services produced by an economy,within its borders,over a period of time,at base-year prices.
E)the value of all goods produced by an economy,within its borders,over a period of time,at base-year prices.

Question 45

If we calculate the real GDP using the initial period's prices,we are using a __________ index.If,instead,we use the final period's prices,we are using a __________ index.

A)Paasche;chain-weighted
B)Laspeyres;chain-weighted
C)Laspeyres;Paasche
D)Paasche;Laspeyres
E)chain-weighted;Paasche

Question 46

Nominal gross domestic product is defined as:

A)the value of all goods and services produced by an economy,within its borders,over a period of time,at base-year prices.
B)the value of all goods produced by an economy,within its borders,over a period of time,at current prices.
C)the value of all goods and services produced by an economy,within its borders,over a period of time,at current prices.
D)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at current prices.
E)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at base-year prices.

Question 47

The percent change in the nominal GDP is given as:

A)percent change in the price level + percent change in Real GDP.
B)percent change in the price level - percent change in Real GDP.
C)percent change in the price level $\times$ percent change in Real GDP.
D)percent change in the price level ÷ percent change in Real GDP.
E)price level $\times$ percent change in Real GDP.

Question 48

The chain-weighted measure of real GDP uses prices from:

A)a constant base year.
B)a constantly changing base year.
C)a base year that changes every five years.
D)a base year that changes every ten years.
E)none of the above

Question 49

Consider Table 2.3.Using the Laspeyres index,inflation between 2004 and 2005 was about:

A)0 percent.
B)5 percent.
C)1 percent.
D)6 percent.
E)Not enough information is given.

Question 50

If the percent change in the price level is __________ than the percent change in __________,__________.

A)smaller;nominal GDP;real GDP shrinks
B)greater;nominal GDP;real GDP shrinks
C)greater;real GDP;nominal GDP shrinks
D)greater;real GDP;nominal GDP stays the same
E)Not enough information is given.

Question 51

Real gross national product is defined as:

A)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at base-year prices.
B)the value of all goods and services produced by an economy's citizens,regardless of where they live,over a period of time,at current prices.
C)the value of all goods and services produced by an economy,within its borders,over a period of time,at current prices.
D)the value of all goods produced by an economy,within its borders,over a period of time,at current prices.
E)the value of all goods and services produced by an economy,within its borders,over a period of time,at base-year prices.

Question 52

Consider Table 2.3.Using the Paasche index,real GDP in 2004 is:

A)$8,475.
B)$8,500.
C)$8,600.
D)$9,150.
E)$8,875.

Question 53

Suppose we calculate the percent change in real GDP from year 1 to year 2 using both the Laspeyres and the Paasche indices.With the Laspeyres index we get 12 percent and with the Paasche index we get 9 percent.The chain-weighted growth of real GDP is:

A)1.5 percent.
B)9.75 percent.
C)1.33 percent.
D)9.5 percent.
E)10.5 percent.

Question 54

If NGDP is nominal GDP and RGDP is real GDP,which of the following can be used to calculate inflation?

A)percent change in NGDP + percent change in RGDP
B)percent change in NGDP - percent change in RGDP
C)percent change in NGDP $\times$ percent change in RGDP
D)percent change in RGDP + percent change in NGDP
E)percent change in RGDP - percent change in NGDP

Question 55

Consider Table 2.3.Using the Laspeyres index,the percent change in nominal GDP was about:

A)5 percent.
B)1 percent.
C)6 percent.
D)0 percent.
E)Not enough information is given.

Question 56

Consider Table 2.3.Using the Laspeyres index,the real GDP in 2004 is:

A)$8,900.
B)$8,500.
C)$1,500.
D)$15,500.
E)$9,150.

Question 57

Consider Table 2.3.Using the Laspeyres index,the real GDP in 2005 is:

A)$9,025.
B)$8,500.
C)$8,600.
D)$9,150.
E)$8,475.

Question 58

If NGDP is nominal GDP and P is the price level,which of the following can be used to calculate the growth of the real GDP?

A)percent change in NGDP - percent change in P
B)percent change in NGDP + percent change in P
C)percent change in NGDP $\times$ percent change in P
D)percent change in P + percent change in NGDP
E)percent change in P - percent change in NGDP

Question 59

Consider Table 2.3.Using the Laspeyres index,the percent change in real GDP was about:

A)6 percent.
B)5 percent.
C)0 percent.
D)1 percent.
E)Not enough information is given.

Question 60

If the nominal GDP rises by 3 percent and the price level rises by 5 percent,then the real GDP __________ by __________.

A)rises;8 percent
B)falls;8 percent
C)rises;2 percent
D)falls;2 percent
E)none of the above

Question 61

Consider the data in Table 2.4.When we convert the Eurozone's nominal GDP into dollars but do not adjust for price differences,the U.S.economy is about __________ times __________ than the Eurozone economy.

A)1.22;smaller
B)1.35;smaller
C)1.35;bigger
D)1.22;bigger
E)Not enough information is given.

Question 62

The largest GDP expenditure share historically has been government expenditure.

Question 63

The value added for a good produced is equal to the value of the firm's output plus the value of the intermediate goods used to produce that output.

Question 64

Which macroeconomic variables has the text not yet discussed in much detail?

A)nominal GDP
B)real GDP
C)GDP deflator
D)all of the above
E)none of the above

Question 65

According to the expenditure approach to GDP,investment expenditures include purchases of residential housing.

Question 66

To get a more accurate view of the size of countries' economies,we first need to convert each country's GDP to the dollar using __________ and then adjust for __________.

A)the interest rate;the exchange rate
B)the exchange rate;price level differences
C)price level differences;the interest rate
D)the exchange rate;fiscal policy
E)fiscal policy;the exchange rate

Question 67

If we want to calculate the Mexican real GDP in U.S.dollars but adjusted for prices,we use the following:

A)
B)
C)
D)
E)none of the above

Question 68

According to the income approach to GDP,the largest portion of GDP is compensation to employees.

Question 69

Consider the data in Table 2.4.The value of the Eurozone nominal GDP in U.S.dollars adjusted for price differences is:

A)$6,441 billion.
B)$9,304 billion.
C)$10,886 billion.
D)$7,536 billion.
E)$9,797 billion.

Question 70

According to the income approach to GDP,the largest portion of GDP is net operating surplus.

Question 71

If the nominal GDP rises by 6 percent and the price level rises by 3 percent,then the real GDP __________ by __________.

A)falls;3 percent
B)rises;9 percent
C)rises;3 percent
D)falls;9 percent
E)none of the above

Question 72

According to the expenditure approach to GDP,household expenditures include purchases of residential housing.

Question 73

Consider the data in Table 2.4.When we convert the Eurozone's nominal GDP into dollars and adjust for price differences,the U.S.economy is about __________ times __________ than the Eurozone economy.

A)1.35;smaller
B)1.35;bigger
C)1.22;bigger
D)1.22;smaller
E)Not enough information is given.

Question 74

Consider the data in Table 2.4.The value of Eurozone nominal GDP in U.S.dollars is:

A)$9,797 billion.
B)$9,304 billion.
C)$10,886 billion.
D)$7,536 billion.
E)$6,441 billion.

Question 75

Which macroeconomic variables has the text not yet discussed in much detail?

A)the unemployment rate
B)interest rates
C)exchange rates
D)all of the above
E)none of the above

Question 76

Nominal GDP means that the value of all goods and services is measured in __________ prices.

A)average
B)last year's
C)the base year's
D)current
E)constant

Question 77

If we want to calculate the U.S.real GDP in Mexican pesos,we would use the following:

A)
B)
C)
D)
E)none of the above

Question 78

Define E = $/£ as the dollar/pound exchange rate and
As the United Kingdom's nominal GDP;then
,the United Kingdom's nominal GDP in dollars,is given by:

A) .
B) .
C) .
D) .
E)none of the above

Question 79

In the income approach to GDP,fixed capital depreciation is defined as the after-tax profits of a firm.

Question 80

In 2005,consumption expenditures accounted for about 70 percent of the total GDP.