Deck 6: Introduction to Macroeconomics and Gross Domestic Product

Question 1

GDP is a good, but not the best, measure of:

A) the percentage change in the overall level of prices.
B) income inequality.
C) changes in average living standards.
D) environmental quality.
E) the cost of living.

Answer 1

changes in average living standards.

Question 2

Consider the following data to answer the next questions:
If these are the only five countries in the world, then country B produces _______ of world GDP.

A) 50%
B) 25%
C) 20%
D) 62.5%
E) 30%

Answer 2

25%

Question 3

Which of the following is a topic of macroeconomics?

A) the income earned by a person
B) the profit earned by a firm
C) production in the computer industry
D) the price of ice cream
E) the number of people in the economy with no jobs

Answer 3

the number of people in the economy with no jobs

Question 4

Joe owns a crab shack. When he produces and sells ________ meals in a given day, his income earned will ________.

A) more; stay the same
B) more; increase
C) more; decrease
D) fewer; stay the same
E) fewer; increase

Question 5

In macroeconomics:

A) output and income are very different concepts.
B) output and income are essentially identical.
C) output is less than income.
D) output is greater than income.
E) income is measured in dollars but output is not.

Question 6

Consider the following data to answer the next questions:
Which two countries have the same average living standard?

A) B and C
B) C and D
C) A and B
D) C and E
E) A and E

Question 7

When GDP increases, national income ________ and national output __________.

A) is unaffected; is unaffected
B) increases; increases
C) decreases; decreases
D) increases; is unaffected
E) is unaffected; decreases

Question 8

To determine living standards for the average person, we calculate:

A) GDP.
B) per capita GDP.
C) the average level of prices in the country.
D) the length of time the average person is unemployed.
E) the growth rate of GDP.

Question 9

Which of the following is a topic of microeconomics?

A) the level of national income
B) the level of employment in the country
C) the prices of all goods in the country
D) the profit of firms in the banking industry
E) the level of national output

Question 10

Country A has a GDP of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true?

A) The value of output is higher in country A.
B) The value of income is higher in country A.
C) The value of GDP per capita is higher in country A.
D) The value of GDP per capita is higher in country B.
E) The average living standard is higher in country B.

Question 11

The business cycle measures:

A) fluctuations in the long-run trend growth rate of GDP.
B) fluctuations in the profit of businesses.
C) fluctuations in consumption.
D) short-run fluctuations in economic activity.
E) fluctuations in the average tax rate paid by businesses.

Question 12

GDP is best defined as the total market value of all:

A) goods and services produced within a country within a given time.
B) final goods and services produced within a country within a given time.
C) services produced within a country within a given time.
D) goods produced within a country within a given time.
E) final goods produced within a country within a given time.

Question 13

Macroeconomics is the study of:

A) individual markets.
B) the behavior of the firm.
C) the behavior of the consumer.
D) changes in national income.
E) changes in commodity prices.

Question 14

Consider the following data to answer the next questions:
Although countries C and D have the same level of GDP, country C has a level of per capita GDP that is ________ times that of country D.

A) two
B) three
C) four
D) five
E) ten

Question 15

Consider the following data to answer the next questions:
Which country has the highest level of GDP per capita?

A) A
B) B
C) C
D) D
E) E

Question 16

Consider the following data to answer the next questions:
Which country has the lowest average living standard?

A) A
B) B
C) C
D) D
E) E

Question 17

The best measure of the average living standards of people in the country is:

A) the dollar value of final goods and services produced.
B) the dollar value of final goods and services produced per person.
C) the amount of final goods and services produced.
D) the amount of final goods and services produced per person.
E) the average price of final goods and services produced.

Question 18

The long run average growth rate of real GDP in the U.S. economy is about:

A) 2%.
B) 3%.
C) 5%.
D) 10%.
E) 1%.

Question 19

To evaluate the change in average living standards over time, it is best to use:

A) the inflation rate.
B) GDP.
C) GDP per capita.
D) real GDP per capita.
E) real GDP.

Question 20

GDP is most often measured by:

A) the year.
B) the month.
C) the week.
D) the day.
E) the quarter.

Question 21

To determine a value for GDP, you would:

A) add up the quantities of the final goods and services produced.
B) add up the dollar value of the final goods and services produced.
C) add up the dollar value of the final goods and services produced minus the dollar value of the intermediate goods and services produced.
D) add up the dollar value of all goods and services produced.
E) add up the quantities of all goods and services produced.

Question 22

Consider the following figure to answer the next questions:
In which year was the economy growing at the long-run average growth rate?

A) 2001
B) 2004
C) 2005
D) 2009
E) 2013

Question 23

An accurate measure of GDP is derived by adding:

A) the dollar value of all goods and services produced.
B) the value added at each stage of the production process.
C) the value of all materials used to make the final goods and services.
D) the profit earned from the sale of the final goods and services.
E) the value of the intermediate goods used to produce the final goods and services.

Question 24

Which of the following is a service?

A) a visit to your local beach
B) a visit to your doctor
C) a trip to the store to buy a T-shirt
D) a trip to your favorite restaurant for dinner
E) having to write a check to pay your taxes

Question 25

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called:

A) business cycles.
B) economic contractions.
C) economic expansions.
D) economic peaks.
E) economic troughs.

Question 26

The percent change in the overall level of prices in the economy is called:

A) the inflation rate.
B) the growth rate of GDP.
C) GDP.
D) GDP per capita.
E) the interest rate.

Question 27

Consider the following figure to answer the next questions:
During which year was average income climbing the most rapidly?

A) 2000
B) 2001
C) 2004
D) 2005
E) 2008

Question 28

Consider the following figure to answer the next questions:
In which year was it most likely the most difficult to find a job?

A) 2000
B) 2001
C) 2004
D) 2005
E) 2008

Question 29

For the next questions, suppose a country has the following quarterly growth data for the last three years:
The country's long-run average growth rate is 3%. How many quarters were spent in recession?

A) six
B) five
C) four
D) three
E) two

Question 30

The phase of the business cycle where the economy is growing faster than usual is called:

A) an economic trough.
B) the long-run trend of GDP.
C) an economic expansion.
D) an economic contraction.
E) an economic peak.

Question 31

Which of the following represents the largest share of U.S. GDP?

A) services
B) agricultural production
C) the production of manufactured goods
D) the production of physical goods
E) the production of capital goods

Question 32

The contraction phase of a business cycle is best described as:

A) the time elapsed from a trough to a peak.
B) the time elapsed from a peak to a trough.
C) the time elapsed from a peak to a peak.
D) the time elapsed from a trough to a trough.
E) the time spent producing below the long-run trend of GDP.

Question 33

Consider the following data, which shows the quantities and prices of two goods produced in the economy, to answer the next three questions:
The market value of cell phones is:

A) $5 million.
B) $100 million.
C) $500 million.
D) $20 million.
E) $750 million.

Question 34

Consider the following figure to answer the next questions:
During which period was the economy in an expansion?

A) 2005-2009
B) 2000-2004
C) 2009-2013
D) 2004-2008
E) 2000-2012

Question 35

For the next questions, suppose a country has the following quarterly growth data for the last three years:
The country's long-run average growth rate is 3%. In how many of these quarters did GDP contract?

A) two
B) six
C) five
D) four
E) three

Question 36

Consider the following data, which shows the quantities and prices of two goods produced in the economy, to answer the next three questions:
The market value of pizza is:

A) $25 million.
B) $10 million.
C) $2.5 million.
D) $250 million.
E) $750 million.

Question 37

Assuming these are the only two goods produced in the economy, what is the value of the GDP?

A) $110 million
B) $750 million
C) $2 million
D) $250 million
E) $500 million

Question 38

The expansion phase of a business cycle is best described as:

A) the time elapsed from a trough to a peak.
B) the time elapsed from a peak to a trough.
C) the time elapsed from a peak to a peak.
D) the time elapsed from a trough to a trough.
E) the time spent producing above the long-run trend of GDP.

Question 39

The phase of the business cycle where the economy is growing slower than usual is called:

A) an economic trough.
B) the long-run trend of GDP.
C) an economic expansion.
D) an economic contraction.
E) an economic peak.

Question 40

Consider the following figure to answer the next questions:
During which period was the economy in a contraction?

A) 2001-2005
B) 2008-2009
C) 2004-2008
D) 2005-2008
E) 2000-2004

Question 41

Company X sells paper to company Y for $100,000. Company Y uses the paper to make textbooks, selling them to consumers for $500,000. The total contribution to GDP is:

A) $500,000.
B) $400,000.
C) $600,000.
D) $550,000.
E) $450,000.

Question 42

You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $40. When you sell your game to the store, how is this included in GDP?

A) as consumption
B) as investment
C) as government purchases
D) as net exports
E) This does not count in GDP.

Question 43

Farmer John produces oranges. He sells half of his inventory to people at his roadside stand for $20,000 and sells the other half to Tropicali for $15,000. Tropicali uses the oranges to make orange juice, which it sells to consumers for $25,000. The impact of these transactions on GDP is:

A) $20,000.
B) $45,000.
C) $60,000.
D) $30,000.
E) $25,000.

Question 44

A company produces a computer. They pay $100 for the keyboard and outer case, $200 for the internal hardware, and $100 for the software. They sell it to a consumer for $500. The contribution to GDP is:

A) $400.
B) $500.
C) $100.
D) $900.
E) $800.

Question 45

When people in the United States buy clothing made in China, this counts as:

A) consumption.
B) consumption and exports.
C) consumption and imports.
D) imports.
E) investment.

Question 46

Company X sells sugar to company Y for $50,000. Company Y uses the sugar to make chocolate bars, selling them to consumers for $150,000. The total contribution to GDP is:

A) $200,000.
B) $100,000.
C) $30,000.
D) $150,000.
E) $50,000.

Question 47

Farmer Bill grows wheat and sells it to the miller for $50,000. The miller turns it into flour and sells it to the bakery for $75,000. The bakery uses the flour in the bread that it sells to people for $90,000. The total contribution to GDP is:

A) $90,000.
B) $75,000.
C) $50,000.
D) $25,000.
E) $215,000.

Question 48

Joe sells the house he has lived in for 10 years to the Smith family for $300,000. He receives $50,000 more than his original purchase price 10 years ago. Joe pays his real estate agent a 5% sales commission. This transaction will increase GDP by:

A) $0.
B) $50,000.
C) $15,000.
D) $65,000.
E) $300,000.

Question 49

The four major expenditure categories of GDP are:

A) consumption, imports, exports, and government purchases.
B) consumption, government purchases, taxes, and investment.
C) consumption, investment, government purchases, and net exports.
D) consumption, investment, government purchases, and stocks.
E) consumption, investment, taxes, and net exports.

Question 50

A doctor receives $50,000 per month from her patients (and their insurance companies) as payment for her services. Each month she buys medical supplies for $10,000 and she pays a lab $15,000 for analyzing slides. The total contribution to GDP this month is:

A) $50,000.
B) $65,000.
C) $75,000.
D) $25,000.
E) $55,000.

Question 51

To avoid double-counting when calculating GDP, it is best to:

A) count the value of goods and services produced at every stage of production.
B) count the value added at each stage of production.
C) count used goods.
D) count stocks and bonds.
E) count all goods and services purchased by consumers, firms, and the government.

Question 52

When John buys new tires for his car it _______, and when Ford buys tires to put on new cars it ____________.

A) does not count toward GDP; does not count toward GDP
B) does not count toward GDP; counts toward investment
C) counts toward consumption; counts toward investment
D) counts toward consumption; does not count toward GDP
E) counts toward investment; counts toward investment

Question 53

Bob sells his car to Stan's Used Car Lot for $5,000. Stan's Used Car Lot sells the car to Bill for $5,500. This transaction contributes ________ to GDP.

A) nothing
B) $500
C) $5,500
D) $5,000
E) $10,500

Question 54

An example of an intermediate good would be:

A) lumber used by a consumer to build a fence in their yard.
B) pencils purchased by a restaurant to be used to take orders.
C) a new stove purchased by a restaurant.
D) an airplane purchased by the government.
E) Social Security payments made by the government.

Question 55

When George buys a new computer for his business, it is included in GDP as _______, and when he buys a new computer for use at home, it counts as ________.

A) investment; investment
B) consumption; consumption
C) consumption; investment
D) investment; consumption
E) investment; services

Question 56

You bought stock in 2010 for $100 and you sold it in 2012 for $200. You used a broker to sell the stock for you, and he charged you $20. This transaction contributed ________ to GDP.

A) $200
B) $20
C) $220
D) $100
E) $120

Question 57

Bob wins the lottery. This ________ included in ________ category of GDP.

A) is; the consumption
B) is; the investment
C) is; the government purchases
D) is; the net export
E) is not; any

Question 58

Goods that firms repackage with other goods for sale at a later stage are:

A) inventory.
B) final goods.
C) intermediate goods.
D) used goods.
E) value-added goods.

Question 59

You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $50. This adds _____ to GDP when the store sells the game to the consumer.

A) nothing
B) $30
C) $50
D) $20
E) $25

Question 60

Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to GDP is:

A) $240,000.
B) $180,000.
C) $60,000.
D) $120,000.
E) $30,000.

Question 61

Hollister Co. stocks up on T-shirts for the holiday season. This inventory is included in the _______ category of GDP.

A) consumption
B) investment
C) government purchases
D) net exports
E) services

Question 62

The investment spending category of GDP does NOT include:

A) purchases of new equipment.
B) purchases of stocks and bonds.
C) purchases of new homes.
D) the value of changes to business inventory.
E) purchases of computer software.

Question 63

When an unemployed worker receives a payment from the government as a result of being unemployed, it is:

A) included in the consumption category of GDP.
B) included in the investment category of GDP.
C) included in the government purchases category of GDP.
D) included in the net export category of GDP.
E) not included in any of the expenditure categories.

Question 64

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

A) It is impossible to sell more than is produced.
B) Inventory investment must be negative.
C) The price of the chocolate must have gone up.
D) The firm must have acquired the extra 10 boxes from another company.
E) The firm sold the chocolate but must have given 10 people an IOU.

Question 65

Ford produces 100,000 cars this year and only sells 95,000. The 5,000 cars that are not sold _______ listed in ________ category of GDP.

A) are not; any
B) are; the consumption
C) are; the investment
D) are; the unsold good
E) are; the excess production

Question 66

Net exports can be defined as:

A) exports plus imports.
B) exports minus imports.
C) exports divided by imports.
D) imports minus exports.
E) imports divided by exports.

Question 67

Which of the following is included in the government purchases category of GDP?

A) Social Security payments
B) welfare payments
C) payments to people in the military
D) interest on the national debt
E) payments to unemployed workers

Question 68

The consumption category of GDP includes all purchases of final goods and services by households except:

A) new appliances.
B) new houses.
C) landscaping work.
D) new cars.
E) food.

Question 69

A computer company builds a new factory. This is included in the ________ category of GDP.

A) consumption
B) investment
C) government purchases
D) net export
E) services

Question 70

Consumption is approximately ________ of GDP.

A) 50%
B) 90%
C) 70%
D) 80%
E) 40%

Question 71

Government salaries paid to soldiers in the military are included in the ________ category of GDP.

A) consumption
B) investment
C) government purchases
D) net export
E) durable goods

Question 72

The state of Florida spends $3 million to repave highways. This is included in the ______ category of GDP.

A) consumption
B) investment
C) government purchases
D) net exports
E) services

Question 73

If real GDP equals nominal GDP, then:

A) output did not grow.
B) there was no inflation.
C) the current year is the base year.
D) the growth in output was equal to the growth in the price level.
E) the growth in output was greater than the growth in the price level.

Question 74

The sale of American-grown corn to China is included in the ________ category of GDP.

A) consumption
B) investment
C) government purchases
D) export
E) import

Question 75

Consider the following data, where GDP values are measured in millions of dollars, to answer the next questions:
What is the value of the GDP deflator in 2011? Round to the nearest decimal.

A) 54.6
B) 154.6
C) 110.0
D) 90.9
E) 112.0

Question 76

Which is the largest component of U.S. GDP?

A) consumption
B) investment
C) government purchases
D) exports
E) imports

Question 77

When you buy a new car built by Ford, it is included in the ________ category of GDP.

A) consumption
B) investment
C) government purchases
D) export
E) import

Question 78

The government purchases category of GDP includes spending by:

A) federal, state, and local government.
B) federal and state government.
C) state and local government.
D) local government only.
E) the federal government only.

Question 79

Consider the following data, where GDP values are measured in millions of dollars, to answer the next questions:
What is the value of real GDP in 2010? Round to the nearest second decimal.

A) $58,427.20 million
B) $584.27 million
C) $520.00 million
D) $445.20 million
E) $657.20 million

Question 80

The consumption category includes:

A) all purchases made by consumers.
B) all purchases of goods and services made by consumers.
C) all purchases of final goods and services made by consumers.
D) all purchases of final goods and services made by consumers except new houses.
E) all purchases of final goods and services made by consumers except new houses and new cars.