Deck 13: Measuring an Economys Performance

Question 1

Which of the following will NOT be counted in the U.S GDP for 2017?

A) the value of a car manufactured in Detroit in 2017 and exported to Canada
B) the value of a car manufactured in Detroit in 2017 and sold in 2018
C) the value of a car manufactured in Detroit in 2016 and sold in 2017
D) the value of a car manufactured in Detroit in 2017 and bought by someone living in California

Answer 1

C

Question 2

Final goods and services are goods and services that are:

A) purchased by the government.
B) purchased by the ultimate consumers.
C) exported out of the country.
D) purchased by firms to produce more goods.

Answer 2

B

Question 3

Which of the following is NOT a final good?

A) bread bought by a deli to make sandwiches
B) a sandwich bought by a customer at a deli
C) a new car purchased by a student to commute to college campus
D) a new laptop purchased by a college student to work on assignments

Answer 3

A

Question 4

Which of the following is NOT included in the calculation of a country's GDP?

A) consumer spending on final goods and services
B) government spending on the military
C) spending on new machinery by firms
D) spending on intermediate goods by firms

Question 5

All the following will be included in a country's GDP EXCEPT:

A) the government's spending on public education.
B) households' purchases of government bonds for investment.
C) firms's purchases of new machinery to carry out more production.
D) other countries' purchases of goods and services produced in the country.

Question 6

Which of the following will NOT be included in the U.S. GDP?

A) social security payments made by the federal government to U.S citizens
B) the purchase of new military equipment by the federal government for the U.S military
C) spending by the federal government to maintain national parks
D) spending by the local government on public schools

Question 7

Suppose that a baker buys flour from a store to bake a wedding cake that has been sold to a couple getting married. In this case, the flour is an example of _____ good, and the cake is an example of _____ good.

A) an intermediate; a capital
B) a final; an intermediate
C) a capital; an intermediate
D) an intermediate; a final

Question 8

Suppose that U.S Metals sells steel to U.S Auto, which uses the steel to manufacture a car that is sold to a college student for personal use. In this case, steel is an example of _____ good, and the car is an example of _____ good.

A) a capital; an intermediate
B) an intermediate; a final
C) a final; an intermediate
D) an intermediate; a capital

Question 9

Which one of the following categories of expenditures is included in a country's GDP for a given year?

A) spending by consumers on final goods and services produced in the country during that year
B) spending by consumers on used goods purchased during that year
C) spending by firms on intermediate goods and services during that year
D) spending on imported goods and services during that year

Question 10

Ford Motors produces a $20,000 car in Detroit in November 2017. This car is sold to a consumer in January 2018 for $20,000, who in turn sells it to a college student in June 2018 for $18,000. Because of these transactions, the 2017 GDP increased by _____, and the 2018 GDP increased by:

A) zero; $38,000.
B) zero; $20,000.
C) $20,000; $18,000.
D) $20,000; zero.

Question 11

Dell Computers manufactures a $1,000 laptop in December 2017. This laptop is sold to a consumer in March 2018 for $1,000, who in turn sells it on eBay in August 2018 for $800. Because of these transactions, the 2017 GDP increases by _____, and the 2018 GDP increases by:

A) zero; $1,000.
B) $1,000; zero.
C) $1,000; $800.
D) zero; $1,800.

Question 12

Suppose that a country exports $500 billion worth of goods and services and imports $200 billion worth of goods during a given year. These transactions would result in a _____ in the country's GDP.

A) $300 billion increase
B) $300 billion decrease
C) $500 billion increase
D) $200 billion decrease

Question 13

To avoid the problem of _____, the value of ______ goods must be excluded when country's GDP is being calculated.

A) inflation; capital
B) double counting; durable
C) double counting; intermediate
D) inflation; intermediate

Question 14

If the net exports of a country are positive, then we can conclude that its imports are:

A) greater than exports.
B) less than exports.
C) equal to exports.
D) zero.

Question 15

If the net exports of a country are zero, then we can conclude that exports:

A) and imports are zero.
B) are greater than imports.
C) are less than imports.
D) are equal to imports.

Question 16

Which one of the following is included in calculating the GDP?

A) net exports
B) purchase of stocks
C) value of intermediate goods
D) unemployment benefits

Question 17

Real GDP is the value of GDP obtained after eliminating the:

A) value of intermediate goods.
B) value of exports.
C) value of imports.
D) effect of a change in prices.

Question 18

Which one of the following statements is NOT true?

A) Nominal GDP can change because of a change in production and prices.
B) Real GDP can change because of a change in production and prices.
C) Nominal GDP does not include the value of intermediate goods.
D) Real GDP does not include the value of intermediate goods.

Question 19

Real GDP per capita refers to the ratio of real GDP to the total _____ in the economy.

A) capital
B) population
C) labor force
D) exports

Question 20

If the nominal GDP of a country increases and the real GDP remains constant, then we can conclude that:

A) both prices and production increased.
B) only production increased while prices remained constant.
C) only prices increased while production remained constant.
D) both prices and production remained constant.

Question 21

If the production of a country remains unchanged between two years and the price level increases, then the _____ GDP must have:

A) nominal; decreased.
B) nominal; remain unchanged.
C) real; decreased.
D) real; remain unchanged.

Question 22

Suppose that the nominal GDP of a country increases and the real GDP remains unchanged. If so, then the production must have _____, and the price level must have:

A) increased; remained unchanged.
B) decreased; remained unchanged.
C) remained unchanged; decreased.
D) remain unchanged; increased.

Question 23

If both the real and nominal GDP of a country increase, then we can be sure that:

A) production must have increased.
B) prices must have increased.
C) production must have decreased.
D) prices must have decreased.

Question 24

If both the real and nominal GDP of a country decrease, then we can be sure that:

A) production must have increased.
B) prices must have increased.
C) production must have decreased.
D) prices must have decreased.

Question 25

If the nominal wage of a worker increases by 10 percent and her purchasing power increases by 5 percent, then we can conclude that the price level must have _____ than 10 percent.

A) increased by more
B) increased by less
C) decreased by more
D) decreased by less

Question 26

If the nominal wage of a worker increases by 10 percent and her purchasing power decreases by 5 percent, then we can conclude that the price level must have _____ than 10 percent.

A) increased by more
B) increased by less
C) decreased by more
D) decreased by less

Question 27

Which one of the following will NOT be included in the GDP of a country?

A) the value of a car manufactured in the country but exported abroad
B) volunteer work done by students at their college campus
C) the amount spent by firms on replacing worn-out machines
D) the amount spent by the federal government on hurricane relief

Question 28

Which one of the following will be included in the GDP of a country?

A) the value of volunteer work done by students on their college campus
B) the value of leisure time enjoyed by the citizens of the country
C) the value of a car manufactured in the country but held as inventory
D) the value of goods and services transacted in the underground economy

Question 29

The alteration between expansions and contractions in the economy's level of output is known as:

A) inflation.
B) the business cycle.
C) deflation.
D) depression.

Question 30

Which of the following statements is true?

A) If two countries have the same real GDP, they also will have the same real GDP per capita.
B) If two countries have the same real GDP, then the country with the higher population will have the higher real GDP per capita.
C) If two countries have the same real GDP, then the country with the lower population will have higher real GDP per capita.
D) If one country has a higher real GDP than another, then it also will have a higher real GDP per capita.

Question 31

The real GDP of the country of Stewarton is $500 million, and it has a population of 2 million people. The real GDP per capita of Stewarton is:

A) $100.
B) $150.
C) $200.
D) $250.

Question 32

If both the real GDP and nominal GDP increase by 10 percent, then we can conclude that the price level _____ and the output:

A) remains unchanged; decreases.
B) remains unchanged; increases.
C) increases; remains unchanged.
D) decreases; remains unchanged.

Question 33

Suppose that the nominal GDP of a country in 2017 is $10 trillion. The real GDP of the country increased by 20 percent between 2017 and 2018, and the price level increased by 10 percent between 2017 and 2018. What is the nominal GDP of the country in 2018?

A) $12 trillion
B) $13 trillion
C) $12.2 trillion
D) $13.2 trillion

Question 34

Suppose that the nominal GDP of a country in 2017 is $10 trillion. The real GDP of the country remains constant between 2017 and 2018, but the price level increases by 20 percent. What is the nominal GDP of the country in 2018?

A) $8 trillion
B) $10 trillion
C) $12 trillion
D) $13 trillion

Question 35

If both real GDP and nominal GDP remain constant between two years, then it can be concluded that:

A) neither price level nor output changed.
B) both output and price level increased by the same percentage.
C) both output and price level decreased by the same percentage.
D) output increased and price level decreased by the same percentage.

Question 36

Which of the following measures of economic activity for a country does NOT capture the overall quality of life of its citizens?

A) net national welfare
B) net domestic product
C) the Human Development Index
D) the Genuine Progress Indicator

Question 37

If the real GDP per capita of a country increases over time, then it can be concluded that the:

A) real GDP of the country must be increasing.
B) population of the country must be increasing.
C) real GDP of the country must be increasing faster than the population.
D) population of the country must be increasing faster than the real GDP.

Question 38

If the real GDP of a country increases and the nominal GDP of a country falls, then it can be concluded that the output of the country must have_____ and the price level must have:

A) increased; increased.
B) increased; decreased.
C) decreased; increased.
D) decreased; decreased.

Question 39

During periods of rapid inflation, people hold less cash and make more frequent trips to banks and ATM machines. The costs associated with this are an example of _____ costs.

A) menu
B) fixed
C) variable
D) shoe-leather

Question 40

The costs associated with people who are trying to minimize the erosive effects of inflation on the value of money are known as _____ costs.

A) shoe-leather
B) menu
C) marginal
D) fixed

Question 41

The costs associated with constantly revising the prices of goods and services as a result of inflation are known as _____ costs.

A) shoe-leather
B) variable
C) menu
D) fixed

Question 42

Suppose that a grocery store has to constantly keep changing the list price of all the products that it sells because of inflation. The costs that are associated with this are known as _____ costs.

A) menu
B) sunk
C) variable
D) shoe-leather

Question 43

_____ are two types of transaction costs that are associated with inflation.

A) Shoe-leather costs and sunk costs
B) Menu costs and sunk costs
C) Sunk costs and variable costs
D) Menu costs and shoe-leather costs

Question 44

Suppose that the Consumer Price Index (CPI) in 2017 is 100 and in 2018 is 108. The inflation rate between 2017 and 2018 is _____ percent.

A) 10
B) 8
C) 6
D) 4

Question 45

If the CPI in 2017 is 100 and the inflation rate between 2017 and 2018 is 6 percent, then the CPI for 2018 is

A) 102.
B) 104.
C) 106.
D) 108.

Question 46

Suppose that the cost of a representative basket used to calculate the Consumer Price Index (CPI) is $500 in the base year 2000. Further, suppose that the cost of the same basket is $525 in 2017. The CPI for the base year is _____, and the CPI for 2017 is:

A) 100; 100.
B) 105; 100.
C) 100; 105.
D) 105; 105.

Question 47

Suppose that the cost of a representative basket used to calculate the Consumer Price Index (CPI) is $500 in the base year 2000. Further, suppose that the cost of the same basket is $525 in 2017. The CPI for 2017 is _____, and the inflation rate between 2000 and 2017 is _____ percent.

A) 100; 5
B) 105; 5
C) 125; 25
D) 100; 25

Question 48

Suppose that the cost of a representative basket used to calculate the Consumer Price Index (CPI) is $500 in the base year 2000 and the CPI in the year 2017 is 110. The cost of the representative basket in 2017 is _____, and the rate of inflation between 2000 and 2017 is _____ percent.

A) 110; 10
B) 550; 5
C) 500; 10
D) 550; 10

Question 49

The Consumer Price Index (CPI) in January 2017 was 244.02 and the CPI in January 2018 was 249.24. Therefore, the rate of inflation between January 2017-January 2018 was _____ percent.

A) 5.22
B) 2.14
C) 6.31
D) 4.86

Question 50

Suppose that the Consumer Price Index (CPI) in the country of Stewarton on May 2015 was 110 and on May 2016 was 115. The rate of inflation in Stewarton between May 2015 and May 2016 was _____ percent.

A) 5.5
B) 5
C) 4.5
D) 4

Question 51

The _____ is responsible for collecting monthly data on prices and publishing the data on Consumer Price Index (CPI).

A) Federal Reserve
B) Congressional Budget Office
C) U.S Treasury
D) Bureau of Labor Statistics

Question 52

Suppose that the nominal GDP of a country is $10 trillion in 2017. Further, the Consumer Price Index (CPI) in 2017 is 125. If the base year is 2000, then real GDP of the country in 2017 in base year prices is _____ trillion.

A) $4
B) $6
C) $8
D) $10

Question 53

Suppose that the price of a slice of pizza in New York City was 30 cents in 1970. Further, the Consumer Price Index (CPI) in 1970 was 75 and in 2018 is 250. The price of the slice of pizza in 2018 dollars is:

A) 50 cents.
B) 75 cents.
C) $1.00.
D) $1.25.

Question 54

Suppose that the price of a slice of pizza in New York City in 2017 was $3. Further, the Consumer Price Index (CPI) in 1970 was 75 and in 2017 was 250. The price of the slice of pizza in 1970 dollars is _____ cents.

A) 30
B) 50
C) 70
D) 90

Question 55

Suppose that the cost of a representative basket used to calculate the Consumer Price Index (CPI) was $1,000 in the base year 2000. The same basket cost $1,100 in 2016 and $1,150 in 2017. Therefore, the rate of inflation between 2016 and 2017 is _____ percent.

A) 4
B) 4.5
C) 5
D) 15

Question 56

The high point of a business cycle is called _____, and the low point of a business cycle is called a:

A) an expansion; contraction.
B) an expansion; trough.
C) a peak; contraction.
D) a peak; trough.

Question 57

The nominal GDP and the Consumer Price Index (CPI) for the country of Stewarton in 2017 were $15 trillion and 125, respectively. In 2012, the CPI for Stewarton was 120. Therefore, the real GDP of Stewarton in 2012 dollars is _____ trillion.

A) $16.2
B) $15.2
C) $14.4
D) $14.2

Question 58

If the Consumer Price Index (CPI) in January 2017 was 243 and the rate of inflation between January 2017 and January 2018 was 10 percent, then the CPI in January 2018 was:

A) 253.
B) 260.7.
C) 267.3.
D) 270.4.

Question 59

Which of the following statements is NOT true?

A) Inflation measures the rate of change in the overall price level in the economy.
B) If inflation is higher than expected, then the borrowers who owe a fixed amount of money lose.
C) If inflation is higher than the growth of income, then the workers lose.
D) Menu costs are an example of the transaction costs that are associated with inflation.

Question 60

Which of the following statements is NOT true?

A) The unemployment rate is the percentage of the total population that is unemployed.
B) The official unemployment rate does not account for discouraged workers.
C) The unemployment rate does not account for underemployed or part-time workers.
D) To be considered as part of labor force, one must be 16 years or older.

Question 61

If an economy has a labor force of 1,000 workers out of which 900 are employed, then the unemployment rate of the economy is _____ percent.

A) 90
B) 50
C) 20
D) 10

Question 62

An economy has a labor force of 1,000. The total number of employed workers in the economy is 900, and the number of discouraged workers in the economy is 50. The unemployment rate in the economy in this case is _____ percent.

A) 5
B) 10
C) 15
D) 20

Question 63

The type of unemployment that occurs as a result of the time that it takes to match workers with jobs is known as _____ unemployment.

A) frictional
B) structural
C) cyclical
D) seasonal

Question 64

Full employment refers to the level of employment when there is no _____ unemployment.

A) structural
B) cyclical
C) seasonal
D) frictional

Question 65

The rate of unemployment when there is full employment in the economy is known as _____ unemployment.

A) cyclical
B) the natural rate of
C) seasonal
D) structural

Question 66

Alex is a skilled furniture maker, but there are no jobs available in the economy that utilize his furniture-making skills. If Alex remains unemployed, then in which category of unemployment will he fall under?

A) frictional unemployment
B) seasonal unemployment
C) cyclical unemployment
D) structural unemployment

Question 67

Nancy lives in a beach town where there is a lot of demand for workers between April and September. During the other months, Nancy remains unemployed. Therefore, during those months Nancy will be categorized as _____ unemployed.

A) structurally
B) frictionally
C) seasonally
D) cyclically

Question 68

_____ unemployment is caused by contractions in the economy.

A) Seasonal
B) Structural
C) Frictional
D) Cyclical

Question 69

The unemployment that results because of a mismatch between the skills that workers have and the skills that employers seek is known as _____ unemployment.

A) the natural rate of
B) structural
C) seasonal
D) frictional

Question 70

Which of the following statements is NOT true?

A) Frictional unemployment is caused when workers and employers spend time searching for a good match.
B) Structural unemployment occurs because of a mismatch between the skills that workers have and the skills that employers seek.
C) Full employment is the level of employment that occurs when there is no structural unemployment.
D) The unemployment rate when there is full employment is called the natural rate of unemployment.

Question 71

The economy of the country of Stewarton has a structural unemployment rate of 2 percent, a frictional unemployment rate of 3 percent, and a cyclical unemployment rate of 2 percent (because the economy is in a recession). If there is no seasonal unemployment, then what is the natural rate of unemployment for Stewarton?

A) 3 percent
B) 4 percent
C) 5 percent
D) 7 percent

Question 72

Which of the following statements is NOT true?

A) To be part of the labor force, an individual must be 16 years or older.
B) Discouraged workers are part of the labor force.
C) Part-time workers are part of the labor force.
D) The unemployment rate is the percentage of the labor force that is unemployed.

Question 73

Which of the following statements is NOT true?

A) Discouraged workers are a part of the labor force.
B) Part-time workers who want to work full-time are part of the labor force.
C) To be considered a part of the labor force, an individual must be 16 years or older.
D) The unemployment rate is the percentage of the labor force that is unemployed.

Question 74

During a recession, an economy experiences an increase in the rate of _____ unemployment.

A) frictional
B) structural
C) cyclical
D) seasonal

Question 75

Carlos is a fresh college graduate who is looking to find employment in advertising. He is currently interviewing with three firms but does not yet have an offer. Carlos will be counted in the category of _____ unemployment.

A) structural
B) frictional
C) cyclical
D) seasonal

Question 76

An economy has 1,050 employed, 150 unemployed, and 150 discouraged workers. The unemployment rate for the economy is _____ percent.

A) 10
B) 12.5
C) 15
D) 17.5

Question 77

An economy has an unemployment rate of 10 percent and a total labor force of 2,000. Therefore, the economy has _____ employed workers and _____ unemployed workers.

A) 1,500; 500
B) 1,600; 400
C) 1,700; 300
D) 1,800; 200

Question 78

If the economy is at full employment, then there is no:

A) unemployment.
B) frictional unemployment.
C) structural unemployment.
D) cyclical unemployment.

Question 79

If the total labor force of an economy is 1,000 and 40 of these people are unemployed, then the unemployment rate of the economy is _____ percent.

A) 40
B) 10
C) 5
D) 4

Question 80

Which one of the following will benefit from an increase in the rate of inflation?

A) A worker at a manufacturing plant receives a fixed nominal income.
B) A lender has lent money to a firm at a fixed nominal interest rate.
C) A firm has borrowed money from a bank and must pay back a fixed nominal interest rate.
D) A person owns bonds that pay a fixed nominal interest.