Economics, 5th Ed.: Macroeconomic Measurements, Part II: GDP and Real GDP

Macroeconomic Measurements, Part II: GDP and Real GDP

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1. Which of the following correctly describes gross domestic product (GDP)?: a. A numerical count of the quantity of total output produced domestically in a given year.
b. The average price level experienced in the domestic economy in a given year.
c. The number of unemployed people divided by the labor force.
d. The total market value of all final goods and services produced annually within a country's borders.

2. Fill in the blank: ________ is the total market value of all final goods and services produced annually by citizens of a country, no matter where in the world they reside.: a. Real GDP.
b. Total consumption expenditure.
c. GNP.
d. Domestic income.

3. Which of the following would be included in GDP but not GNP?: a. Cars produced in the U.S. by Mexican citizens.
b. Cars produced in France by U.S. citizens.
c. French wine produced in France by French winery workers.
d. California wine produced in the U.S. by U.S. winery workers.

4. A group of college students buy a pizza. Which of the following would be included in GDP from this purchase?: a. The market value of the pizza.
b. The market value of pizza plus the market value of the dough, sauce, cheese, toppings, electricity, and labor required to produce the pizza.
c. The market value of the pizza, ingredients, electricity, and labor, plus rental fee paid by the owner of the pizza restaurant for the building and equipment in which she produces her pizzas.
d. All of the above.

5. Which of the following is not included in GDP?: a. The cost of hiring someone to perform cooking, cleaning, and household maintenance services.
b. A new car bought using income earned from the sale of illegal drugs.
c. A vacation rental on the Big Sur coast of California.
d. A used car purchase.

6. Fill in the blank: If we divide a country's nominal GDP by the population in the country we get ________.: a. Per-capita nominal GDP.
b. Per-capita disposable income.
c. Per-capita national income.
d. Per-capita real GDP.

7. Which of the following correctly describes the expenditure approach to measuring GDP?: a. Consumption minus investment plus government purchases minus net exports.
b. National income minus income earned from the rest of the world plus income earned by the rest of the world plus indirect business taxes plus capital consumption allowance plus statistical discrepancy.
c. Consumption minus national income plus statistical discrepancy.
d. Consumption plus investment plus government purchases plus net exports.

8. Which of the following has the largest dollar value in the U.S.?: a. Consumption.
b. Investment.
c. Government purchases.
d. Net exports.

9. What has been the trend in U.S. nominal GDP since 1990?: a. Nominal GDP declined steadily between 1990 and 1994, and has increased ever since.
b. Nominal GDP has increased steadily since 1990.
c. Nominal GDP increased steadily from 1990 to 1994, and has declined ever since.
d. Nominal GDP declined from 1990 to 1992, and has increased steadily ever since.

10. Fill in the blank: If we can compute nominal GDP by summing expenditures, then we can also compute nominal GDP by _____________.: a. Summing the total quantity of output and ignoring prices.
b. Multiplying the total quantity of current output by past prices from a base year.
c. Summing all the taxes paid on those expenditures.
d. Summing the income earned by the different resources or factors of production in the economy.

11. What is the relationship between nominal GDP and national income?: a. They are identical.
b. GDP equals national income minus income earned from the rest of the world, plus income earned by the rest of the world, plus indirect business taxes, plus capital consumption allowance, plus statistical discrepancy.
c. National income equals GDP minus income earned from the rest of the world, plus income earned by the rest of the world, plus indirect business taxes, plus capital consumption allowance, plus statistical discrepancy.
d. GDP equals national income minus domestic income.

12. What are indirect business taxes?: a. Resource payments by government for land, labor, and capital.
b. Income or profit taxes paid by corporations.
c. Excise taxes, sales taxes, and property taxes included in the purchase of goods and services.
d. Both (b) and (c) above.

13. Which of the following correctly describes personal income?: a. The amount of income that individuals actually receive.
b. National income minus transfer payments plus personal taxes, especially income taxes.
c. The sum of undistributed corporate profits, social insurance taxes, and corporate profit taxes.
d. National income minus domestic income.

14. Fill in the blanks: If _______ increases it may be due to an increase in the price level rather than economic growth, while if _______ increases it indicates economic growth.: a. real GDP, nominal GDP.
b. nominal GDP, real GDP.
c. national income, domestic income.
d. indirect business taxes, undistributed corporate profits.

15. How is real GDP computed?: a. Multiply output from a base year by current prices.
b. Multiply current output by current prices.
c. Multiply current output by prices base year prices.
d. National income minus domestic income.

16. Which of the following will always indicate a recession?: a. A decline in real GDP that lasts at least two consecutive quarters.
b. A decline in nominal GDP that lasts at least two consecutive quarters.
c. When national income minus domestic income is negative for at least two consecutive quarters.
d. When personal income rises for at least two consecutive quarters.

17. Suppose that the chain-weighted price index has a value of 125 in 1999, and that nominal GDP is $9,000 billion in 1999. What is real GDP in 1999?: a. $11,250 billion.
b. $7,200 billion.
c. [Nominal GDP/chain-weighted price index] multiplied by 100 equals real GDP, which in this case is $9000 billion/1.25 = $7,200 billion.
d. [Nominal GDP/chain-weighted price index] multiplied by 100 equals real GDP, which in this case is $9000 billion/1.25 = $7,200 billion.

18. If real GDP was $1000 billion in 1998 and $1100 billion in 1999, then what was the rate of economic growth?: a. $100 billion.
b. 1 percent.
c. 10 percent.
d. Cannot be determined, since some or all of the increase may be attributable to inflation.

19. According to the model developed by Professor Ray Fair, which of the following would increase the likelihood of a Democrat being elected as president in 2000?: a. An increase in the rate of growth in per-capita real GDP.
b. An increase in the growth rate in the GDP deflator in the 15 quarters prior to the election.
c. A decline in the number of quarters (out of the 15 prior to the election) in which real GDP grew at more than a 3.2 percent annual rate.
d. Both (b) and (c) above.

20. Which of the following categories (measuring the degree of economic freedom) has the highest long-run average annual growth rate in per-capita real GDP?: a. Free countries.
b. Mostly free countries.
c. Mostly unfree countries.
d. Repressed countries.