Principles of Macroeconomics
Multiple Multiple Choice
____ 1. 1. Gross domestic product serves as a measure of two things:
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a. |
the total spending of everyone in the economy and the total saving of everyone in the economy. |
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b. |
the total income of everyone in the economy and the total expenditure on the nation's output of goods and services. |
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c. |
the value of the nation's output of goods and services for domestic citizens and the value of the nation's output of goods and services for the rest of the world. |
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d. |
the nation's saving and the nation's investment. |
____ 2. 2. GDP is defined as
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a. |
the market value of all goods and services produced within a country in a given period of time. |
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b. |
the market value of all goods and services produced by the citizens of a country, regardless of where they are living in a given period of time. |
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c. |
the market value of all final goods and services produced within a country in a given period of time. |
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d. |
the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. |
____ 3. 3 In computing GDP, market prices are used to value final goods and services because
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a. |
market prices reflect the values of goods and services. |
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b. |
market prices do not change much over time, so it is easy to make comparisons between years. |
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c. |
if market prices are out of line with how people value goods, the government sets price ceilings and price floors. |
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d. |
None of the above is correct; market prices are not used in computing GDP. |
____ 4. 4. Grapes are
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a. |
always counted as an intermediate good. |
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b. |
counted as an intermediate good if they are used to produce another good such as wine. |
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c. |
counted as an intermediate good only if they are consumed. |
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d. |
counted as an intermediate good, whether they are used to produce another good or consumed. |
____ 5. 5. One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?
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a. |
GDP increases by $1.50. |
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b. |
GDP increases by $3.50. |
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c. |
GDP increases by $6.00. |
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d. |
GDP increases by $7.50. |
____ 6. 6. A branch of the Ford Corporation (U.S.A), located in Argentina, finished assembly 100 new cars which were worth $20,000,000. As a result of this business activity,
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a. |
both U.S. GDP and U.S. GNP increase. |
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b. |
U.S. GDP decreases while U.S. GNP increases. |
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c. |
U.S. GDP is unaffected; but U.S. GNP increases. |
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d. |
both U.S. GDP and U.S. GNP are unaffected. |
____ 7. 7. Darla, a Canadian citizen, works only in the United States. The income she makes is
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a. |
included in both U.S. GDI and Canada GDI. |
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b. |
included in U.S. GDI, but it is not included in Canada GDI. |
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c. |
included in Canada GDI, but it is not included in U.S. GDI. |
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d. |
included in neither U.S. GDI nor Canada GDI. |
____ 8. 8. Which of the following items is included in 2009’s GDP?
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a. |
the sales of stocks and bonds in 2009. |
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b. |
the sales of new cars in 2009. |
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c. |
The sales of used cars in 2009. |
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d. |
The sales of both new and used cars in 2009. |
____ 9. 9. The component of GDP called consumption consists of
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a. |
household spending on durable goods, but not household spending on nondurable goods or on services. |
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b. |
household spending on durable and nondurable goods, but not household spending on services. |
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c. |
household spending on durable and nondurable goods as well as household spending on services. |
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d. |
spending by households and business firms on durable and nondurable goods as well as spending by households and business firms on services. |
____ 10. 10. Which of the following examples of household spending are categorized as investment rather than consumption?
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a. |
expenditures on new housing |
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b. |
expenditures on intangibles items such as medical care |
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c. |
expenditures on durable goods such as automobiles and refrigerators |
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d. |
All of the above are correct. |
____ 11. 11. After the terrorist attacks on September 11, 2001, governments within the United States raised expenditures to increase security at airports. These purchases of goods and services are
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a. |
not included in GDP since they do not represent production. |
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b. |
not included in GDP since the government will have to raise taxes to pay for them. |
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c. |
included in GDP since government expenditures are included in GDP. |
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d. |
included in GDP only to the extent that the federal government, rather than state or local governments, paid for them. |
____ 12. 12. If net exports is a negative number for a particular year, then
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a. |
the value of firms’ inventories declined over the course of the year. |
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b. |
consumption exceeded the sum of investment and government purchases during the year. |
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c. |
the value of goods sold to foreigners exceeded the value of foreign goods purchased during the year. |
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d. |
the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year. |
____ 13. 13. In a certain economy in 2007, government spending was amounted to $1,100; consumption amounted to $3,000; investment was $1,100; and the value of imports exceeded the value of exports by $200. It follows that GDP for 2007 was
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a. |
$5,200. |
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b. |
$5,000. |
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c. |
$5,400. |
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d. |
$5,600. |
Table 23-3
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Prices and Quantities |
||||
|
Year |
Price of Sandwiches |
Quantity of Sandwiches |
Price of Magazines |
Quantity of Magazines |
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2006 |
$4.00 |
100 |
$2.00 |
180 |
|
2007 |
$5.00 |
120 |
$2.50 |
200 |
|
2008 |
$6.00 |
150 |
$3.50 |
200 |
____ 14. 14 Refer to Table 23-3. Nominal GDP is
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a. |
$680 for 2006, $880 for 2007, and $1,200 for 2008. |
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b. |
$760 for 2006, $880 for 2007, and $1,000 for 2008. |
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c. |
$760 for 2006, $1,100 for 2007, and $1,600 for 2008. |
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d. |
$960 for 2006, $1,280 for 2007, and $1,300 for 2008. |
____ 15. 15. Refer to Table 23-3. Using 2006 as the base year, for 2007,
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a. |
real GDP is $880 and the GDP deflator is 80. |
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b. |
real GDP is $880 and the GDP deflator is 125. |
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c. |
real GDP is $950 and the GDP deflator is 95. |
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d. |
real GDP is $950 and the GDP deflator is 116. |
____ 16. 16. A student has spent the following amounts during May 2009: tuition $1000; new textbooks $80; used textbooks $50; a used car $10,000, gasoline $300; and fast food $40. How would the student’s spending affect GDP?
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a. |
GDP would increase by $11,470. |
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b. |
GDP would increase by $11,420. |
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c. |
GDP would increase by $1,420. |
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d. |
GDP would increase by$1,470. |
____ 17. 17. Real GDP is the production of final goods and services valued at
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a. |
current year prices. |
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b. |
constant prices. |
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c. |
expected future prices. |
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d. |
the ratio of current year prices to constant year prices. |
____ 18. 18. Suppose in a particular year, the U.S. Federal government spends $80 billion on highway and bridge construction; Georgia state government spends $326 million on highway and bridge; the total collection of tolls from some of these roads and bridges is $200 million. As a result,
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a. |
GDP increases by $80,126 million. |
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b. |
GDP increases by $80,326 million. |
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c. |
GDP increases by $80,526 million. |
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d. |
GDP increases by $606 million. |
____ 19. 19. If a small country has current nominal GDP of $25 billion and the GDP deflator is 125, what is real GDP?
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a. |
$312.5 billion |
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b. |
$207.5 billion |
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c. |
$31.25 billion |
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d. |
$20 billion |
____ 20. 20. Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $17,000 and sold it to Tyler for $20,000. Later that year, Tyler sold the car to Camille for $15,000. By how much did these transactions contribute to U.S. GDP for the year?
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a. |
$17,000 |
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b. |
$20,000 |
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c. |
$35,000 |
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d. |
$52,000 |