Macro Chapter 10

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily, a. values of goods and services based on surveys of consumers. b. market prices. c. quantities purchased by a typical urban household. d. profits from producing goods and services.

The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly. a. True b. False

Which of the following items is counted as part of government purchases? a. The federal government pays $2,000 in Social Security benefits to a retired person. b. The city of Athens, Ohio pays $10,000 to a tree-trimming firm to trim trees along city boulevards. c. The state of Nebraska pays $1,000 to help a low-income family pay its medical bills. d. All of the above are correct.

GDP is equal to a. the market value of all final goods and services produced within a country in a given period of time. b. Y. c. C + I + G + NX. d. All of the above are correct.

GDP is adjusted to reflect changes in the quality of the environment such as changes in air and water quality. a. True b. False

International data on GDP and socioeconomic variables a. are inconclusive about the relationship between GDP and the economic well-being of citizens. b. suggest that poor nations actually might enjoy a higher standard of living than do rich nations. c. leave no doubt that a nation's GDP is closely associated with its citizens' standard of living. d. indicate that there are few real differences in living standards around the world, in spite of the large differences in GDP between nations.

Total income from the domestic production of final goods and services equals a. only household expenditures on these goods and services b. only household and business expenditures on these goods and services. c. only household and government expenditures on these goods and services. d. the expenditures on these goods and services by whoever buys them.

Most goods and services produced at home a. and most goods and services produced illegally are included in GDP. b. are included in GDP while most goods and services produced illegally are excluded from GDP. c. are excluded from GDP while most goods and services produced illegally are included in GDP d. and most goods and services produced illegally are excluded from GDP.

In the economy of Talikastan in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was Talikastan's consumption in 2015? a. $830 b. $1230 c. $1370 d. $1770

Changes in inventory are included in the investment component of GDP. a. True b. False

If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator? a. 25. b. 40. c. 250. d. 400.

Which of the following is correct? a. Nominal GDP is always less than real GDP. b. Nominal GDP is always greater than real GDP. c. Nominal GDP equals real GDP in the base year. d. Nominal GDP equals real GDP in all years but the base year.

GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services, but GDP cannot measure both at the same time. a. True b. False

Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person. a. True b. False

If you buy a burger and fries at your favorite fast food restaurant, a. then neither GDP nor consumption will be affected because you would have eaten at home had you not bought the meal at the restaurant. b. then GDP will be higher, but consumption spending will be unchanged. c. then GDP will be unchanged, but consumption spending will be higher. d. then both GDP and consumption spending will be higher.

In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014? a. $3 million b. $7 million c. $8 million d. $11 million

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics? a. Since the televisions eventually will be bought by consumers, they will be included as consumption in the first quarter. b. Since the televisions were not purchased in the first quarter, they will be counted as an increase in second-quarter GDP. c. The televisions will be counted as a change in inventory in the first quarter and so will be included in first-quarter GDP. d. The televisions will be counted as a change in inventory in the first quarter, and when sold in the second quarter will raise second-quarter GDP.