Practice Problems: Chapter 7 Tracking the Macroeconomy

Transcription

1 Practice Problems: Chapter 7 Tracking the Macroeconomy 1. The national accounts keep track of: A) the spending of consumers and the government. B) the sales of producers. C) business investment. D) all of the above. 2. The money spent on domestically produced final goods and services: A) is the GDP. B) appears as income to someone. C) appears in the circular flow model. D) is all of the above. 3. In the circular flow model, households: A) receive transfer payments from the government. B) buy resources in the factor markets. C) sell products in the market for goods and services. D) issue stocks and bonds to raise capital. 4. Households receive income in the form of all the following EXCEPT: A) wages. B) dividends. C) interest and rent. D) investment spending. 5. A stock in a company is: A) a share of ownership of a company held by a shareholder. B) an IOU that pays interest. C) a portion of a firms profits paid to stock owners. D) part of private savings. 6. Which of the following is considered to be an IOU? A) Stock B) Bond C) Interest D) Dividend

2 7. An example of a government transfer is a(n): A) expenditure on an interstate highway. B) bequest from a deceased relative. C) Social Security payment. D) salary for members of the armed forces. 8. Private savings is: A) disposable income less taxes. B) disposable income less consumption. C) wealth. D) wealth plus government transfer payments. 9. Gross domestic product or GDP is: A) the total dollar value intermediate goods and services produced in the economy in a given time period. B) the total dollar value of wages paid to producing workers in a given time period. C) the total dollar value of final goods and services produced in the economy in a given time period. D) the total dollar value of government production in a given time period. 10. An example of a final good is: A) a new computer purchased by Federal Express for one of its corporate executives. B) a storage facility for a moving company. C) a new car purchased by an employee of a company for personal use. D) a dump truck purchased by a demolition company. 11. Which of the following would be an example of an intermediate good? A) stocks and bonds purchased by a business executive B) a cellular telephone purchased by a college student C) a wedding ring purchased by an engineer for his fianc e D) motor oil purchased by a taxi driver for his cab

3 Use the following to answer question 12: Table: Furniture Production Schedule Stage of production Sales value of material Timber 100 Milled wood 300 Finished wood 600 Assembled furniture 800 Retail price to consumer (Table: Furniture Production Schedule) What is the value added at all stages of the production process of the furniture as described in the accompanying table? A) $800 B) $1,200 C) $1,800 D) $2, Gross Domestic Product is defined as: A) consumer spending + government purchases + financial spending + exports imports. B) consumer spending + government transfers + investment spending + exports imports. C) disposable income + taxes + investment spending + exports + imports. D) consumer spending + government purchases + investment spending + exports imports. Use the following to answer questions 14-15: Table: Measuring GDP (billions of dollars) Personal consumption expenditures $500 Gross private domestic investment 200 Net exports -5 State and local government purchases of goods and services 200 Federal government purchases of goods and services 100 Imports (Table: Measuring GDP) Government purchases of goods and services are: A) $50 billion. B) $100 billion. C) $200 billion. D) $300 billion.

4 15. (Table: Measuring GDP) Exports are: A) -$5 billion. B) $0 billion. C) $5 billion. D) $10 billion. Use the following to answer question 16: Figure: Circular Flow (Figure: Circular Flow Model 1) What is GDP in this economy? A) $100 B) $400 C) $500 D) $ Real GDP is nominal GDP adjusted for: A) double counting. B) changes in prices. C) population. D) imports.

5 Use the following to answer questions 18-21: Exhibit: Real GDP Suppose that in year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. 18. (Exhibit: Real GDP) The value of nominal GDP in years 1 and 2 respectively is: A) $900; $1, B) $900; $990. C) $180,000; $257,400. D) $1,000; $1, (Exhibit: Real GDP) Using year 1 as the base year, real GDP in year 2 is: A) $900. B) $970. C) $1,000. D) $1, (Exhibit: Real GDP) The growth rate of nominal GDP from year 1 to year 2 is: A) 10%. B) 7.8%. C) 19.7%. D) 8.8%. 21. (Exhibit: Real GDP) Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is: A) 10%. B) 7.8%. C) 19.7%. D) 8.8%. 22. GDP per capita is: A) a perfect measure of a countries standard of living. B) the only way to measure living standards among different countries. C) an incomplete measure of a country's standard of living. D) used by the U.N. to compare nations based on measures of welfare.

6 23. Economists frequently use GDP per capita to better reflect: A) the impact of prices on GDP. B) differences in living standards across countries. C) people who are employed. D) people who are both employed and unemployed 24. A price index: A) always includes a base year. B) measures the cost of purchasing a market basket of output across different years. C) is normalized to 100 for the base year. D) is all of the above. 25. The major difference between the Consumer Price Index and the Producer Price Index is that: A) the PPI is based on retail prices and CPI is based on wholesale prices. B) the PPI measures the cost of living of self-employed workers and the CPI measures the cost of living of salaried workers. C) the PPI generally registers a higher rate of inflation than the CPI. D) the PPI is based on the cost of a basket typically purchased by producers, while the CPI is based on the cost of a basket typically purchased by consumers.

7 Answer Key 1. D 2. D 3. A 4. D 5. A 6. B 7. C 8. B 9. C 10. C 11. D 12. B 13. D 14. D 15. D 16. C 17. B 18. A 19. B 20. C 21. B 22. C 23. B 24. D 25. D