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If nominal GDP of a country increased and real GDP remained unchanged in a particular year, which of the following is most likely to

 

have taken place?

 

A)Output increased and the price level

 

increased.

 

B)Output increased and the price level

 

decreased.

 

C)Output remained contant and the price level

 

increased.

 

D)Output decreased and the price level

 

decreased.

 

E)Output increased and the price level remained

 

constant.

 

 

 


 

 

 

If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following is most

 

likely to have taken place?

 

A)Output increased and the price level

 

increased.

 

B)Output increased and the price level

 

decreased.

 

C)Output decreased and the price level

 

increased.

 

D)Output decreased and the price level

 

decreased.

 

E)Output increased and the price level remained

 

constant.

 

 

 

 


 

 

 

 

Consider a small country producing only two commodities (coffee beans and corn). In 2008, the country produced 500 pounds of

 

coffee at $12 per pound and 600 bushels of corn at $6 per bushel.

 

 

 

Assuming the price level in the economy remains same while the output of both these products increase by 10 percent in 2009,

 

calculate the value of real GDP in this country for the year 2009?

 

 

A)$1,056

 

B)$6,900

 

C)$9,600

 

D)$10,560

 

E)$10, 960

 

 

 

 


 

 

 

Consider a small country producing only two commodities (coffee beans and corn). In 2008, the country produced 500 pounds of coffee

 

at $12 per pound and 600 bushels of corn at $6 per bushel. Assuming that the output of these two commodities remains constant,

 

while the price of each rises by 10 percent in 2009, compute the value of real GDP in 2009.

 

A)$6,560

 

B)$8,400

 

C)$9,600

 

D)$10,560

 

E)$12,000

 

 

 

 


 

 

 

Which of the following industrial countries experienced a relatively slower growth of real GDP in the latter half of the 1990s?

 

A)Canada

 

B)United States

 

C)Italy

 

D)France

 

E)Japan

 

 

 

 


 

 

 

 

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a

 

nation) for the years 1995 and 2003.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price per Unit

 

 

Quantity

 

 

Production

 

 

1995

 

 

2003

 

 

1995

 

 

2003

 

 

Computers

 

 

$2,000

 

 

$1,600

 

 

100

 

 

100

 

 

Calculators

 

 

$60

 

 

$70

 

 

900

 

 

900

 

 

 

Calculate the nominal GDP for 1995.

 

 

A)$110,000

 

B)$223,000

 

C)$254,000

 

D)$448,000

 

E)$520,000

 

 

 

 


 

 

 

 

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a

 

nation) for the years 1995 and 2003.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price per Unit

 

 

Quantity

 

 

Production

 

 

1995

 

 

2003

 

 

1995

 

 

2003

 

 

Computers

 

 

$2,000

 

 

$1,600

 

 

100

 

 

100

 

 

Calculators

 

 

$60

 

 

$70

 

 

900

 

 

900

 

 

 

Calculate the nominal GDP for 2003.

 

 

A)$223,000

 

B)$254,000

 

C)$376,000

 

D)$448,000

 

E)$520,000

 

 

 

 


 

 

 

 

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a

 

nation) for the years 1995 and 2003.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price per Unit

 

 

Quantity

 

 

Production

 

 

1995

 

 

2003

 

 

1995

 

 

2003

 

 

Computers

 

 

$2,000

 

 

$1,600

 

 

100

 

 

100

 

 

Calculators

 

 

$60

 

 

$70

 

 

900

 

 

900

 

 

 

What is the constant-dollar real GDP growth from 1995 to 2003 using 2003 as the base

 

year?

 

 

A)-75 percent

 

B)zero percent

 

C)14 percent

 

D)50 percent

 

E)100 percent

 

 

 

 


 

 

 

Suppose the price index is 100 in the base year and the price of a pound of oranges in that year is $1.96. Now, if the price index

 

changes to 105 in the following year, how much would a pound of oranges cost?

 

A)$0.25

 

B)$1.50

 

C)$1.96

 

D)$2.06

 

E)$2.45

 

 

 

 


 

 

 

Suppose the current price of DVDs is $16, while its base-year price is $11.50. The value of the price index for the current year is

 

approximately:

 

A)25

 

B)39

 

C)139

 

D)160

 

E)172

 

 

 

 


 

 

 

 

The table given below reports the price of soda over four consecutive years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

Soda Price

 

 

1 (base year)

 

 

$0.30

 

 

2

 

 

$0.45

 

 

3

 

 

$0.55

 

 

4

 

 

$0.65

 

 

 

Compute the price index for the base year.

 

 

A)30

 

B)80

 

C)100

 

D)120

 

E)130

 

 

 

 


 

 

 

 

The table given below reports the price of soda over four consecutive years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

 

Soda Price

 

 

1 (base year)

 

 

$0.30

 

 

2

 

 

$0.45

 

 

3

 

 

$0.55

 

 

4

 

 

$0.65

 

 

 

Compute the price index for the third year.

 

 

A)100

 

B)118

 

C)130

 

D)150

 

E)183

 

 

 

 


 

 

 

National income accounting fills in the dollar values in the circular flow.

 

A)True

 

B)False

 

 

 

 


 

 

 

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and

 

services.

 

A)True

 

B)False

 

 

 

 


 

 

 

The services of a husband or wife as a homemaker and cash gains from a lottery are included in the calculation of gross domestic

 

product.

 

A)True

 

B)False

 

 

 

 


 

 

 

The sale of live cattle to a slaughterhouse constitutes a final transaction that is counted as part of the gross domestic product.

 

A)True

 

B)False

 

 

 

 


 

 

 

The value added approach involves adding up the value of the final product and the value of intermediate goods used in the

 

production process.

 

A)True

 

B)False

 

 

 

 


 

 

 

According to the expenditures approach, gross domestic product represents the sum of consumption spending, government spending, net

 

exports, and net investment.

 

A)True

 

B)False

 

 

 

 


 

 

 

Other things remaining unchanged, a decline in imports is associated with an increase in gross domestic product.

 

A)True

 

B)False

 

 

 

 


 

 

 

Depreciation must be subtracted from the calculation of gross domestic product.

 

A)True

 

B)False

 

 

 

 


 

 

 

Gross national product in terms of the income method is equal to national income plus indirect business taxes minus the capital

 

consumption allowance.

 

A)True

 

B)False

 

 

 

 


 

 

 

The output produced by domestically owned firms in foreign countries is included in the U.S. GDP but not in the U.S. GNP.

 

A)True

 

B)False

 

 

 

 


 

 

 

When indirect business taxes are subtracted from GDP we get net national product of a nation.

 

A)True

 

B)False

 

 

 

 


 

 

 

FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.

 

A)True

 

B)False

 

 

 

 


 

 

 

To arrive at a more accurate measure of real output changes in an economy, nominal GDP figures should be adjusted for inflation.

 

A)True

 

B)False

 

 

 

 


 

 

 

A price index is a measure of the average level of prices in an economy.

 

A)True

 

B)False

 

 

 

 


 

 

 

The consumer price index [CPI] is considered the best measure of the cost of living of individuals in a country.

 

A)True

 

B)False

 

 

 

 


 

 

 

The consumer price index [CPI] measures price changes at an earlier stage of production than the producer price index [PPI], hence,

 

increases in the CPI are usually followed by increases in the PPI.

 

A)True

 

B)False

 

 

 

 


 

 

 

Since there are smaller fluctuations in the equilibrium prices of final goods than in the prices of intermediate goods, the

 

producer price index is more volatile than the consumer price index.

 

A)True

 

B)False

 

 

 

 


 







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