When a firm sells a good or a service, the sale contributes to the nation’s income

whether the buyer of the good or a service is a household, another firm, or the government.

only if the buyer of the good or service is a household.

only if the buyer of the good or service is a household or another firm.

We have to know whether the item being sold is a good or a service in order to answer the question.

GDP is defined as the market value of all final goods and services produced

within a country in a given period of time; this definition focuses on GDP as a measure of total expenditure.

by the citizens of a country, regardless of where they live, in a given period of time; this definition focuses on GDP as a measure of total income.

by the citizens of a country, regardless of where they live, in a given period of time; this definition focuses on GDP as a measure of total expenditure.

within a country in a given period of time; this definition focuses on GDP as a measure of total income.

add up the market values of all final goods and services.

add up the wages paid to all workers.

add up the costs of producing all final goods and services.

take the difference between the market value of all final goods and services and the cost of producing those final goods and services.

Which of the following is not included in GDP?

unpaid cleaning and maintenance of houses

services such as those provided by lawyers and hair stylists

the estimated rental value of owner-occupied housing

production of foreign citizens living in the United States

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

increased measured GDP by the full value of the restaurant meals.

increased measured GDP only to the extent that the value of the restaurant meals exceeded the value of meals previously cooked at home.

Which of the following statements is correct?

The value of intermediate goods is never included in GDP.

The value of all intermediate goods and final goods is included in GDP.

The value of intermediate goods is included in GDP only if those goods were produced in the previous year.

The value of intermediate goods is included in GDP only if those goods are added to firms’ inventories to be used or sold at a later date.

The local Chevrolet dealership has an increase in inventory of 25 cars in 2006. In 2007 it sells all 25 cars. Which of the following statements is correct?

The full value of the increased inventory will be counted as part of GDP in 2006, and the value of the cars sold in 2007 will not cause 2007 GDP to increase.

The value of the increased inventory will not affect 2006 GDP; instead, the full value of the inventory will be counted as part of 2007 GDP.

The value of the increased inventory will be counted as part of 2006 GDP and the value of the cars sold in 2007 will increase 2007 GDP.

One-half of the value of the increased inventory will be counted as part of 2006 GDP and the other one-half of the value will be counted as part of 2007 GDP.

Darla, a Canadian citizen, works only in the United States. The value that her labor contributes to U.S. output is

included in U.S. GDP, but it is not included in U.S. GNP.

included in both U.S. GDP and U.S. GNP.

included in U.S. GNP, but it is not included in U.S. GDP.

included in neither U.S. GDP nor U.S. GNP.

Which of the following items is included in U.S. GDP?

goods produced by foreign citizens working in the United States

the difference in the price of the sale of an existing home and its original purchase price

None of the above is included in GDP

How is Net National Product (NNP) calculated?

Depreciation losses are subtracted from the total income of a nation’s permanent residents.

Saving is subtracted from the total income of a nation’s citizens.

Saving is subtracted from the total income of a nation’s permanent residents.

Depreciation losses are subtracted from the total income of a nation’s citizens.

National income is defined as

the total income earned by a nation's residents in the production of goods and services.

GDP minus losses from depreciation.

GDP minus taxes paid by U.S. residents.

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between

the income and expenditure approaches to the calculation of GDP.

personal income and personal disposable income.

total household payments to the government and taxes paid to the government.

the quarterly and annual approaches to the calculation of GDP.

The component of GDP called consumption consists of

household spending on durable and nondurable goods as well as household spending on services.

household spending on durable goods, but not household spending on nondurable goods or on services.

household spending on durable and nondurable goods, but not household spending on services.

spending by households and business firms on durable and nondurable goods as well as spending by households and business firms on services.

For the purpose of calculating GDP, investment is spending on

new capital equipment, inventories, and structures, including new housing.

stocks, bonds, and other financial assets.

real estate and financial assets.

capital equipment, inventories, and structures, excluding household purchases of new housing.

If a U.S. citizen buys a television made in Korea by a Korean firm,

U.S. net exports decrease and U.S. GDP is unaffected.

U.S. net exports decrease and U.S. GDP decreases

U.S. net exports are unaffected and U.S. GDP decreases.

U.S. net exports are unaffected and U.S. GDP is unaffected.

Transfer payments are

not included in GDP because they are not payments for currently produced goods or services.

included in GDP because they represent income to individuals.

included in GDP because the income eventually will be spent on consumption.

not included in GDP because taxes will have to be raised to pay for them.

Unemployment compensation is

not part of GDP because it is a transfer payment

part of GDP because it represents income.

part of GDP because the recipients must have worked in the past to qualify.

not part of GDP because the payments reduce business profits.

To encourage formation of small businesses, the government could provide subsidies; these subsidies

would not be included in GDP because they are transfer payments.

would be included in GDP because they are part of government expenditures.

would be included in GDP because they are part of investment expenditures.

would not be included in GDP because the government raises taxes to pay for them.

When economists talk about growth in the economy, they measure that growth with the

absolute change in nominal GDP.

percentage change in nominal GDP.

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living.

finds that its standard of living is not affected.

can offset the effects of rising prices by saving more.

The consumer price index is used to

monitor changes in the cost of living.

track changes in the level of wholesale prices in the economy.

monitor changes in the cost of living.

track changes in the stock market.

The term inflation is used to describe a situation in which

the overall level of prices in the economy is increasing.

incomes in the economy are increasing.

stock-market prices are rising.

the economy is growing rapidly.

The economy's inflation rate is the

percentage change in the price level from the previous period.

price level in the current period.

change in the price level from the previous period.

The CPI is a measure of the overall cost of

goods and services bought by a typical consumer.

inputs purchased by a typical producer.

goods and services produced in the economy.

stocks on the New York Stock Exchange.

The CPI is calculated

monthly by the Bureau of Labor Statistics.

monthly by the Department of Commerce.

quarterly by the Department of Commerce.

quarterly by the Bureau of Labor Statistics.

In the CPI, goods and services are weighted according to

how much consumers buy of each good or service.

how long a market has existed for each good or service.

the extent to which each good or service is regarded by the government as a necessity.

the number of firms that produce and sell each good or service.

The steps involved in calculating the consumer price index, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index.

Choose a base year, fix the basket, compute the inflation rate, compute the basket's cost, and compute the index.

Choose a base year, find the prices, fix the basket, compute the basket's cost, and compute the index.

Fix the basket, find the prices, compute the inflation rate, choose a base year and compute the index.

For any given year, the CPI is the price of the basket of goods and services in the

given year divided by the price of the basket in the base year, then multiplied by 100.

given year divided by the price of the basket in the previous year, then multiplied by 100.

base year divided by the price of the basket in the given year, then multiplied by 100.

previous year divided by the price of the basket in the given year, then multiplied by 100.

In calculating the consumer price index, a fixed basket of goods is used. The quantities of the goods in the fixed basket are determined by

surveying sellers of those goods.

working backward from the rate of inflation to arrive at imputed values for those quantities.

arbitrary choices made by federal government employees.

The inflation rate is calculated

by determining the percentage increase in the price index from the preceding period.

using the national income accounts.

by adding up the price increases of all goods and services.

by computing a simple average of the price increases for all goods and services.

If this year the CPI is 110 and last year it was 100, then

the price level as measured by the CPI has increased by 10 percent.

the cost of the CPI basket of goods and services has increased this year by 110 percent.

the inflation rate for this year has increased by 10 percent over last year’s inflation rate.

The producer price index measures the cost of a basket of goods and services

typical of those produced in the economy.

produced for a typical consumer.

The consumer price index is

a useful measure, but not a perfect measure, of the cost of living.

not very useful as a measure of the cost of living.

a perfect measure of the cost of living.

not used as a measure of the cost of living.

Suppose the price of gasoline increases rapidly, and that consumers respond by buying a smaller quantity of gasoline. The consumer price index

overstates the price increase due to the so-called substitution bias.

reflects this price increase accurately.

understates the price increase due to the so-called income bias.

overstates the price increase due to the so-called income bias.

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.

new goods and services are always of higher quality than existing goods and services.

new goods and services cost less than existing goods and services.

new goods and services cost more than existing goods and services.

When the quality of a good improves, the purchasing power of the dollar

increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problem in the construction of the CPI does this situation represent?

substitution bias and introduction of new goods

introduction of new goods and unmeasured quality change

unmeasured quality change and new goods.

income bias and substitution bias

An important difference between the GDP deflator and the consumer price index is that

the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers.

the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.

the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers.

the GDP deflator reflects the prices of all goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of final goods and services bought by consumers.

Topic 1,2

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Education

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Anh Mỹ

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the number of firms must be equal to the number of households in a simple circular-flow diagram.

firms’ profits are necessarily zero in a simple circular-flow diagram.

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Macroeconomists study

Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?

Which of the following statistics is usually regarded as the best single measure of a society’s economic well-being?

For an economy as a whole,

Which of the following statements about GDP is correct?

If a nation’s GDP rises, then it must be the case that the nation’s

Because every transaction has a buyer and a seller,

When a firm sells a good or a service, the sale contributes to the nation’s income

GDP is defined as the market value of all final goods and services produced

To compute GDP, we

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