CHAPTER 2 _ GDP and CPI

Suppose a basket of goods and services has been selected to calculate the CPI and 2004 has been selected as the base year.  In 2002, the basket’s cost was $50; in 2004, the basket’s cost was $52; and in 2006, the basket’s cost was $54.60.  The value of the CPI in 2006 was

a. 91.6.

b. 95.2.

c. 105.0.

d. 109.2.

• a

• b

• c

• d

37. Which of the following is not included in U.S. GDP?

a.

unpaid cleaning and maintenance of houses

b.

services such as those provided by lawyers and hair stylists

c.

the estimated rental value of owner-occupied housing

d.

production of foreign citizens living in the United States

• a

• b

• c

• d

31. Sally purchases a classic 1964 car she saw for sale on someone’s lawn.  She then purchases some new parts and spends 120 hours refurbishing the car which she keeps.   Which of the following is included in GDP?

a.

the amount she paid to buy the car

b.

the amount she paid to buy new parts

c.

the value of her time repairing the car

d.

All of the above are included.

• a

• b

• c

• d

33. Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there.   His purchase is included in

a.

both Mexican GDP and U.S. GDP.

b.

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

c.

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

d.

neither Mexican GDP nor U.S. GDP.

• a

• b

• c

• d

42. The residents of country A earn $500 million of income from abroad.  Residents of other countries earn $200 million in country A.   These earnings are accounted for in country A’s

a.

GNP which is larger than GDP in country A.

b.

GNP which is smaller than GDP in country A.

c.

GDP which is larger than GNP in country A.

d.

GDP which is smaller than GNP in country A.

• a

• b

• c

• d