Unit 2 Test Review

Which of the following is true regarding GDP

• intermediate goods are not counted because GDP does not include imports from foreign countries

• household production, like home auto repair, is counted in GDP

• Transfer payment are not included in GDP because government expenditures are not counted

• GDP includes the purchase and sale of all goods and services in a country in one year

• GDP, adjusted for inflation, measures economic growth over time

Which statement is true about the approaches used to measure the value of a nation’s gross domestic product

• The value-added approach to calculating GDP sums the final monetary value of output at each stage of production.

• The income approach to calculating GDP sums the income earned by the factors of production excluding profits.

• The expenditure approach to calculating GDP sums consumption spending, investment spending, government spending, and net exports.

Calculate Country X’s nominal gross domestic product (GDP) for 2017 using the expenditures approach.

• 14 billion dollars

• 18 billion dollars

• 19 billion dollars

Which of the following describes a limitation of gross domestic product

• It does not account for the distribution of income in a nation or income inequality.

• It understates the value of output by accounting for negative environmental side effects of production.

• It fails to make adjustments for the value of services consumed for free such as browsing on the Web.

Which of the following is classified as a discouraged worker?

• Peter earned a degree in business and is actively seeking a job in the financial sector.

• Ella has been unable to find a job and abandoned her job search.

• Max decided to be a stay-at-home dad after he lost his job.

What type of unemployment describes the situation of factory workers displaced by automation?

• Frictional

• Cyclical

• Structural

Given the labor market data above, what are the labor-force participation rate (LFPR) and the unemployment rate (UR) ?

• The LFPR is 60% and the UR is 6.0%.

• The LFPR is 60% and the UR is 10.0%.

• The LFPR is 60% and the UR is 3.3%.

Suppose the consumer price index (CPI) was 100 on January 1st, 2017 and 110 on January 1st, 2018 with no changes in nominal wages. Which of the following is definitely true about the economy between January of 2017 and January of 2018?

• The inflation rate was 10 percent.

• The inflation rate was −10 percent.

• Real wages increased by 10 percent.

Labor unions negotiated a 3-year contract with employers in the automobile industry. They agreed to a 3 percent per year increase in pay over the 3 years. How would each group be affected by an actual inflation rate of 4% next year?

• Workers would be better off, and the employers would be worse off.

• Workers would be worse off, and the employers would be unaffected.

• Workers would be worse off, and the employers would be better off.

Which of the following describes a difference between nominal gross domestic product (nGDP) and real GDP (rGDP)?

• Nominal GDP uses constant prices to measure the value of final output, while real GDP uses current prices.

• Nominal GDP uses current prices to measure the value of final output, while real GDP uses constant prices.

• Nominal GDP takes into account the size of the population while real GDP does not.