Economics Quiz

The major difference between real and nominal gross domestic product is that real GDP

• Excludes government transfer payments

• Excludes net exports

• Is adjusted for inflation using a price index

• Measures only the value of final goods and services that are consumed

Which of the following best explains why transfer payments are not included in the calculation of GDP?

• Transfer payments are used to pay for intermediate goods, and intermediate goods are excluded from GDP

• Transfer payments are a government expenditure, and government expenditures are excluded from GDP

• Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments

• Recipients of transfer payments are usually children, and gross income earned by children is excluded in GDP

In the circular flow diagram, which of the following is true in the product market?

• Households sell goods and services to business firms

• Households sell resources to business firms

• Business firms sell resources to households

• Business firms sell goods and services to households

The market value of all final goods and services produced in the economy in a given year is

• Net national product

• Nation income

• Personal income

• Gross domestic product

Alice, who has left her job in New York, is moving to Atlanta and looking for a job. In terms of employment status, Alice can most accurately be described as

• Involuntarily unemployed

• Cyclically unemployed

• Seasonally unemployed

• Frictionally unemployed

• Not in the labor force

Which of the following is recognized as a valid criticism of the current practice of measuring unemployment?

• Discouraged workers are counted in the total of unemployed workers and therefore the published number overstates the actual amount of unemployment.

• Discouraged workers are not counted in the total of unemployed workers and therefore the published number understates the actual amount of unemployment.

• Inflation is not factored in, thereby making the published numbers nominal and not real values.

• Inflation is figured in, therefore the published numbers are real and not nominal.

• All published numbers are susceptible to variations by season.

In an economy, the GDP deflator in 2006 was 100 and the real gross domestic product (GDP) was $1,000. In 2010, the GDP deflator was 110 and the nominal GDP was $2,200. Based on that information, which of the following can be inferred about the economy’s nominal GDP in 2006 and real GDP in 2010?

• Nominal GDP in 2006 = $2,000 ; Real GDP in 2010 = $1,000

• Nominal GDP in 2006 = $1,000 ; Real GDP in 2010 = $2,000

• Nominal GDP in 2006 = $1,100 ; Real GDP in 2010 = $2,420

• Nominal GDP in 2006 = $1,000 ; Real GDP in 2010 = $2,420

• Nominal GDP in 2006 = $1,100 ; Real GDP in 2010 = $2,200

If a worker’s nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10%, the worker’s real wage has

• Approximately decreased by 10%

• Approximately decreased by 20%

• Approximately increased by 10%

• Approximately increased by 20%

• Not changed

Which of the following would cause the official unemployment rate to understate the problem of unemployment?

• Workers receiving unemployment compensation

• Cyclically unemployed workers

• Discouraged workers

• Recent college graduates looking for work

• Retirees

Policies that generate an unexpected increase in inflation will inflict costs on all of the following EXCEPT

• Borrowers

• Workers with fixed incomes

• Savers

• Lenders of fixed interest rate loans

• People whose incomes are not adjusted for inflation