Brief Principles of Macroeconomics 7th Edition by N. Gregory Mankiw – Test Bank

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Measuring a Nation’s Income

Multiple Choice – Section 00: Introduction

Macroeconomists study
1. the decisions of individual households and
2. the interaction between households and
3. economy-wide
4. regulations imposed on firms and

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Knowledge

Which of the following headlines is more closely related to what microeconomists study than to what macroeconomists study?
1. Unemployment rate falls from 5 percent to 7.3 percent.
2. Real GDP falls by 4 percent in the third quarter.
3. Inflation was 4 percent last year.
4. The price of gasoline rises due to rising oil

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Micro

KEYWORDS: BLOOM’S: Comprehension

NOTES: r

Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?
1. Why do prices in general rise by more in some countries than in others?
2. Why do wages differ across industries?
3. Why do national production and income increase in some periods and not in others?
4. How rapidly is GDP currently increasing?

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Micro

KEYWORDS: BLOOM’S: Comprehension

Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?
1. the effect of taxes on the prices of airline tickets, and the profitability of automobile-manufacturing firms
2. the price of beef, and wage differences between genders
3. how consumers maximize utility, and how prices are established in markets for agricultural products
4. the percentage of the labor force that is out of work, and differences in average income from country to country

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Comprehension

A macroeconomist is interested in
1. explaining how changes in sellers’ behavior affect prices of a particular
2. explaining price changes in a particular
3. explaining why the unemployment rate is
4. All of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Comprehension

NOTES: r

Which of the following is not a question addressed by macroeconomists?
1. Why is average income high in some nations but low in others?
2. What, if anything, can the government do to promote growth in incomes, low inflation, and stable employment?
3. What is the impact of foreign competition on the S. auto industry?
4. Why do production and employment expand in some years and contract in others?

ANSWER: c

POINTS: 1

DIFFICULTY: Difficulty: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Knowledge

Which of the following is not a question that macroeconomists address?
1. Why is average income high in some countries while it is low in others?
2. Why does the price of oil rise when war erupts in the Middle East?
3. Why do production and employment expand in some years and contract in others?
4. Why do prices rise rapidly in some periods of time while they are more stable in other periods?

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Comprehension

The basic tools of supply and demand are
1. useful only in the analysis of economic behavior in individual
2. useful in analyzing the overall economy, but not in analyzing individual
3. central to microeconomic analysis, but seldom used in macroeconomic
4. central to macroeconomic analysis as well as to microeconomic

ANSWER: d

POINTS: 1

DIFFICULTY: Difficulty: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Supply and Demand

KEYWORDS: BLOOM’S: Knowledge

Which of the following statistics is usually regarded as the best single measure of a society’s economic wellbeing?
1. the unemployment rate
2. the inflation rate
3. gross domestic product
4. the trade deficit

ANSWER: c

POINTS: 1

DIFFICULTY: Difficulty: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP
1. is used to monitor the performance of the overall economy but is not the single best measure of a society’s

economic well-being.

is used to monitor the performance of the overall economy and is the single best measure of a society’s

economic well-being.

is not used to monitor the performance of the overall economy but is the single best measure of a society’s

economic well-being.

is not used to monitor the performance of the overall economy and is not the single best measure of a

society’s economic wellbeing.

ANSWER: b

POINTS: 1

DIFFICULTY: Difficulty: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Multiple Choice – Section 01: The Economy’s Income and Expenditure

Gross domestic product measures
1. income and
2. income but not
3. expenditures but not
4. neither income nor

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Expenditures on a nation’s domestic production
1. are less than its domestic
2. are equal to its domestic
3. are greater than its domestic
4. could be less than, equal to, or greater than its domestic

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Income generated by a nation’s domestic production
1. is less than its domestic
2. is equal to its domestic
3. is greater than its domestic
4. could be less than, equal to, or greater than its domestic

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Income Approach

KEYWORDS: BLOOM’S: Knowledge

For an economy as a whole,
1. wages must equal
2. consumption must equal
3. income must equal
4. consumption must equal

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

NOTES: r

For an economy as a whole,
1. the market value of production must equal
2. investment must equal the value of stocks and bonds
3. wages must equal
4. consumption must equal

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

NOTES: n

For the economy as a whole,
1. income must be greater than
2. unemployment must rise when GDP
3. expenditure must equal
4. consumption must be greater than

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Which of the following statements about GDP is correct?
1. GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy’s output of goods and
2. Money continuously flows from households to firms and then back to households, and GDP measures this flow of
3. GDP is generally regarded as the best single measure of a society’s economic wellbeing.
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

In the GDP accounts production equals
2. income +
3. income – government
4. income –

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Because every transaction has a buyer and a seller,
1. GDP is more closely associated with an economy’s income than it is with an economy’s
2. every transaction contributes equally to an economy’s income and to its
3. the number of firms must be equal to the number of households in a simple circular-flow
4. firms’ profits are necessarily zero in a simple circularflow

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

For an economy as a whole, income must equal expenditure because
1. the number of firms is equal to the number of households in an
2. individuals can only spend what they earn each
3. every dollar of spending by some buyer is a dollar of income for some
4. every dollar of saving by some consumer is a dollar of spending by some other

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

If an economy’s GDP falls, then it must be the case that the economy’s
1. income falls and saving
2. income and saving both
3. income falls and expenditure
4. income and expenditure both

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

If an economy’s GDP falls, then it must be the case that the economy’s
1. income and saving
2. income and market value of all production both
3. income falls and market value of all production
4. income rises and market value of all production

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

NOTES: n

If an economy’s GDP rises, then it must be the case that the economy’s
1. income rises and saving
2. income and saving both
3. income rises and expenditure
4. income and expenditure both

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following statements about GDP is correct?
1. GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy’s labor
2. Money continuously flows from households to government and then back to households, and GDP measures this flow of
3. GDP is to a nation’s economy as household income is to a
4. All of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

In a simple circular-flow diagram, total income and total expenditure are
1. never equal because total income always exceeds total
2. seldom equal because of the ongoing changes in an economy’s unemployment
3. equal only when the government purchases no goods or
4. always equal because every transaction has a buyer and a

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Comprehension

In a simple circular-flow diagram,
1. households spend all of their
2. all goods and services are bought by
3. expenditures flow through the markets for goods and services, while income flows through the markets for the factors of
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Comprehension

In a simple circular-flow diagram, firms use the money they get from a sale to
1. pay wages to
2. pay rent to
3. pay profit to the firms’
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

In a simple circular-flow diagram, firms
1. purchase resources from
2. purchase the output produced by
3. receive income by selling resources to
4. All of the above are

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

NOTES: n

In a simple circular-flow diagram, households buy goods and services with the income they get from
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

In the actual economy, households
1. spend all of their
2. divide their income among spending, taxes, and
3. buy all goods and services produced in the
4. Both (a) and (c) are

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Consumption, Saving, and Investment

KEYWORDS: BLOOM’S: Comprehension

Total income from the domestic production of final goods and services equals
1. only household expenditures for these
2. only household and business expenditures for these
3. only household and government expenditures for these
4. the expenditures for these goods whoever buys

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

In the actual economy, goods and services are purchased by
1. households, but not firms or the
2. households and firms, but not the
3. households and the government, but not
4. households, firms, and the

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

According to the circular-flow diagram GDP
1. can be computed as the total income paid by firms or as expenditures on final goods and
2. can be computed as the total income paid by firms, but not as expenditures on final goods and
3. can be computed as expenditures on final goods and services, but not as the total income paid by
4. cannot be computed as either total income paid by firms or expenditures on final goods and

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

According to the circular-flow diagram GDP
1. can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of
2. can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of
3. can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and
4. cannot be computed as either the revenue firms receive or the payments they make to factors of

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

According to the circular-flow diagram, GDP
1. can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and
2. can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of
3. can be computed as either the revenue firms receive from the sales of goods and services or as revenues they receive from the sales of goods and
4. can be computed as the payments firms make to factors of production, but not as revenues they receive from the sales of goods and

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Figure 23-1.

Refer to Figure 23-1. Which of the following pairs correctly identify W and Y?
1. markets for factors of production and markets for goods and services
2. firms and households
3. expenditures and income
4. consumption and investment

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Refer to Figure 23-1. Which of the following correctly identifies the flow of dollars?
1. W, X, Y and Z
2. K, M, L and N
3. C, K, M and D
4. A, L, N and B

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Refer to Figure 23-1. Which of the following pairs correctly identify X and Z?
1. markets for factors of production and markets for goods and services
2. firms and households
3. GDP deflator and CPI
4. flow of dollars and flow of inputs and outputs

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Multiple Choice – Section 02: The Measurement of GDP

GDP is defined as the
1. value of all goods and services produced within a country in a given period of
2. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of
3. value of all final goods and services produced within a country in a given period of
4. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is a way to compute GDP?
1. add up the wages paid to all workers
2. add up the quantities of all final goods and services
3. add up the market values of all final goods and services
4. add up the difference between the market values of all final goods and services and then subtract the costs of producing those goods and services

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following is a way to compute GDP?
1. total income
2. total expenditures on final
3. add up the market values of all final goods and
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

NOTES: n

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,
1. values of goods and services based on surveys of
2. market
3. quantities purchased by a typical urban
4. profits from producing goods and

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of
1. market
2. statistical estimates of the value of goods and services to
3. prices based on the assumption that producers make no
4. the maximum amount consumers would be willing to

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

In computing GDP, market prices are used to value final goods and services because
1. market prices do not change much over time, so it is easy to make comparisons between
2. market prices reflect the values of goods and
3. market prices reflect the quantity
4. None of the above is correct; market prices are not used in computing

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

GDP includes the value of all
1. final goods and services produced within a country using primarily market prices to measure the value of goods and
2. final goods and services produced within a country using primarily a survey of consumers to measure the value of goods and
3. goods and services produced within a country using primarily market prices to measure the value of goods and
4. goods and services produced within a country using primarily a survey of consumers to measure the value of goods and

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes
1. exactly one-third as much to GDP as does a
2. more than one-third as much to GDP as does a
3. less than one-third as much to GDP as does a
4. exactly one-fourth as much to GDP as does a

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Suppose that an economy produces 20,000 units of good A which sells at $3 a unit and 40,000 units of good B which sells at $1 per unit. Production of good A contributes
1. 1/3 times as much to GDP as the production of good
2. 3/2 times as much to GDP as the production of good
3. 3 times as much to GDP as the production of good
4. 2/3 times as much to GDP as production of good

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Suppose that an economy produces 30,000 units of good A which sells at $3 a unit and 60,000 units of good B which sells at $2 per unit. Production of good A contributes
1. 1/2 times as much to GDP as the production of good
2. 3/2 times as much to GDP as the production of good
3. 3/4 times as much to GDP as the production of good
4. 4/3 times as much to GDP as production of good

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Which of the following is included in GDP?
1. the market value of rental housing services, but not the market value of owner-occupied housing
2. the market value of owner-occupied housing services, but not the market value of rental housing services
3. both the market value of rental housing services and the market value of owner-occupied housing services
4. neither the market value of owner-occupied housing services nor the market value of rental housing

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is included in the calculation of GDP?
1. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the
2. The purchase of a new edition of a foreign textbook that was produced in a different
3. The purchase of ink and paper supplies by a textbook company for the production of new
4. The purchase of a used textbook from a friend who took the same class last

ANSWER: a

POINTS: 2

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

The value of the housing services provided by the economy’s owner-occupied houses is
1. included in GDP, and the estimated rental values of the houses are used to place a value on these housing
2. included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental
3. excluded from GDP since these services are not sold in any
4. excluded from GDP since the value of these housing services cannot be estimated with any degree of

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Estimates of the values of which of the following non-market goods or services are included in GDP?
1. unpaid housework but not the rental value of owner-occupied
2. the rental value of owner-occupied homes but not unpaid
3. unpaid housework and the rental value of owner-occupied
4. Neither unpaid housework nor the rental value of owner-occupied

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners’ housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?
1. GDP necessarily
2. GDP necessarily
3. GDP is unaffected because neither the rent nor the estimate of the value owner-occupied housing services is included in
4. GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?
1. $0
2. $10,000
3. c. $12,000
4. $22,000

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Ryan lives in an apartment where he pays $7,000 a year in rent. Sarah lives in a house that could be rented for $21,000 a year. How much do these housing services contribute to GDP?
a. $21,000
$28,000
c. $7,000
$14,000

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Most goods and services produced at home
1. and most goods and services produced illegally are included in
2. are included in GDP while most goods and services produced illegally are excluded from
3. are excluded from GDP while most goods and services produced illegally are included in GDP
4. and most goods and services produced illegally are excluded from

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because
1. the quality of these items is not high enough to contribute value to
2. measuring them is so
3. the government wants to discourage the production and consumption of these
4. these items are not reported on income tax

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Estimates of the values of which of the following non-market goods or services are included in GDP?
1. the value of unpaid housework
2. the value of services provided by major household appliances purchased in a previous period
3. the estimated rental value of owner-occupied homes
4. All of the above are included in

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

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
1. reduced measured
2. not affected measured
3. increased measured GDP by the value of the restaurant
4. increased measured GDP by the value added by the restaurant’s preparation and serving of the

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has
1. caused measured GDP to
2. not caused any change in measured
3. caused measured GDP to
4. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?
1. Only Joe’s grocery store purchases are included in
2. Only Joe’s and Jim’s grocery store purchases are included in
3. Joe’s and Jim’s grocery store purchases are included in GDP. The vegetables from Jim’s backyard garden are included at their market
4. Joe’s and Jim’s grocery store purchases are included in GDP. The vegetables from Jim’s backyard garden are included at their market value, if Jim provides this

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

NOTES: r

Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is
1. included in GDP whether Susan pays Speedy Lube to change it or changes it
2. included in GDP if Susan pays Speedy Lube to change it but not if she changes it
3. included in GDP if Susan changes it herself, but not if she pays Speedy Lube to change
4. not included in GDP whether Susan pays Speedy lube to change it or she changes it

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Rachel babysits for her sister for no pay. When she babysits for someone else she charges $8 an hour. When is Rachel’s babysitting included in GDP?
1. When she babysits for her sister and when she babysits for someone
2. When she babysits for her sister, but not when she babysits for someone
3. When she babysits for someone else, but not when she babysits for her
4. Neither when she babysits for her sister nor for someone

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following is not included in GDP?
1. carrots grown in your garden and eaten by your family
2. carrots purchased at a farmer’s market and eaten by your family
3. carrots purchased at a grocery store and eaten by your family
4. None of the above are included in

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move
1. raises
2. decreases
3. doesn’t change GDP because gambling is never included in
4. doesn’t change GDP because in either case his income is

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP
3. doesn’t change because both legal and illegal production are included in
4. doesn’t change because these activities are never included in

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Which of the following is included in GDP?
1. medical marijuana purchased from a government-run pharmacy by a glaucoma patient
2. recreational marijuana purchased from a drug dealer by a college student
3. recreational marijuana produced and consumed by a man in his attic
4. All of the above are included in

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they use to sell her. Which of the following statements is consistent with the way GDP is computed?
1. GDP will fall if Jennifer marries either Darin or
2. GDP will fall if Jennifer marries Darin but not if she marries
3. GDP will fall if Jennifer marries Thomas but not if she marries
4. GDP remains the same whether Jennifer marries Darin or

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called
1. inventory
2. transitory
3. final
4. intermediate

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

NOTES: r

The purchase of rice produced this period is included in GDP if the rice is
1. used in a meal a restaurant sells during the same period they buy the
2. purchased by a family who uses it to make tuna casserole for its
3. purchased by a frozen food company to increase its
4. B and C are

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

A farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. How much of the farmer’s sales will be included as apples in GDP?
a. $25,000
$150,000
c. $100,000
$125,000

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?
1. Sam’s and Ellen’s.
2. Sam’s but not Ellen’s.
3. Ellen’s but not Sam’s.
4. Neither Sam’s nor Ellen’s.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Grapes are considered intermediate goods
1. whether the purchaser uses them to make wine to sell or eats
2. if the purchaser uses them to make wine to sell others but not if the purchaser eats
3. if the purchaser eats them, but not if the purchaser uses to them to make wine to
4. None of the above is

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Gasoline is considered a final good if it is sold by a
1. gasoline station to a bus company that operates a bus route between San Francisco and Los
2. pipeline operator to a gasoline station in San
3. gasoline station to a motorist in Los
4. All of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
1. $150 to
2. $250 to
3. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the
4. $400 to

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Al’s Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just described contribute how much to GDP?
1. $1 million
2. $3 million
3. $4 million
4. $5 million

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP?
1. GDP increases by $3.00.
2. GDP increases by $5.00.
3. GDP increases by $6.00.
4. GDP increases by $7.00.

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

A farmer sells five pounds of pecans to a Smith’s Fresh Pecans for $10. Smith’s Fresh Pecans resells three pounds for $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP?
a. $22.50 $29.50 c. $21.50 d. $31.50

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP?
1. $500
2. $700
3. $1200
4. $1700

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Wholesome Wheat Bakery buys $10.00 worth of flour from Mikes’ Mill and uses the flour to make Wholesome Wheat sells the bread to the public for $22.00. Taking these two transactions into account, what is the effect on GDP?
1. GDP increases by $10.00
2. GDP increases by $12.00
3. GDP increases by $22.00
4. GDP increases by $32.00

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer’s inventory. How much is added to GDP?
a. $8,000
$15,000
c. $17,000
$13,000

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: n

Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it used to bake bread that customers purchased. In which case will the flour be counted as a final good?
1. Janet’s purchase and ABC Bakery’s
2. ABC Bakery’s purchase but not Janet’s
3. Janet’s purchase but not ABC Bakery’s
4. Neither Janet’s purchase nor ABC Bakery’s

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What’s the total contribution to GDP each time Tim mows a yard?
1. $1
2. $19
3. $20
4. $21

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A dairy buys $50,000 worth of milk and spend $5,000 on cartons and utilities. It sells the cartons of milk to a grocery store for $60,000 that then sells all of the cartons to consumers for $65,000. How much do these actions add to GDP?
a. $55,000
$65,000
c. $120,000
None of the above are correct.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A S.-owned automobile factory uses $100,000 worth of parts purchased from foreign countries along with U.S. inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did these actions add to GDP?
a. $300,000
$500,000
c. $600,000
$700,000

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these cars are sold in Mexico and the other $2.5 million are sold in the U.S. In both cases $1 million of the value of the cars was due to U.S-owned equipment located in Mexico and U.S. managers working in Mexico. How much did this production contribute to U.S. GDP?
$0
$1 million
$2 million
None of the above are correct

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, , which produces and sells leather furniture. With each $1,000 worth of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch and sells it for $2,600. Neither firm had any inventory at the beginning of 2015. During that year, Cowhide produced enough leather for 25 couches. Couches, Inc. bought 80% of that leather for $20,000 and promised to buy the remaining 20% for $5,000 in 2016. Couches, Inc. produced 20 couches during 2015 and sold each one during that year for $2,600. What was the economy’s GDP for 2015?
a. $25,000
$52,000
c. $57,000
$65,000

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp, , which uses the rawhide to produce and sell dog chews. With each $1 worth of rawhide that it buys from Rolling Rawhide, Chewy Chomp, Inc. produces a dog chew and sells it for $2.50. Neither firm had any inventory at the beginning of 2014. During that year, Rolling Rawhide produced enough rawhide for 2000 dog chews. Chewy Chomp, Inc. bought 90% of that rawhide for $1800 and promised to buy the remaining 10% for $200 in 2015. Chewy Chomp, Inc. produced 1800 dog chews during 2014 and sold each one during that year for $2.50. What was the economy’s GDP for 2014?
a. $3,800
$4,500
c. $4,700
$5,000

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company’s inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014?
1. $3 million
2. $7 million
3. $8 million
4. $11 million

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

Fine Edge manufactures lawn mowers. In 2014 it had $2 million worth of lawn mowers in inventory. In 2015 it sold $10 million worth of lawn mowers to consumers and had $1 million worth of lawn mowers in inventory. How much did the lawn mowers produced by Fine Edge add to GDP in 2015?
1. $11 million
2. $10 million
3. $7 million
4. $9 million

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely
3. stayed the
4. may have increased, decreased, or stayed the

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Which of the following domestically produced items is not included in GDP?
1. a bottle of shampoo
2. a hairdryer
3. a haircut
4. All of the above are included in

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following is not included in GDP?
1. a can of bug spray
2. the services of an exterminator
3. the honey produced and sold by a beekeeper
4. All of the above are included in

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following transactions is not included in GDP?
1. oranges sold to households by a
2. orange juice sold by a restaurant to its
3. oranges sold by a farmer to a grocery
4. All of the above are included in

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

NOTES: n

Gross domestic product includes all
1. legal and illegal final goods, but it excludes all legal and illegal final
2. legal and illegal final goods and all legal and illegal final
3. legal final goods and services, but it excludes illegal final goods and
4. legal and illegal final goods and legal final services, but it excludes illegal final

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used car dealership or the purchase of an antique rocking chair by a person at a yard sale, are
1. included in current GDP because GDP measures the value of all goods and services sold in the current
2. included in current GDP but valued at their original
3. not included in current GDP because it is difficult to determine their
4. not included in current GDP because GDP only measures the value of goods and services produced in the current

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Which of the following transactions would be included in GDP for 2015?
1. In February 2015, Amanda sells a 2009 Hyundai to
2. In March 2015, Amanda buys a ticket to visit a zoo in Florida. She visits the zoo in February
3. In November 2015, Isabella eats onions that she harvested from her backyard garden in October
4. All of the above are

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house for $260,000. Which of the following statements is correct regarding the sale of the house?
1. The 2014 sale increased 2014 GDP by $260,000 and had no effect on 2011
2. The 2014 sale increased 2014 GDP by $20,000 and had no effect on 2011
3. The 2014 sale increased 2014 GDP by $260,000; furthermore, the 2014 sale caused 2011 GDP to be revised upward by $20,000.
4. The 2014 sale affected neither 2014 GDP nor 2011

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

The Patersons bought a home that was newly constructed in 2007 for $275,000. They sold the home in 2015 for $255,000. Which of the following statements is correct regarding the sale of the house?
1. The 2015 sale increased 2015 GDP by $255,000 and had no effect on 2007
2. The 2015 sale reduced 2015 GDP by $20,000 and had no effect on 2007
3. The 2015 sale increased 2015 GDP by $255,000; and caused 2007 GDP to be revised downward by $20,000.
4. The 2015 sale affected neither 2007 GDP nor 2015

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

In early 2010 Molly paid $200,000 for a house built in 2000. She spent $30,000 on new materials to remodel the house. Although Molly lived in the house after she remodeled it, its rental value rose. Which of the following contributed to real GDP in 2010?
1. the price of the house, the cost of remodeling materials, the increase in rental value
2. the price of the house and the cost of remodeling materials, but not the increase in rental value
3. the costs of the remodeling materials and the increase in rent, but not the price of the house
4. None of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly’s decision to buy the house change GDP?
1. it reduces GDP by $12,000
2. it does not change GDP
3. it raises GDP by $238,000
4. it raises GDP by $250,000

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Sally purchased a log-splitter five years ago. This year, she purchases some new parts, gasoline, oil, and spends 2 hours repairing the log-splitter. Which of the following is included in this year’s GDP?
1. the amount she paid to buy the new parts
2. the amount she paid to buy new parts and gasoline
3. the amount she paid to buy new parts, gasoline, and
4. the amount she paid to buy new parts, gasoline, oil, and the market value of the 2 hours spent to repair the log-splitter.

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

NOTES: r

Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did these transactions contribute to S. GDP for the year?
a. $18,000
$22,000
c. $39,000
$57,000

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Consider two cars manufactured by Chevrolet in 2014. During 2014, Chevrolet sells one of the two cars to Emily for $20,000. Later in the same year, Emily sells the car to Jim for $18,000. The second automobile, with a market value of $19,000, is unsold at the end of 2014 and it remains in Chevrolet’s inventory. The transactions just described contribute how much to GDP for 2014?
a. $20,000
$37,000
c. $38,000
$39,000

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

AA Appliances sells refrigerators. In 2015 it added $100,000 to its inventory. $10,000 of this addition was from used refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of AA’s inventory is included in 2015 GDP?
1. $0
2. $10,000
3. c. $90,000
4. $100,000

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

Which of the following is included in Singapore’s GDP?
1. The value of production by a Singaporean working in the S.
2. The value of production by an American working in Singapore
3. The value of production by a Singaporean that crosses the border to work in
4. All of the above are

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Sheri, a S. citizen, works only in Germany. The value she adds to production in Germany is included
1. in both German GDP and S. GDP.
2. in German GDP, but is not included in S. GDP.
3. in S. GDP, but is not included in German GDP.
4. in neither German GDP nor S. GDP.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Martin, a S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
1. both Mexican GDP and S. GDP.
2. Mexican GDP, but it is not included in S. GDP.
3. S. GDP, but it is not included in Mexican GDP.
4. neither Mexican GDP nor S. GDP.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?
1. The value of the goods and services produced by the restaurant is included in both French GDP and S. GDP.
2. The value added by American workers and equipment in France is included in S. GDP and the value added by French workers and equipment is added to French GDP.
3. The value of the goods and services produced by the restaurant is included in French GDP, but not in S. GDP.
4. The value of the goods and services produced by the restaurant is included in S. GDP, but not in French GDP.

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Michigan Cranberry Company sold $10 million worth of cranberries it produced. In producing cranberries, it purchased $1 million dollars worth of supplies from foreign countries and paid workers who reside in Canada but commute to the S. $1 million. How much did these transactions add to U.S. GDP?
1. $12 million
2. $11 million
3. $10 million
4. $9 million

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2010 Quality Motors produced $30 million worth of automobiles, with $17 million in sales to Americans, $9 million in sales to Canadians, and $4 million worth of automobiles added to Quality Motors’ inventory. The transactions just described contribute how much to S. GDP for 2010?
1. $17 million
2. $21 million
3. $26 million
4. $30 million

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2008, Quality Motors produced $25 million worth of automobiles and sold $12 million in the S. and $13 million in Mexico. In addition, it sold $2 million from the previous year’s inventory in the U.S. The transactions just described contribute how much to U.S. GDP for 2008?
$12 million
$14 million
$25 million
$27 million

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Which of the following items is included in S. GDP?
1. goods produced by foreign citizens working in the United States
2. the difference in the price of the sale of an existing home and its original purchase price
3. known illegal activities
4. None of the above is included in S. GDP.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following items is included in S. GDP?
1. final goods and services that are purchased by the S. federal government
2. intermediate goods that are produced in the S. but that are unsold at the end of the GDP accounting period
3. goods and services produced by foreign citizens working in the S.
4. All of the above are included in S. GDP.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following items is included in S. GDP?
1. the estimated value of production accomplished at home, such as backyard production of fruits and vegetables
2. the value of illegally-produced goods and services
3. the value of cars and trucks produced in foreign countries and sold in the S.
4. None of the above is included in S. GDP.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Which of the following is not included in S. GDP?
1. The market value of an oil change that Ben performs on his own
2. The market value of an oil change at Speedy
3. The market value of oil purchased by
4. Production of foreign citizens living in the United States that work in an oil packaging

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Which of the following is not included in S. GDP?
1. additions of newly produced output to inventory
2. production of S citizens working in foreign countries.
3. the estimated rental value of owner-occupied housing
4. the value of food purchased from a grocery store to make meals at home without pay

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Which of the following values would be included in S. GDP for 2015?
1. the rent that Sam, an American citizen, would have paid on his home in Houston in 2015 had he not owned that
2. the rent that Jim, an American citizen, paid on his apartment in San Francisco in
3. the value of the legal services provided by Juan, an attorney and a Mexican citizen, who lived in San Antonio and practiced law there in 2015
4. All of the above would be included in S. GDP for 2015.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Which of the following examples of production of goods and services would be included in S. GDP?
1. Sally, a Canadian citizen, works on a drilling crew in North Dakota for Northland Gas Services, and Northland sells the natural gas to a utility company in
2. Jim grows pecans for his family in the yard of their San Antonio
3. Joe grows marijuana in his Kansas City home and sells it to his friends and
4. None of the above examples of production would be included in S. GDP.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Which of the following transactions adds to S. GDP for 2015?
1. In 2015, Ann sells a car that she bought in 2011 to Bill for $7,000.
2. An American management consultant works in Canada during the summer of 2015 and earns the equivalent of $40,000 during that
3. When Ken and Kim were both single, they lived in separate apartments and each paid $800 in rent. Ken and Kim got married in 2015 and they bought a previously unoccupied house that, according to reliable estimates, could be rented for $1,700 per
4. None of the above transactions adds to S. GDP for 2015.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Which of the following transactions adds to S. GDP for 2015?
1. In 2015, Frank’s Feta manufactures 2000 pounds of cheese that will eventually be sold to grocery

The 2000 pounds of cheese remains in Frank’s inventory at the end of 2015.

An Irish marketing consultant works in Richmond during the summer of 2015 and earns $45,000 during that
When Len and Mika were both single, they lived in separate apartments and each paid $700 in rent. Len and Mika got married in 2015 and they bought a previously unoccupied house that, according to reliable estimates, could be rented for $1,500 per
All of the above transactions add to S. GDP for 2015.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

The government of a country, which has adopted American GDP accounting conventions, reported that seasonally adjusted GDP in quarter 3 was $48 billion at an annual rate. This means that the seasonally-adjusted market value of all final goods and services produced within this country in quarter 3 was
1. $4
2. $12
3. $16
4. $48

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

The government of country A, which has adopted American GDP accounting conventions, has calculated that the seasonally-adjusted market value of all final goods and services produced within country A in quarter 1 was $5 billion. The government will report that GDP in quarter 1 was
1. $1.25 billion at an annual
2. $4 billion at an annual
3. $5 billion at an annual
4. $20 billion at an annual

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between
1. personal income and personal disposable
2. estimates of GDP and actual
3. the income and expenditure approaches to the calculation of
4. the quarterly and annual approaches to the calculation of

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

A statistical discrepancy
1. exists because data sources are not perfect, so measures of expenditures and income are not
2. insures that GDP will approximately equal
3. explains the close association between GDP and quality of life measures such as literacy and life
4. explains the inadequacy of GDP in capturing the value of leisure and the value of a clean

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Which government entity computes S. GDP every three months?
1. the Council of Economic Advisers
2. the Department of Commerce
3. the Department of Treasury
4. the Federal Reserve

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following correctly orders S. income measures from largest to smallest?
1. disposable personal income, gross national product, national income, net national product, personal income
2. personal income, net national product, national income, gross national product, disposable personal income
3. gross national product, net national product, national income, personal income, disposable personal income
4. disposable personal income, personal income, national income, net national product, gross national product

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Income Approach

KEYWORDS: BLOOM’S: Comprehension

S. GDP and U.S. GNP are related as follows:
1. GNP = GDP + Value of exported goods – Value of imported
2. GNP = GDP – Value of exported goods + Value of imported
3. GNP = GDP + Income earned by foreigners in the S. – Income earned by U.S. citizens abroad.
4. GNP = GDP – Income earned by foreigners in the S. + Income earned by U.S. citizens abroad.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Comprehension

S. GNP
1. includes production of foreigners working in the S. and production of U.S. citizens working in foreign countries.
2. includes production of foreigners working in the S. but excludes production of U.S. citizens working in foreign countries.
3. excludes production of foreigners working in the S. but includes production by U.S. citizens working in foreign countries.
4. excludes production of foreigners working in the S. and production by U.S. citizens working in foreign countries.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Knowledge

How does S. gross domestic product (GDP) differ from U.S. gross national product (GNP)?
1. GNP = GDP – losses from depreciation
2. GNP = GDP + income earned by S. citizens abroad – income that foreign citizens earned in the U.S.
3. GNP = GDP + transfer payments to households + – indirect sales taxes
4. GNP = GDP – depreciation – retained earnings

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

If foreign citizens earn less income in the S. than U.S. citizens earn in foreign countries,
1. S. net factor payments from abroad are positive, and its GDP is larger than its GNP.
2. S. net factor payments from abroad are positive, and its GNP is larger than its GDP.
3. S. net factor payments from abroad are negative, and its GDP is larger than its GNP.
4. S. net factor payments from abroad are negative, and its GNP is larger than its GDP.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Application

NOTES: r

The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland’s
1. net factor payments from abroad are positive, and its GDP is larger than its
2. net factor payments from abroad are positive, and its GNP is larger than its
3. net factor payments from abroad are negative, and its GDP is larger than its
4. net factor payments from abroad are negative, and its GNP is larger than its

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Application

NOTES: r

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
1. GNP which is larger than GDP in country
2. GNP which is smaller than GDP in country
3. GDP which is larger than GNP in country
4. GDP which is smaller than GNP in country

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is
1. included in both S. GDP and U.S. GNP.
2. included in S. GDP, but it is not included in U.S. GNP.
3. included in S. GNP, but it is not included in U.S. GDP.
4. included in neither S. GDP nor U.S. GNP.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Comprehension

Thomas, a S. citizen, works only in Canada. The value of the output he produces is
1. included in both S. GDP and U.S. GNP.
2. included in S. GDP, but it is not included in U.S. GNP.
3. included in S. GNP, but it is not included in U.S. GDP.
4. included in neither S. GDP nor U.S. GNP.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Comprehension

A Mexican oil field service company works on oil rigs in the S. The value of the company’s services produced by Mexican citizens and the equipment they own is included in
1. Mexican GNP and S. GNP.
2. Mexican GDP and S. GNP.
3. Mexican GNP and S. GDP.
4. Mexican GDP and S. GDP.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Application

NOTES: r

Gina, a S. citizen, works only in Bermuda. The value of Gina’s production is included in
1. S. GDP and Bermudan GDP.
2. S. GDP and Bermudan GNP.
3. S. GNP and Bermudan GDP.
4. S. GNP and Bermudan GNP.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Application

S. GDP
1. includes production of foreigners working in the S. and production by U.S. residents working in foreign countries.
2. includes production of foreigners working in the S. but excludes production by U.S. residents working in foreign countries.
3. excludes production of foreigners working in the S. but includes production by U.S. residents working in foreign countries.
4. excludes production of foreigners working in the S. and production by U.S. residents working in foreign countries.

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is not correct?
1. GNP equals net national product plus losses from
2. For most countries, including the United States, GDP and GNP are nearly the
3. GDP and GNP typically move in opposite
4. Personal income equals disposable personal income plus personal taxes plus certain nontax

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

For monitoring fluctuations in the national economy, which measure of income is best?
1. GDP
2. GNP
3. NNP
4. It does not matter very much which measure we

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Business Cycles

KEYWORDS: BLOOM’S: Comprehension

How is net national product (NNP) calculated?
1. Saving is subtracted from the total income of a nation’s
2. Saving is added to the total income of a nation’s citizens
3. Depreciation losses are subtracted from the total income of a nation’s
4. Depreciation losses are added to the total income of a nation’s

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Comprehension

In the national income accounts, depreciation is called
1. “consumption of fixed “
2. “negative “
3. “diminished “
4. “loss due to “

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Knowledge

Which of the following is an example of depreciation?
1. falling stock prices
2. the retirement of several employees
3. computers becoming obsolete
4. All of the above are examples of

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Application

How is net national product (NNP) calculated?
1. Saving is added to the total income of a nation’s
2. Saving is added to the total income earned within a
3. Depreciation losses are subtracted from the total income of a nation’s
4. Depreciation losses are subtracted from the total income earned within a

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Comprehension

National income is defined as
1. the total income of a nation’s permanent residents minus losses from
2. the income that households and noncorporate businesses
3. the total income earned by a nation’s permanent residents in the production of goods and
4. the income that households and noncorporate businesses have left after satisfying all their obligations to the

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Income Approach

KEYWORDS: BLOOM’S: Knowledge

National income differs from net national because
1. it includes profits of
2. of a statistical
3. it includes transfer
4. it excludes

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Comprehension

The income that households and noncorporate businesses receive is called
1. personal
2. net national
3. disposable personal
4. national

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Knowledge

Unlike national income, personal income
1. includes retained earnings, indirect business taxes, corporate income taxes and social insurance contributions, and excludes interest and transfer payments received by households from the
2. excludes retained earnings, indirect business taxes corporate income taxes, social insurance contributions and interest and transfer payments received by households from the
3. excludes retained earnings, indirect business taxes, corporate income taxes and social insurance contributions, and includes interest and transfer payments received by households from the
4. includes retained earnings, indirect business taxes, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from the

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Comprehension

Retained earnings is income that
1. households retain after paying
2. businesses retain after paying
3. corporations have earned but have not used to invest in plant, equipment, and
4. corporations have earned but have not paid out to their

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Knowledge

Disposable personal income is the income that
1. households have left after paying taxes and non-tax payments to the
2. businesses have left after paying taxes and non-tax payments to the
3. households and noncorporate businesses have left after paying taxes and non-tax payments to the
4. households and businesses have left after paying taxes and non-tax payments to the

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Knowledge

Disposable income is
1. the total income earned by a nation’s permanent
2. the total income earned by a nation’s residents in the production of goods and
3. the income that households and non-corporate businesses
4. the income that households and businesses have remaining after satisfying their obligations to the

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Comprehension

Table 23-1

The table below contains data for Chereaux for the year 2015.

GDP	$200
Income earned by citizens abroad	$9
Income foreigners earn here	$5
Losses from depreciation	$6
Indirect business taxes	$10
Statistical discrepancy	$0
Retained earnings	$8
Corporate income taxes	$12
Social insurance contributions	$30
Interest paid to households by government	$8
Transfer payments to households from government	$55
Personal taxes	$60
Nontax payments to government	$11

Refer to Table 23-1. The market value of all final goods and services produced within Chereaux in 2015 is
a. $214.
$200.
c. $204.
$230.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-1. Gross national product for Chereaux in 2015 is
a. $186.
$214.
c. $200.
$204.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-1. Net national product for Chereaux in 2015 is
a. $194.
$196.
c. $198.
$204.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-1. Personal income for Chereaux in 2015 is
a. $178.
$201.
c. $259.
$196.

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-1. Disposable personal income for Chereaux in 2015 is
a. $190.
$211.
c. $130.
$141.

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Application

NOTES: r

Multiple Choice – Section 03: The Components of GDP

In the equation Y = C + I + G + NX,
1. Y represents the economy’s total
2. C represents household expenditures on services and durable
3. all of the variables are always positive
4. All of the above are

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

GDP is equal to
1. the market value of all final goods and services produced within a country in a given period of
2. Y.
3. C + I + G + NX.
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

An identity is an equation that
1. describes an
2. pertains to macroeconomics, not to
3. must be true because of how the variables in the equation are
4. involves final goods, not intermediate

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Knowledge

The consumption component of GDP includes spending on
1. durable goods and nondurable goods, but not spending on
2. durable goods and services, but not spending on nondurable
3. nondurable goods and services, but not spending on durable
4. durable goods, nondurable goods, and

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following correctly lists what is included in the consumption component of GDP?
1. household purchases of services and household purchases of nondurable goods but not any household purchases of durable goods
2. household purchases of nondurable goods and durable goods other than residential construction but not household purchases of services
3. household purchases of services, nondurable goods, and all durable goods
4. household purchases of services, nondurable goods, and durable goods other than residential construction

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Consumption consists of spending by households on goods and services, with the exception of
1. purchases of intangible
2. purchases of durable
3. purchases of new
4. spending on

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment Consumption

KEYWORDS: BLOOM’S: Comprehension

Which of the following is included in the consumption component of GDP?
1. household purchases of
2. household purchases of medical
3. household purchases of
4. All of the above are included in the consumption component of

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment Consumption

KEYWORDS: BLOOM’S: Comprehension

Which of the following is an example of a durable good?
1. a hair
2. a
3. a pair of
4. All of the above are

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Application

NOTES: r

Which of the following is not an example of a durable good?
1. a
2. an
3. a business
4. a

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Application

All of the following are examples of a nondurable good except
1. a
2. one gallon of
3. a queen-size
4. a pair of

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Application

NOTES: r

When economists refer to intangible items, they are referring to such things as
1. illegal goods, and the value of such items is included in
2. illegal goods, and the value of such items is excluded from
3. hair styling and dental care, and the value of such items is included in
4. hair styling and dental care, and the value of such items is excluded from

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Household spending on education is included in
1. consumption, although it might be argued that it would fit better in
2. investment, although it might be argued that it would fit better in
3. government spending, based on the fact that most higher-education students attend publicly-supported colleges and
4. None of the above is correct; in general, household spending on services is not included in any component of

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment

KEYWORDS: BLOOM’S: Comprehension

Household spending on education is counted in which component or subcomponent of GDP?
1. consumption of durable goods
2. consumption of nondurable goods
3. consumption of services
4. investment

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment

KEYWORDS: BLOOM’S: Comprehension

Which of the following is included in the consumption component of S. GDP?
1. purchases of staplers, paper clips, and pens by S. business firms
2. purchases of natural gas by S. households
3. purchases of newly constructed homes by S. households
4. All of the above are

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment Consumption

KEYWORDS: BLOOM’S: Application

If you buy a burger and fries at your favorite fast food restaurant,
1. then neither GDP nor consumption will be affected because you would have eaten at home had you not bought the meal at the
2. then GDP will be higher, but consumption spending will be
3. then GDP will be unchanged, but consumption spending will be
4. then both GDP and consumption spending will be

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the S. The end result of these two transactions is
1. S. consumption purchases increase by $200 and U.S. GDP increases by $200.
2. S. consumption purchases increase by $200 and U.S. GDP increases by $10,000.
3. S. consumption purchases increase by $10,000 and U.S. GDP increases by $10,200.
4. S. consumption purchases increase by $10,200 and U.S. GDP increases by $10,200.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

For the purpose of calculating GDP, investment is spending on
1. stocks, bonds, and other financial
2. real estate and financial assets such as stocks and
3. capital equipment, inventories, and structures, including household purchases of new
4. capital equipment, inventories, and structures, excluding household purchases of new

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services?
1. capital
2. consumption
3. investment
4. costs

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment Investment

KEYWORDS: BLOOM’S: Knowledge

Which of the following is included in the investment component of GDP?
1. households’ purchases of newly constructed homes
2. net additions to firms’ inventories
3. firms’ purchases of capital equipment
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following examples of household spending is categorized as investment rather than consumption?
1. expenditures on durable goods such as automobiles and refrigerators
2. expenditures on intangibles items such as medical care
3. expenditures on new housing
4. All of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment

KEYWORDS: BLOOM’S: Application

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?
1. spending on education
2. the purchase of stocks and bonds
3. the purchase of a new house
4. the purchase of durable goods such as stoves and washing machines

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment

KEYWORDS: BLOOM’S: Application

Which of the following is included in the investment component of GDP?
1. spending to build new houses
2. spending to build new factories
3. spending on business equipment such as welding equipment
4. All of the above are included in the investment component of

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is included in the investment component of GDP?
1. spending on new residential construction and spending on stocks and bonds
2. spending on new residential construction but not spending on stocks and bonds
3. spending on stocks and bonds but not spending on new residential construction
4. neither spending on stocks and bonds nor spending on new residential construction

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is included in the investment component of GDP?
1. spending on new business equipment such as power tools and spending on stocks and bonds
2. spending on new business equipment such as power tools but not spending on stocks and bonds
3. spending on stocks and bonds but not spending on new business equipment such as power tools
4. neither spending on new business equipment such as power tools nor spending on stocks and bonds

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is included in the investment component of GDP?
1. Elaine pays her college tuition
2. John’s law firm buys him a new
3. Laura buys a bond that McDonald’s sells to raise
4. All of the above are

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is not included in the investment component of GDP?
1. The purchase of 100 shares of
2. The purchase of a $1000
3. A firm’s purchase of a used van to use for
4. None of the above are included in the investment component of

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

NOTES: n

The Carters’ oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as
2. government
3. consumption of
4. consumption of durable

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Consider two items that might be included in GDP: (1) the estimated rental value of owner-occupied housing and (2) purchases of newly-constructed homes. How are these two items accounted for when GDP is calculated?
Both item (1) and item (2) are included in the consumption component of
Item (1) is included in the consumption component of GDP, while item (2) is included in the investment component of
Item (1) is included in the investment component of GDP, while item (2) is included in the consumption component of
Only item (2) is included in GDP, and it is included in the investment

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes
1. a positive contribution both to investment and to
2. a positive contribution both to consumption and to
3. a positive contribution to GDP, but it does not affect investment or
4. a positive contribution to investment, but it does not affect

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,
1. S. investment and GDP increase, but German GDP is unaffected.
2. S. investment and German GDP increase, but U.S. GDP is unaffected.
3. S. investment, U.S. GDP, and German GDP are unaffected because tractors are intermediate goods.
4. S. investment, U.S. GDP, and German GDP all increase.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,
1. S. investment, GDP, and GNP all increase by the same amount.
2. S. investment increases, but GDP and GNP are unaffected by the purchase.
3. S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount.
4. S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount.

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

The value of goods added to a firm’s inventory in a certain year is treated as
1. consumption, since the goods will be sold to consumers in another
2. intermediate goods, and so is not included in that year’s
3. investment, since GDP aims to measure the value of the economy’s production that
4. spending on durable goods, since the goods could not be inventoried unless they were

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

onsumer goods that are produced, go into inventory, and are not sold during the current period are
1. counted as intermediate goods and so are not included in current period
2. counted in current period GDP only if the firm that produced them sells them to another
3. included in current period GDP as inventory
4. included in current period GDP as

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

During the current quarter, a firm produces consumer goods and adds some of those goods to its inventory rather than selling them. The value of the goods added to inventory is
1. not included in the current quarter
2. included in the current quarter GDP as
3. included in the current quarter GDP as
4. included in the current quarter GDP as a statistical

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which component(s) of fourth-quarter GDP?
1. they increase consumption and have no effect on investment
2. they increase consumption and decrease investment
3. they have no effect on either consumption or investment
4. they have no effect on consumption and decrease investment

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?
1. Since the televisions eventually will be bought by consumers, they will be included as consumption in the first
2. Since the televisions were not purchased in the first quarter, they will be counted as an increase in second- quarter
3. The televisions will be counted as a change in inventory in the first quarter and so will be included in first- quarter
4. The televisions will be counted as a change in inventory in the first quarter, and when sold in the second quarter will raise second-quarter

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct?
1. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016
2. The value of the cars in inventory will not affect 2015 GDP, and the value of the cars sold in 2016 will increase 2016
3. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will increase 2016
4. The value of the cars in inventory will not affect 2015 GDP, and the value of the cars sold in 2016 will not increase 2016

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

A S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarter(s) does(do) these transactions raise investment?
1. the first and the second
2. the first but not the second
3. the second but not the first
4. neither the first nor the second

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment Investment

KEYWORDS: BLOOM’S: Application

A S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarter(s) is (are) GDP higher?
1. the first and the second
2. the first but not the second
3. the second but not the first
4. neither the first nor the second

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarter(s) does(do) these transactions raise consumption?
1. the first and the second
2. the first but not the second
3. the second but not the first
4. neither the first nor the second

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Consumption, Saving, and Investment Consumption

KEYWORDS: BLOOM’S: Application

A good is produced by a firm in 2009, added to the firm’s inventory in 2010, and sold to a household in 2010. As a result, on net,
1. 2009 GDP increased and 2010 GDP
2. 2009 GDP decreased and 2010 GDP
3. 2009 GDP did not change and 2010 GDP
4. 2009 GDP increased and 2010 GDP did not

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A stove is produced by a firm in 2014, added to the firm’s inventory in 2014, and sold to a household in 2015. It follows that
1. the value of the good is added to the investment category of 2014 GDP, added to the consumption category of 2015 GDP, and subtracted from the investment category of 2015
2. the value of the good is added to the investment category of 2014 GDP, added to the consumption category of 2015 GDP, and not included in the investment category of 2015
3. the value of the good is added to the investment category of 2014 GDP, subtracted from the consumption category of 2015 GDP, and not included in the investment category of 2015
4. the value of the good is added to the investment category of 2014 GDP, subtracted from the consumption category of 2015 GDP, and added to the investment category of 2015

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

NOTES: r

Rocket Energy Drink Company buys sugar to produce energy drinks. At the end of a quarter both its inventory of sugar and its inventory of energy drinks has increased. Investment for the quarter will include
1. both the increased inventory of sugar and the increased inventory of energy
2. the increased inventory of sugar, but not the increased inventory of energy
3. the increased inventory of energy drinks, but not the increased inventory of
4. neither the increased inventory of sugar nor the increased inventory of energy

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Which of the following items is included in GDP?
1. the sale of stocks and bonds
2. the sale of used goods
3. the sale of services such as those performed by a doctor
4. All of the above are included in

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Government purchases include spending on goods and services by
1. the federal government, but not by state or local
2. federal and state governments, but not by local
3. federal, state, and local
4. federal, state, and local governments, as well as household spending by employees of those

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Which of the following items is counted as part of government purchases?
1. The federal government pays the salary of a Navy
2. The state of Nevada pays a private firm to repair a Nevada state
3. The city of Las Vegas, Nevada pays a private firm to collect garbage in that
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Which of the following is included in government purchases?
1. unemployment benefits a state pays
2. Social Security payments the S. government makes
3. the services of a S. government attorney valued at the cost of her salary
4. All of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Recently, the S. national income accounts have switched to calling government purchases
1. government spending and transfer
2. transfer payments and gross investment by
3. government consumption expenditure and gross
4. government wages, salaries, and investment

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

A form of government spending that is not made in exchange for a currently produced good or service is called
1. a transfer
4. None of the above is

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Knowledge

A transfer payment is
1. a payment for moving expenses a worker receives when he or she is transferred by an employer to a new
2. a payment that is automatically transferred from your bank account to pay a bill or some other
3. a form of government spending that is not made in exchange for a currently produced good or
4. the benefit that a person receives from an expenditure by government minus the taxes that were collected by government to fund that

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Knowledge

Transfer payments
1. are payments that flow from government to
2. are not made in exchange for currently produced goods or
3. alter household income, but they do not reflect the economy’s
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Comprehension

A transfer payment is a payment made by
1. consumers, but not in exchange for a tangible
2. firms, but not in exchange for capital
3. foreigners, but not in exchange for a domestically-produced good or
4. government, but not in exchange for a currently produced good or

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Comprehension

Transfer payments are
1. included in GDP because they represent income to
2. included in GDP because they eventually will be spent on
3. not included in GDP because they are not payments for currently produced goods or
4. not included in GDP because taxes will have to be raised to pay for

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Comprehension

Which of the following represents a transfer payment?
1. You transfer $1,000 from your bank account to a mutual
2. The government sends your grandfather his Social Security
3. You make a payment to get legal documents showing you purchased a previously owned
4. Your employer automatically transfers $100 each month from your wages to a non-taxable medical spending

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Application

Social Security payments are
1. included in GDP because they represent current
2. included in GDP because they represent potential
3. excluded from GDP because they are not private
4. excluded from GDP because they do not reflect the economy’s

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Application

Unemployment compensation is
1. part of GDP because it represents
2. part of GDP because the recipients must have worked in the past to
3. not part of GDP because it is a transfer
4. not part of GDP because the payments reduce business

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Application

To encourage formation of small businesses, the government could provide subsidies; these subsidies
1. would be included in GDP because they are part of government
2. would be included in GDP because they are part of investment
3. would not be included in GDP because they are transfer
4. would not be included in GDP because the government raises taxes to pay for

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Application

After the terrorist attacks on September 11, 2001, governments within the United States raised expenditures to increase security at airports. These purchases of goods and services are
1. not included in GDP since they do not represent
2. not included in GDP since the government collects taxes to pay for
3. included in GDP since government expenditures on goods and services are included in
4. included in GDP only to the extent that the federal government, rather than state or local governments, paid for

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Application

Which of the following items is counted as part of government purchases?
1. The federal government pays $2,000 in Social Security benefits to a retired
2. The city of Athens, Ohio pays $10,000 to a tree-trimming firm to trim trees along city
3. The state of Nebraska pays $1,000 to help a low-income family pay its medical
4. All of the above are

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Fiscal Policy

KEYWORDS: BLOOM’S: Application

The S. government pays an economist at the U.S. Department of Commerce $100,000 in salary in 2013. The economist then retires. In 2014, the government pays him $60,000 in Social Security benefits. Which of the following is correct?
1. The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is included in 2014 GDP as government
2. The 2013 payment is included in 2013 GDP as government purchases, but the 2014 payment is not included in 2014
3. The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is included in 2014 GDP as government transfer
4. The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is allocated to previous years’ GDP according to the amount of work performed by the economist each

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

Consider the following three items of spending by the government: (i) the federal government pays a $500 unemployment benefit to an unemployed person; (ii) the federal government makes a $2,000 salary payment to a Navy lieutenant; (iii) the city of Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman. Which of these payments contributes directly to government purchases in the national income accounts?
1. only item (i)
2. only item (ii)
3. only items (i) and (ii)
4. only items (ii) and (iii)

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Application

Which of the following subcomponents of GDP can be either positive or negative?
1. inventory investment
2. exports
3. government purchases
4. All of the above are

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Net exports equal
1. exports plus
2. exports minus
3. imports minus
4. GDP minus

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Net exports equal
1. exports plus
2. imports minus
3. Y – (C + I + G).
4. Y – (C – I – G).

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

NOTES: n

If net exports is a negative number for a particular year, then
1. the value of firms’ inventories declined over the course of the
2. consumption exceeded the sum of investment and government purchases during the
3. the value of goods sold to foreigners exceeded the value of foreign goods purchased during the
4. the value of foreign goods purchased exceeded the value of goods sold to foreigners during the

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

If a S. citizen buys a television made in Korea by a Korean firm, then
1. S. net exports decrease and U.S. GDP decreases.
2. S. net exports are unaffected and U.S. GDP decreases.
3. S. net exports are unaffected and U.S. GDP is unaffected.
4. S. net exports decrease and U.S. GDP is unaffected.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

A S. grocery chain purchases olive oil from Tunisia and sells it to U.S. consumers. In which of the following is this transaction included?
1. S. consumption and U.S. imports
2. S. consumption but not U.S. imports
3. S. imports but not U.S. consumption
4. neither S. consumption nor U.S. imports

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

When a S. citizen buys $500 of Chinese-made parts for a motorcycle,
1. S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000.
2. S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500.
3. S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500.
4. S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

If a S. company buys an electrical generator made in Japan by a Japanese firm, and the Japanese firm uses the payment to buy stocks issued by a U.S. company then
1. S. exports and U.S imports increase.
2. S. exports but not U.S. imports increase.
3. S. imports but not U.S. exports increase.
4. neither S. exports nor U.S. imports increase.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

A German citizen buys an automobile produced in the United States by a Japanese company. As a result,
1. S. net exports increase, U.S. GDP is unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.
2. S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, German GNP is unaffected, and German GDP decreases.
3. S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.
4. S. net exports and GDP are unaffected, Japanese GNP increases, and German net exports, GNP, and GDP decrease.

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

A S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for?
1. consumption and imports
2. consumption but not imports
3. imports but not consumption
4. neither consumption nor imports

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

If a S. citizen buys a dress made in Nepal by a Nepalese firm, then
1. S. consumption increases, U.S. net exports decrease, and U.S. GDP decreases.
2. S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected.
3. S. consumption decreases, U.S. net exports increase, and U.S. GDP increases.
4. S. consumption decreases, U.S. net exports increase, and U.S. GDP is unaffected.

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

When an American household purchases a bottle of Italian wine for $100,
1. S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by $100.
2. S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by $100.
3. S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.
4. S. consumption increases by $100, U.S. net exports do not change, and U.S. GDP increases by $100.

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

An American retailer purchased 100 pairs of shoes from a company in Mexico in the second quarter of 2016 but does not sell them to a consumer until the third quarter of 2016. In which quarter(s) does(do) the value of the shoes add to S. GDP?
1. the second and third quarters
2. the second quarter but not the third quarter
3. the third but not the second quarter
4. neither the second nor the third quarter

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

NOTES: r

An American retailer purchased 500 pairs of shoes from a company in Thailand in the second quarter of 2016 but does not sell them to a consumer until the third quarter of 2016. Which of the following components of S. GDP is affected by this transaction in the third quarter of 2016?
1. consumption, investment and imports
2. only consumption and investment
3. only consumption and imports
4. only investment and imports

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

NOTES: r

The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included in
1. in government expenditures and
2. government expenditures and
3. exports, but not government
4. imports, but not government

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Analysis

When an Egyptian firm purchases a cement mixer from Slovakia,
1. Egyptian investment does not change, Egyptian net exports decrease, Egyptian GDP decreases, Slovakian net exports increase, and Slovakian GDP
2. Egyptian investment increases, Egyptian net exports decrease, Egyptian GDP is unaffected, Slovakian net exports increase, and Slovakian GDP
3. Egyptian investment decreases, Egyptian net exports increase, Egyptian GDP is unaffected, Slovakian net exports decrease, and Slovakian GDP
4. Egyptian investment increases, Egyptian net exports do not change, Egyptian GDP increases, Slovakian net exports do not change, and Slovakian GDP is

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

The S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result,
1. S. government purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP is unaffected.
2. S. government purchases increase by $30,000; U.S. net exports are unaffected; and U.S. GDP increases by $30,000.
3. S. government purchases, net exports, and GDP are unaffected.
4. S. government purchases are unaffected; U.S. net exports decrease by $30,000; and U.S. GDP decreases by $30,000.

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local As a result, U.S. GDP
1. increases by $40.
2. increases by $220.
3. increases by $280.
4. increases by $1500.

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

An American soldier stationed in North Carolina receives a paycheck from the federal government for $300, which she uses to purchase a $100 MP3 player made in China by a Chinese firm and $200 for fruit and vegetables from a local farmers market. As a result, S. GDP increases by
a. $200.
$300.
c. $500.
$600.

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800, and investment of $3,000. GDP equals
a. $24,450.
$11,550.
c. $15,300.
$20,700.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan’s GDP in 2015?
a. $1350
$1450
c. $1050
$1750

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $5000, exports were $400, government purchases were $1000, imports were $600, and investment was $1200. What was Talikastan’s GDP in 2015?
a. $6200
$6400
c. $7000
$8200

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was Talikastan’s consumption in 2015?
1. $830
2. $1230
3. $1370
4. $1770

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, exports were $500, GDP was $6400, government purchases were $1700, imports were $400, and investment was $1800. What was Talikastan’s consumption in 2015?
a. $2000
$2800
c. $3000
$3800

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $1800, and imports were $1200. What was Talikastan’s investment in 2015?
1. $0
2. $1200
3. c. $2400
4. $5600

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan’s investment in 2015?
a. $3200
$5600
c. $2000
$4400

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $3000, exports were $400, GDP was $5000, imports were $500, and investment was $1400. What were Talikastan’s government purchases in 2015?
1. $60
2. $500
3. $700
4. $1500

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $4000, exports were $800, GDP was $7500, imports were $200, and investment was $1000. What were Talikastan’s government purchases in 2015?
a. $1200
$1900
c. $2500
$4500

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $200, exports were $150, GDP was $475, government purchases were $100, imports were $75, and investment was $100. What were Talikastan’s net exports in 2015?
a. -$75
-$225
c. $225
$75

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $800, GDP was $2000, government purchases were $400, and investment was $600. What were Talikastan’s net exports in 2015?
a. -$200
$200
c. $1800
Net exports cannot be calculated from the information given.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

In the economy of Talikastan in 2015, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Talikastan’s net exports in 2015?
a. -$250
$250
c. $2200
Net exports cannot be calculated from the information given.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

In the economy of Talikastan in 2015, consumption was $5300, GDP was $8800, government purchases were $1800, imports were $600, and investment was $2000. What were Talikastan’s exports in 2015?
a. -$900
-$600
c. $200
$300

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $3000, GDP was $5500, government purchases were $1000, imports were $1000, and investment was $1000. What were Talikastan’s exports in 2015?

a.-$500

$500
$1500
$-1500

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $6300, government purchases were $1300, and investment was $1500. What were Talikastan’s imports in 2015?
a. $500
-$700
$700
$500

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was $600, exports were $300, GDP was $1300, government purchases were $250, and investment was $300. What were Talikastan’s imports in 2015?
a. -$150
-$200
c. $200
$150

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

NOTES: r

In the economy of Talikastan in 2015, consumption was two-thirds of GDP, government purchases were $1000 more than investment, investment was one-ninth of GDP, and the value of exports exceeded the value of imports by $500. What was Talikastan’s GDP in 2015?
a. $1688
$9000
c. $13,500
$15,000

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

In the economy of Talikastan in 2015, consumption was 75% of GDP, government purchases were $200, imports were $50 and 125% of the value of exports, investment was one-sixth of the value of consumption. What was Talikastan’s GDP in 2015?
1. $218
2. $2500
3. $1520
4. $2100

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

NOTES: r

Table 23-2

The table below contains data for country A for the year 2010.

Household purchases of durable goods	$1293
Household purchases of nondurable goods	$1717
Household purchases of services	$301
Household purchases of new housing	$704
Purchases of capital equipment	$310
Inventory changes	$374
Purchases of new structures	$611
Depreciation	$117
Salaries of government workers	$1422
Government expenditures on public works	$553
Transfer payments	$777
Foreign purchases of domestically produced goods	$88
Domestic purchases of foreign goods	$120

Refer to Table 23-2. What was country A’s GDP in 2010?
a. $6359
$7136
c. $7253
$8147

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-2. What was country A’s consumption in 2010?
a. $2018
$3010
c. $3311
$4015

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-2. What was country A’s investment in 2010?
a. $1178
$1295
c. $1882
$1999

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-2. What were country A’s government purchases in 2010?
1. $553
2. $1198
3. $1975
4. $2752

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-2. What were country A’s exports in 2010?
1. -$32
2. $32
3. $88
4. $120

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-2. What were country A’s imports in 2010?
1. -$32
2. $32
3. $88
4. $120

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-2. What were country A’s net exports in 2010?
1. -$32
2. $32
3. $88
4. $120

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Table 23-3

The table below contains data for the country of Crete for the year 2010.

Total income	$5731
Household purchases of durable goods	$1108
Household purchases of nondurable goods	$702
Household purchases of non-education services	$203
Household purchases of education services	$302
Household purchases of new housing	$816
Purchases of capital equipment	$333
Inventory changes	$75
Purchases of new structures	$267
Depreciation	$401
Local government spending on goods and services	$236
State government spending on goods and services	$419
Federal government spending on goods and services	$1182
Transfer payments	$707
Foreign purchases of domestically produced goods	$217
Domestic purchases of foreign goods	$129

Refer to Table 23-3. What was Crete’s GDP in 2010?
a. $4623
$5731
c. $6037
$6839

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-3. What was Crete’s consumption in 2010?
a. $1810
$2013
c. $2315
$3131

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-3. What was Crete’s investment in 2010?
1. $675
2. $1090
3. $1491
4. $1793

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-3. What were Crete’s government purchases in 2010?
a. $1130
$1601
c. $1837
$2544

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Refer to Table 23-3. What were Crete’s net exports in 2010?
a. -$217
-$88
c. $88
$217

ANSWER: c

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

In 2012, S. GDP was almost
1. $16
2. $12
3. $15
4. $14

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

NOTES: r

In 2012, GDP per person in the United States was almost
a. $14,000.
$36,000.
c. $46,000
$50,000

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

NOTES: r

In the United States in 2012, consumption represented approximately
1. 60 percent of
2. 70 percent of
3. 80 percent of
4. 90 percent of

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

In the United States in 2012, purchases of capital equipment, inventories, and structures represented approximately
1. 3 percent of
2. 7 percent of
3. 13 percent of
4. 15 percent of

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

In the United States in 2012, government purchases of goods and services were
1. larger than consumption, but smaller than
2. larger than investment, but smaller than
3. smaller than both consumption and
4. larger than both consumption and

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

In 2012, S. net exports were
1. positive and about 5 percent the size of GDP.
2. positive and about 6 percent the size of
3. negative and about 5 percent the size of GDP.
4. negative and about 6 percent the size of

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.113 – LO: 23-3

NATIONAL STANDARDS: United States – Analytic – Skills

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Multiple Choice – Section 04: Real versus nominal GDP

If total spending rises from one year to the next, then
1. the economy must be producing a larger output of goods and
2. goods and services must be selling at higher
3. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or
4. employment or productivity must be

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

If total spending rises from one year to the next, then which of the following could not be true?
1. the economy is producing a smaller output of goods and services, and goods and services are selling at higher
2. the economy is producing a larger output of goods and services, and goods and services are selling at lower
3. the economy is producing a larger output of goods and services, and goods and services are selling at higher
4. the economy is producing a smaller output of goods and services, and goods and services are selling at lower

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?
1. both real GDP and nominal
2. real GDP but not nominal
3. nominal GDP but not real
4. neither nominal GDP nor real

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study
1. nominal
2. real
3. the GDP

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Nominal GDP will definitely increase when
1. prices increase and output
2. prices increase and output
3. prices decrease and output
4. All of the above are

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

NOTES: n

Changes in nominal GDP reflect
1. only changes in
2. only changes in the amounts being
3. both changes in prices and changes in the amounts being
4. neither changes in prices nor changes in the amounts being

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Real GDP will increase
1. only when prices
2. only when output
3. when prices increase or output
4. All of the above are

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Comprehension

NOTES: n

Changes in real GDP reflect
1. only changes in
2. only changes in the amounts being
3. both changes in prices and changes in the amounts being
4. neither changes in prices nor changes in the amounts being

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Real GDP is the yearly production of final goods and services valued at
1. current
2. constant
3. expected future
4. the ratio of current prices to constant

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Knowledge

Which of the following statements about GDP is correct?
1. Nominal GDP values production at current prices, whereas real GDP values production at constant
2. Nominal GDP values production at constant prices, whereas real GDP values production at current
3. Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production
4. Nominal GDP values production at the cost of the resources used in the production process, whereas real GDP values production at market

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following is always measured in prices from a base-year?
1. both nominal and real
2. nominal but not real
3. real but not nominal
4. neither nominal nor real

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which of the following always uses prices and quantities from the same period?
1. both nominal and real
2. nominal GDP but not real
3. real GDP but not nominal
4. neither nominal or real

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following is correct?
1. Nominal GDP is always less than real
2. Nominal GDP is always greater than real
3. Nominal GDP equals real GDP in the base
4. Nominal GDP equals real GDP in all years but the base

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Which of the following statements about nominal GDP and real GDP is correct?
1. Nominal GDP is a better gauge of economic well-being than real
2. Real GDP is a better gauge of economic well-being than nominal
3. Real GDP and nominal GDP are equally good measures of economic well-being.
4. Neither nominal nor real GDP provide a measure of economic well-being.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

When economists talk about growth in the economy, they measure that growth as the
1. absolute change in nominal GDP from one period to
2. percentage change in nominal GDP from one period to
3. absolute change in real GDP from one period to
4. percentage change in real GDP from one period to

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Knowledge

The GDP deflator is the ratio of
1. real GDP to nominal GDP multiplied by
2. real GDP to the inflation rate multiplied by
3. nominal GDP to real GDP multiplied by
4. nominal GDP to the inflation rate multiplied by

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

Which of the following is the correct formula for the GDP deflator?
1. .

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

Changes in the GDP deflator reflect
1. only changes in
2. only changes in the amounts being
3. both changes in prices and changes in the amounts being
4. neither changes in prices nor changes in the amounts being

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

The GDP deflator for years subsequent to the base year measures the change in
1. nominal GDP from the base year that cannot be attributable to a change in real
2. real GDP from the base year that cannot be attributable to a change in nominal
3. nominal GDP from the base year that cannot be attributable to a change in
4. real GDP from the base year that cannot be attributable to a change in

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Comprehension

In the base year, the GDP deflator is always
a. -1.

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

The term economists use to describe a situation in which the economy’s overall price level is rising is

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Knowledge

The inflation rate is the
1. absolute change in real GDP from one period to
2. percentage change in real GDP from one period to
3. absolute change in the price level from one period to
4. percentage change in the price level from one period to

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Knowledge

The percentage change in the price level from one period to another is called
1. the growth
2. the inflation
3. the GDP
4. the unemployment

ANSWER: b

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Knowledge

The inflation rate in year 2 equals
1. .

ANSWER: a

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Knowledge

A country’s real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country’s inflation rate?
a. 7%.
10.0%.
c. 0%.
-9.1%.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

NOTES: r

If real GDP doubles and the GDP deflator doubles, then nominal GDP
1. remains

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If nominal GDP doubles and the GDP deflator doubles, then real GDP
1. remains

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is
1. 1 so prices are higher than in the base year.
2. 1 so prices are lower than in the base year.
3. 1 so prices are higher than in the base year.
4. 1 so prices are lower than in the base year.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?
1. $2.5
2. $10
3. $40
4. $100

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If in some year real GDP was $25 billion and the GDP deflator was 68, what was nominal GDP?
1. $2.72
2. $17
3. $36.8
4. $43

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
1. $6.7
2. $15
3. $21.6
4. $38

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP?
1. $2.5
2. $10
3. $40
4. $100

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator?
a.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If in some year nominal GDP was $28 trillion and real GDP was $32 trillion, what was the GDP deflator?
a. 5.
114.3.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

An economy recently reported nominal GDP of 3 trillion euro and a GDP deflator of 200. What was real GDP?
1. 5 trillion euro, and real GDP is a better gauge of economic activity than nominal GDP.
2. 5 trillion euro, but nominal GDP is a better gauge of economic activity than real GDP.
3. 6 trillion euro, and real GDP is a better gauge of economic activity than nominal
4. 6 trillion euro, but nominal GDP is a better gauge of economic activity than real

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is
1. 33, and this indicates that the price level has decreased by 16.67 percent since the base year.
2. 33, and this indicates that the price level has increased by 83.33 percent since the base year.
3. 120, and this indicates that the price level has increased by 20 percent since the base
4. 120, and this indicates that the price level has increased by 120 percent since the base

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is
1. 33, and this indicates that the price level has decreased by 16.67 percent since the base year.
2. 33, and this indicates that the price level has increased by 83.33 percent since the base year.
3. 120, and this indicates that the price level has increased by 20 percent since the base
4. 120, and this indicates that the price level has increased by 120 percent since the base

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is
1. 80, and this indicates that the price level has decreased by 20 percent since the base
2. 80, and this indicates that the price level has increased by 80 percent since the base
3. 125, and this indicates that the price level has increased by 25 percent since the base
4. 125, and this indicates that the price level has increased by 125 percent since the base

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is
1. 80, and this indicates that the price level has decreased by 20 percent since the base
2. 80, and this indicates that the price level has increased by 80 percent since the base
3. 125, and this indicates that the price level has increased by 25 percent since the base
4. 125, and this indicates that the price level has increased by 125 percent since the base

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Suppose an economy’s production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,
1. nominal GDP is $50, real GDP is $100, and the GDP deflator is
2. nominal GDP is $50, real GDP is $100, and the GDP deflator is
3. nominal GDP is $100, real GDP is $50, and the GDP deflator is
4. nominal GDP is $100, real GDP is $50, and the GDP deflator is

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Suppose an economy produces only eggs and ham. In 2009, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2010, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2009,
1. nominal GDP is $400, real GDP is $500, and the GDP deflator is
2. nominal GDP is $400, real GDP is $500, and the GDP deflator is
3. nominal GDP is $500, real GDP is $400, and the GDP deflator is
4. nominal GDP is $500, real GDP is $400, and the GDP deflator is

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Suppose an economy produces only cranberries and maple syrup. In 2010, 50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit. In 2009, the base year, the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit. For 2010,
1. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is
2. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 1.
3. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is
4. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 1.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10 per unit and the price of fish was $75 per unit. For 2010,
1. nominal GDP is $500, real GDP is $800, and the GDP deflator is 5.
2. nominal GDP is $500, real GDP is $800, and the GDP deflator is
3. nominal GDP is $800, real GDP is $500, and the GDP deflator is 5.
4. nominal GDP is $800, real GDP is $500, and the GDP deflator is

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are sold at $300 each and 5000 pounds of bananas are sold at $3 per pound. In 2009, the base year, iPhones sold at $400 each and bananas sold at $2 per pound. For 2010,
1. nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 83.
2. nominal GDP is $410,000, real GDP is $315,000, and the GDP deflator is 16.
3. nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 16.
4. nominal GDP is $410,000, real GDP is $315,000, and the GDP deflator is 83.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Suppose an economy produces only burgers and bags of fries. In 2010, 4000 burgers are sold at $3 each and 6000 bags of fires are sold at $1.50 each. In 2008, the base year, burgers sold for $2.50 each and bags of fries sold for $2
1. nominal GDP is $22,000, real GDP is $21,000, and the GDP deflator is 45.
2. nominal GDP is $22,000, real GDP is $21,000, and the GDP deflator is 77.
3. nominal GDP is $21,000, real GDP is $22,000, and the GDP deflator is 45.
4. nominal GDP is $21,000, real GDP is $22,000, and the GDP deflator is 77.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,
1. real output and the price level both
2. real output rose and the price level
3. real output fell and the price level
4. real output and the price level both

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010,
1. real output and the price level both
2. real output rose and the price level
3. real output fell and the price level
4. real output and the price level both

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,
1. real output and the price level both
2. real output rose and the price level
3. real output fell and the price level
4. real output and the price level both

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

A country reported a nominal GDP of $85 billion in 2010 and $100 billion in 2009. It also reported a GDP deflator of 100 in 2010 and 105 in 2009. Between 2009 and 2010,
1. real output and the price level both
2. real output rose and the price level
3. real output fell and the price level
4. real output and the price level both

ANSWER: d

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Table 23-4

The table below reports nominal and real GDP for the U.S. from 1929 to 1932.

Year	Nominal GDP Real GDP
1929	103.6 977
1930	91.2 892.8
1931	76.5 834.9
1932	58.7 725.8

Refer to Table 23-4. What are the GDP deflator and the inflation rate for 1931?
a. 16, -11.5
9.16, -10.3
c. 37, 10.3
1091.37, 11.5

ANSWER: b

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Refer to Table 23-4. What are the GDP deflator and the inflation rate for 1932?
a. 09, -11.7
8.09.16, -13.3
c. 46, 11.7
1236.46, 13.3

ANSWER: a

POINTS: 1

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TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Refer to Table 23-4. What was the growth rate of real GDP for 1930?
1. -8.62%. Real GDP is a better gauge of economic well-being than nominal
2. -8.62%. Nominal GDP is a better gauge of economic well-being than real
3. -9.43%. Real GDP is a better gauge of economic well-being than nominal
4. -9.43%. Nominal GDP is a better gauge of economic well-being than real

ANSWER: a

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TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Application

Refer to Table 23-4. What was the growth rate of real GDP for 1931?
1. -6.93%. Real GDP is a better gauge of economic well-being than nominal
2. -6.93%. Nominal GDP is a better gauge of economic well-being than real
3. -6.49%. Real GDP is a better gauge of economic well-being than nominal
4. -6.49%. Nominal GDP is a better gauge of economic well-being than real

ANSWER: c

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KEYWORDS: BLOOM’S: Application

Refer to Table 23-4. If prices had remained constant between 1929 and 1930, Nominal GDP would have decreased
a. 62%.
9.43%.
c. 97%.
13.6%.

ANSWER: a

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Table 23-5

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015.

Prices and Quantities

Year	Price of Cereal	Quantity of Cereal	Price of Milk	Quantity of Milk
2015	$4.00	100	$1.50	180
2016	$4.00	120	$2.00	200
2017	$5.00	150	$2.50	200
2018	$6.00	180	$3.50	240

Refer to Table 23-5. In 2015, this country’s
1. nominal GDP was greater than real GDP, and the GDP deflator was greater than
2. nominal GDP was equal to real GDP, and the GDP deflator was equal to 100%.
3. nominal GDP was less than real GDP, and the GDP deflator was less than
4. nominal GDP was equal to real GDP, and the GDP deflator was equal to

ANSWER: d

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Refer to Table 23-5. In 2016, this country’s
1. real GDP was $880, and the GDP deflator was 4.
2. real GDP was $780, and the GDP deflator was 6.
3. real GDP was $880, and the GDP deflator was 8.
4. real GDP was $780, and the GDP deflator was 8.

ANSWER: d

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KEYWORDS: BLOOM’S: Analysis

NOTES: r

Refer to Table 23-5. In 2017, this country’s
1. real GDP was $900, and the GDP deflator was 9.
2. real GDP was $1250, and the GDP deflator was 0.
3. real GDP was $900, and the GDP deflator was 0.
4. real GDP was $1250, and the GDP deflator was 9.

ANSWER: a

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-5. In 2018, this country’s
1. real GDP was $1080, and the GDP deflator was 3.
2. real GDP was $1080, and the GDP deflator was 8.
3. real GDP was $1920, and the GDP deflator was 8.
4. real GDP was $1920, and the GDP deflator was 3.

ANSWER: b

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-5. This country’s output grew
a. 3% from 2015 to 2016.
42.0% from 2016 to 2017.
c. 4% from 2016 to 2017.
53.6% from 2017 to 2018.

ANSWER: c

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NOTES: r

Refer to Table 23-5. This country’s inflation rate from 2017 to 2018 was
a. 0%.
21.8%.
c. 9%.
28.0%.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

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TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-5. This country’s inflation rate from 2016 to 2017 was
a. 0%.
23.1%.
c. 1%.
18.8%.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

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TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

NOTES: r

Table 23-10

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 .

Year	Price of Movies	Quantity of Movies	Price of Popcorn	Quantity of Popcorn
2014	$10.00	500	$5	1000
2015	$11.00	600	$4	900
2016	$12.00	650	$5	950
2017	$12.00	625	$6	925

Refer to Table 23-10. In which year was this country’s nominal GDP highest?
1. 2014
2. 2015
3. 2016
4. 2017

ANSWER: d

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DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-10. In which year was this country’s real GDP highest?
1. 2014
2. 2015
3. 2016
4. 2017

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

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TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-10. What was this country’s nominal GDP in 2014?
a. $9,500
$10,000
c. $10,200
$10,500

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-10. What was this country’s real GDP in 2016?
a. $10,575
$11,250
c. $10,950
$12,550

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-10. What was this country’s GDP deflator in 2017?
a. 4
116.7
c. 0
None of the above is correct.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

NOTES: r

Table 23-6

The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013.

Year	Price of Waffles	Quantity of Waffles	Price of Pancakes	Quantity of Pancakes
2010	$2.00	80	$1.00	100
2011	$2.00	100	$2.00	120
2012	$2.00	120	$3.00	150
2013	$4.00	150	$3.00	200

Refer to Table 23-6. In 2010, this country’s nominal GDP was
a. $260.
$440.
c. $620.
$760.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2011, this country’s nominal GDP was
a. $260.
$440.
c. $620.
$760.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

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TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2010, this country’s real GDP was
a. $620.
$260.
c. $400.
$630.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2011, this country’s real GDP was
a. $320.
$440.
c. $760.
$770.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2012, this country’s real GDP was
a. $510.
$690.
c. $930.
$780.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2013, this country’s real GDP was
a. $500.
$700.
c. $900.
$1200.

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

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NOTES: r

Refer to Table 23-6. In 2010, this country’s GDP deflator was
a. 9.
100.
c. 0.
This cannot be calculated from the information given.

ANSWER: a

POINTS: 1

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2013, this country’s GDP deflator was
a. 0.
100.0.
c. 4.
240.0.

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2011, this country’s GDP deflator was
a. 9.
100.0.
c. 5.
169.2.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

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TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. In 2012, this country’s GDP deflator was
a. 2.
100.0.
c. 4.
240.0.

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. From 2012 to 2013, this country’s output grew
a. 2%.
29.0%.
c. 6%.
73.9%.

ANSWER: b

POINTS: 1

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KEYWORDS: BLOOM’S: Analysis

NOTES: r

Refer to Table 23-6. This country’s inflation rate from 2010 to 2011 was
a. 38%.
38.20%.
c. 20%.
41.90.

ANSWER: b

POINTS: 1

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KEYWORDS: BLOOM’S: Application

NOTES: r

Refer to Table 23-6. This country’s inflation rate from 2012 to 2013 was
a. 6%.
25.8%.
c. 8%.
100.0%.

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

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KEYWORDS: BLOOM’S: Application

NOTES: r

Table 23-7

The table below contains data for the country of Togogo. The base year is 1974.

Year	Nominal GDP	GDP Deflator
1974	$2000	100
1975	$3000	120
1976	$3750	150
1977	$6000	200

Refer to Table 23-7. Which of the following is not correct?
1. This economy experienced growth from 1974 to
2. This economy experienced growth from 1975 to
3. This economy experienced growth from 1976 to
4. This economy experienced inflation from 1974 to 1975, from 1975 to 1976, and from 1976 to

ANSWER: b

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Refer to Table 23-7. From 1975 to 1976,
1. inflation was 25% and output did not
2. inflation was 25% and output
3. inflation was 50% and output did not
4. inflation was 50% and output

ANSWER: a

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Refer to Table 23-7. From 1976 to 1977,
1. inflation was 3% and output grew at a rate of 20%.
2. inflation was 3% and output grew at a rate of 60%.
3. inflation was 50% and output grew at a rate of 20%.
4. inflation was 50% and output grew at a rate of 60%.

ANSWER: a

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Table 23-8

A country produces only meat and potatoes in the quantities and prices listed below. Use 2011 as the base year.

Year	Price of Potatoes	Quantity of Potatoes	Price of Meat	Quantity of Meat
2011	$2.00	10	$20	6
2012	$2.50	15	$22	7
2013	$3.50	20	$25	8

Refer to Table 23-8. In 2012, nominal GDP is
1. $191.50, and real GDP is $170.
2. $157, and real GDP is $170.
3. $191.50, and real GDP is $157.
4. $170, and real GDP is $227.50.

ANSWER: a

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Refer to Table 23-8. In 2012, GDP deflator is
a.

ANSWER: d

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Table 23-9

A country produces only ice cream and pie. Quantities and prices of these goods for the last several years are shown below. The base year is 2008.

Prices and Quantities

Year	Price of Ice Cream	Quantity of Ice Cream	Price of Pie	Quantity of Pie
2008	$2.50	40	$5.00	20
2009	$3.00	50	$6.00	25
2010	$4.00	40	$6.00	30

Refer to Table 23-9. In 2009, this country’s
1. real GDP was $250, and the GDP deflator was
2. real GDP was $250, and the GDP deflator was
3. real GDP was $240, and the GDP deflator was
4. real GDP was $240, and the GDP deflator was

ANSWER: b

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Refer to Table 23-9. This country’s inflation rate from 2009 to 2010 to the nearest tenth was
1. 9%
2. 8%
3. c. 3%
4. None of the above is correct.

ANSWER: c

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Which of the following is not a correct statement about the growth of real GDP in the S. economy?
1. Real GDP in 2009 was almost four times its 1965
2. Growth was steady between 1965 and
3. Continued growth in real GDP enables the typical American to enjoy greater economic prosperity than his or her parents and grandparents
4. The output of goods and services produced grew on average about 3 percent per year between 1965 and

ANSWER: b

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A recession has traditionally been defined as a period during which
1. nominal GDP declines for two consecutive
2. nominal GDP declines for four consecutive
3. real GDP declines for two consecutive
4. real GDP declines for four consecutive

ANSWER: c

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Recessions are not associated with which of the following?
1. increased bankruptcies
2. falling profits
3. falling incomes
4. falling unemployment

ANSWER: d

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A recession is always associated with
1. the end of a
2. slowly growing real
3. rising
4. declining real

ANSWER: d

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Much of macroeconomics attempts to explain
1. changes in the price of oil and
2. long-run growth and short-run fluctuations in real
3. changes in the growth rate of state government
4. changes in the prices and quantities of individual goods and

ANSWER: b

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Which of the following statements about recessions is true?
1. An old rule of thumb defining recession is two consecutive quarters of falling nominal
2. Recessions occur at regular intervals and last standard amounts of
3. There is no ironclad rule for the declaration of
4. Recessions are associated with low unemployment and high

ANSWER: c

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Multiple Choice – Section 05: Is GDP a Good Measure of Economic Well-Being?

GDP per person tells us the income and expenditure of the
1. richest person in the
2. poorest person in the
3. average person in the
4. entire

ANSWER: c

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GDP is used as the basic measure of a society’s economic well-being. A better measure of the economic well-being of individuals in society is
1. saving per
2. GDP per
3. government expenditures per
4. investment per business

ANSWER: b

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KEYWORDS: BLOOM’S: Comprehension

Which of the following is a true statement?
1. International data leave few doubts that a nation’s GDP per person is associated with its citizens’ standard of
2. Rich and poor countries often have vastly different standards of living, but similar levels of real GDP per
3. The value of leisure time is included in the calculation of GDP per
4. International data indicate that measures on the distribution of income are closely associated with GDP per

ANSWER: a

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Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that
1. GDP is not a useful measure of society’s
2. GDP is still a useful measure of society’s welfare because providing these other attributes is the responsibility of
3. GDP is still a useful measure of society’s welfare because it measures a nation’s ability to purchase the inputs that can be used to help produce the things that contribute to
4. GDP is still the best measure of society’s welfare because these other values cannot actually be

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

GDP does not reflect
1. the value of
2. the value of goods and services produced at
3. the quality of the
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

Which of the following statements regarding GDP is correct?
1. GDP includes factory production, but not any harm that may be inflicted on the
2. GDP accounts for all activities taking place outside
3. GDP provides detailed information about the distribution of
4. GDP is a good measure of economic well-being for all

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

GDP is not a perfect measure of well-being; for example,
1. GDP incorporates a large number of non-market goods and services that are of little value to
2. GDP places too much emphasis on the value of
3. GDP fails to account for the quality of the
4. All of the above are

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

GDP is not a perfect measure of well-being; for example,
1. GDP excludes the value of volunteer
2. GDP does not address the distribution of
3. GDP does not address environmental
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct?
1. GDP would definitely increase, despite the fact that GDP includes
2. GDP would definitely increase because GDP excludes
3. GDP could either increase or decrease because GDP includes
4. GDP could either increase or decrease because GDP excludes

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Application

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?
1. GDP would definitely increase, despite the fact that GDP includes environmental
2. GDP would definitely decrease because GDP includes environmental
3. GDP would definitely increase because GDP excludes environmental
4. GDP could either increase or decrease because GDP excludes environmental

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Application

The underground economy
1. excludes the amount of criminal activity in an
2. is larger for developed nations than developing nations when measured as a percent of
3. includes otherwise legal transactions that go unreported or
4. in the United States is insignificant is size when compared to the official measure of

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Knowledge

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person?
1. It more than
2. It increased, but it less than
3. It was
4. It

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person
1. grew by more than 12
2. grew, but by less than 12
3. was

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

Suppose that over the last twenty-five years a country’s nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?
1. It more than
2. It increased, but it less than
3. It was
4. It

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Analysis

The information for 2008 in millions in the table below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of real GDP per person from highest to lowest?

Country	GDP (Constant US$)	GDP(Current US$)	Population
Germany	2,091,573	3,649,493	82.11
Japan	5,166,281	4,910,839	127.70
U.S.	11,513,872	14,093,309	304.06

Japan, Germany, United States
Japan, United States, Germany
Germany, United States, Japan
United States, Japan, Germany

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

Country	GDP (Constant US$)	GDP(Current US$)	Population
Argentina	$394,595	$328,465	39.88
Bolivia	$11,373	$16,674	9.69
Peru	$84,241	$129,109	28.84

Argentina, Bolivia, Peru
Argentina, Peru, Bolivia
Bolivia, Argentina, Peru
Peru, Bolivia, Argentina

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

Country	GDP (Constant US$)	GDP(Current US$)	Population
Ghana	7,690	16,653	23.35
Kenya	17,569	30,354	38.76
Tanzania	15,394	20,490	41.276

Ghana, Kenya, Tanzania
Ghana, Tanzania, Kenya
Kenya, Tanzania, Ghana
Kenya, Ghana, Tanzania

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a population of 40

Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population of 50 million. From these numbers which country is likely to have had the higher standard of living?

Country A because it had the higher nominal GDP per
Country B because it had the higher nominal GDP per
Country A because it had the higher real GDP per
Country B because it had the higher real GDP per

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

On the basis of the information presented in the table below, which presents the correct ordering of real GDP per person from highest to lowest?

Country	Real GDP	Population
Atlantis	$4,800 billion	127 million
Merpois	$240 billion	7.2 million
Bensalem	$9,800 billion	280 million

Atlantis, Merpois, Bensalem
Bensalem, Atlantis, Merpois
Atlantis, Bensalem, Merpois
Bensalem, Merpois, Atlantis

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

International data on GDP and socioeconomic variables
1. are inconclusive about the relationship between GDP and the economic well-being of
2. suggest that poor nations actually might enjoy a higher standard of living than do rich
3. leave no doubt that a nation’s GDP is closely associated with its citizens’ standard of
4. indicate that there are few real differences in living standards around the world, in spite of the large differences in GDP between

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with
1. longer life expectancy and a lower percentage of the population that is
2. longer life expectancy and a higher percentage of the population that is
3. very nearly the same life expectancy and a lower percentage of the population that is
4. very nearly the same life expectancy and a higher percentage of the population that is

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Countries with low GDP per person tend to have
1. lower rates of child
2. fewer infants with low birth
3. higher rates of infant
4. more access to safe drinking

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Otherwise legal transactions that go unreported or unrecorded are called
1. the underground
2. the shadow
3. the informal
4. All of the above are

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Knowledge

Underground economic activity as a percentage of GDP was highest in
4. the United

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

Rank the countries from highest to lowest based on underground economic activity as a percentage of
1. Bolivia, Thailand, United States,
2. Thailand, United States, Sweden,
3. United States, Bolivia, Sweden,
4. Bolivia, Thailand, Sweden, United

ANSWER: d

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Comprehension

True/False and Short Answer

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Business Cycles

KEYWORDS: BLOOM’S: Knowledge

Macroeconomic statistics include GDP, the inflation rate, the unemployment rate, retail sales, and the trade
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Knowledge

Macroeconomic statistics tell us about a particular household, firm, or
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Knowledge

Macroeconomics is the study of the economy as a
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Knowledge

The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:General Macro

KEYWORDS: BLOOM’S: Knowledge

Microeconomics and macroeconomics are closely
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Knowledge

The basic tools of supply and demand are central to microeconomic analysis but are of little use to
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Supply and Demand

KEYWORDS: BLOOM’S: Knowledge

GDP is the most closely watched economic statistic because it is thought to be the best single measure of a society’s economic well-being.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.110 – LO: 23-0

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

GDP can measure either the total income of everyone in the economy or the total expenditure on the economy’s output of goods and services, but GDP cannot measure both at the same
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

For an economy as a whole, income must exceed
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

An economy’s income is the same as its expenditure because every transaction has a buyer and a
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

GDP is the market value of all final goods and services produced by a country’s citizens in a given period of
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP is the market value of all final goods and services produced within a country in a given period of
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP adds together many different kinds of products into a single measure of the value of economic activity by using market
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

S. GDP includes the market value of rental housing, but not the market value of owner-occupied housing services.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

S. GDP excludes the production of most illegal goods.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP excludes the value of intermediate goods because their value is included in the value of final
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Both the value of hamburgers sold by a restaurant and the value of the beef it used to make these hamburgers are included in
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

GDP includes the value of paper clips but does not also count the value of the metal used to make
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Additions to inventory subtract from GDP, and when the goods in inventory are sold, the reductions in inventory add to
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

If a good produced this quarter goes into inventory, then it is included in this period’s GDP. If it is sold in the next quarter, it will have no effect on
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

While GDP includes tangible goods such as books and bug spray, it excludes intangible services such as the services provided by teachers and
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

When an American doctor opens a practice in Bermuda, his production there is part of S. GDP.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

If the S. government reports that GDP in the third quarter was $16 trillion at an annual rate, then the amount of income and expenditure during quarter three was $4 trillion.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

The government computes measures of income other than GDP because these other measures usually tell different stories about overall economic
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

When an American doctor opens a practice in Bermuda, his production there is part of S. GNP.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Application

Disposable personal income is the income that households and noncorporate businesses have left after satisfying all their obligations to the
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output National Income Accounting

KEYWORDS: BLOOM’S: Knowledge

Expenditures by households on education are included in the consumption component of
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Expenditures by households on education are included in the investment component of
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Most goods whose purchases are included in the investment component of GDP are used to produce other goods in future
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Consumption, Saving, and Investment Investment

KEYWORDS: BLOOM’S: Knowledge

New home construction is included in the consumption component of
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Changes in inventory are included in the investment component of
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Consumption, Saving, and Investment Investment

KEYWORDS: BLOOM’S: Knowledge

If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm is considered to have “purchased” the good so it will count as part of that period’s investment
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

The investment component of GDP refers to financial investment in stocks and
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

The government’s purchases of goods but not its purchases of services are included in
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

If the value of an economy’s imports exceeds the value of that economy’s exports, then net exports is a negative
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

If someone in the United States buys a surfboard produced in Australia, then that purchase is included in both the consumption component of S. GDP and the net exports component of U.S. GDP.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

A consumer buys toys made in China. The value of the toys is included only in the net exports component of
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

If Brazil buys $100 million of tractors from the S., then U.S. net exports will decrease.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

The overall effect of accounting for purchases of foreign goods in GDP reduces
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Expenditure Approach

KEYWORDS: BLOOM’S: Application

If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Expenditure Approach

KEYWORDS: BLOOM’S: Application

If exports are $500, GDP is $8000, government purchases are $1200, imports are $700, and investment is $800, then consumption is $6200.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Expenditure Approach

KEYWORDS: BLOOM’S: Analysis

If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Expenditure Approach

KEYWORDS: BLOOM’S: Analysis

S. GDP was almost $14 billion in 2009.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

In 2009, government purchases was the largest component of S. GDP.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

The output of goods and services produced in the United States has grown on average 3 percent per year since
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Knowledge

If total spending rises from one year to the next, then the economy must be producing a larger output of goods and
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Comprehension

An increase in nominal S. GDP necessarily implies that the United States is producing a larger output of goods and services.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Growth

KEYWORDS: BLOOM’S: Comprehension

Nominal GDP uses constant baseyear prices to place a value on the economy’s production of goods and services, while real GDP uses current prices to place a value on the economy’s production of goods and
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Real GDP evaluates current production using prices that are fixed at past levels and therefore shows how the economy’s overall production of goods and services changes over
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

The term real GDP refers to a country’s actual GDP as opposed to its estimated
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Changes in real GDP reflect only changes in the amounts being
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

If real GDP and the GDP deflator both rise, then it must be that nominal GDP
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Real GDP is a better gauge of economic well-being than is nominal
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Knowledge

Changes in the GDP deflator reflect only changes in the prices of goods and
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Comprehension

If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

If nominal GDP is $12,000 and the GDP deflator is 80, then real GDP is $15,000.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Economists use the term inflation to describe a situation in which the economy’s overall production level is
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Knowledge

The GDP deflator can be used to take inflation out of nominal
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 5%.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

If the GDP deflator in 2009 was 150 and the GDP deflator in 2010 was 175, then the inflation rate in 2010 was 25%.
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

In 2009, the level of S. real GDP was close to four times its 1965 level.
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Periods during which real GDP rises are called
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Business Cycles

KEYWORDS: BLOOM’S: Knowledge

Recessions are associated with lower incomes, rising unemployment, and falling
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Business Cycles

KEYWORDS: BLOOM’S: Knowledge

If real GDP is higher in one country than in another, then we can be sure that the standard of living is higher in the country with the higher real
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

Real GDP per person tells us the income and expenditure of the average person in the
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP does not directly measure those things that make life worthwhile, but it does measure our ability to obtain many of the inputs into a worthwhile
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Knowledge

GDP is a good measure of economic well-being for all
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

GDP does not make adjustments for leisure time, environmental quality, or volunteer
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Knowledge

GDP is adjusted to reflect changes in the quality of the environment such as changes in air and water
1. True
2. False

ANSWER: False

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Knowledge

Typically in countries with lower levels of real GDP person, a smaller percentage of the population is
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Knowledge

Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per
1. True
2. False

ANSWER: True

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist

KEYWORDS: BLOOM’S: Knowledge

GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not

ANSWER: GDP excludes some products because they are so difficult to measure. These products include services performed by individuals for themselves and their families, and most goods that are produced and consumed at home and, therefore, never enter the marketplace. In addition, illegal products are not included in GDP.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP, but the value of intermediate goods produced and not sold is included directly as part of

ANSWER: Intermediate goods produced and sold during the year are not included separately as part of GDP because the value of those goods is included in the value of the final goods produced from them. If the intermediate good is produced but not sold during the year, its value is included as inventory investment for the year in which it was produced. If inventory investment was not included as part of GDP, true production would be underestimated for the year the intermediate good went into inventory, and overestimated for the year the intermediate good is used or sold.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Since it is counted as investment, why doesn’t the purchase of earthmoving equipment from China by a S. corporation increase U.S. GDP?

ANSWER: The purchase of foreign equipment is counted as investment, but GDP measures only the value of production within the geographic borders of the United States. In order to avoid including the value of the imported equipment, imports are subtracted from GDP. Hence, the value of the equipment in investment is canceled by subtracting its value as an import.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Identify the immediate effect of each of the following events on S. GDP and its components.
1. James receives a Social Security
2. John buys an Italian sports
3. Henry buys domestically produced tools for his construction

ANSWER: a. Since this is a transfer payment, there is no change to GDP or to any of its components.

Consumption and imports will rise and cancel each other out so that there is no change in U.S. GDP.
This increases the investment component of GDP and so increases GDP

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Between 1929 and 1933, NNP measured in current prices fell from $96 billion to $48 billion. Over the same period, the relevant price index fell from 100 to
1. What was the percentage decline in nominal NNP from 1929 to1933?
2. What was the percentage decline in real NNP from 1929 to 1933? Show your

ANSWER: a. NNP measured in current prices is nominal NNP. Nominal NNP fell from $96billion to $48 billion, a decline of 50 percent.

Real NNP is nominal NNP divided by the price index and multiplied by 100. RealNNP in 1929 was ($96 b/100) 100 = $96 b. Real NNP in 1933 was ($48 b/75)100 = $64 b. Real NNP fell from $96 billion to $64 billion, a decline of 33 percent.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain

ANSWER: Real income is nominal income adjusted for general increase in prices. If your paycheck is higher this year than last, your nominal income has increased. Whether your real income has increased or not depends on what has happened since last year to the level of prices of things you buy. If the percentage increase in prices is less than the percentage increase in nominal income, then real income has increased. If the percentage increase in prices is greater than the percentage increase in nominal income, the real income has decreases.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Purchasing Power

KEYWORDS: BLOOM’S: Comprehension

S. real GDP is substantially higher today than it was 60 years ago. What does this tell us, and what does it not tell us, about the well-being of U.S. residents?

ANSWER: Since this is in real terms, it tells us that the U.S. is able to make a lot more stuff than in the past. Some of the increase in real GDP is probably due to an increase in population, so we could say more if we knew what had happened to real GDP per person. Supposing that there was also an increase in real GDP per person, we can say that the standard of living has risen. Material things are an important part of well-being. Having sufficient amounts of things such as food, shelter, and clothing are fundamental to well-being. Other things such as security, a safe environment, access to safe water, access to medical care, justice, and freedom also matter. However, many of these things are more easily obtained by being able to produce more using fewer resources. Countries with higher real GDP per person tend to have longer life spans, less discrimination towards women, less child labor, and a higher rate of literacy.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Limitations

KEYWORDS: BLOOM’S: Comprehension

Problems

For the economy as a whole, how does income compare to expenditures?

ANSWER: For the economy as a whole income and expenditures are equal. This is because every dollar of spending by some buyer is a dollar of income for some seller.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

In the circular flow diagram what are the three types of payments from firms to factors of production? Is the sum of these payments greater than, less than, or equal to GDP?

ANSWER: Wages, rents, and profits. The sum of these payments equals GDP.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Figure 23-2.

Refer to Figure 23-2. Identify the location for markets for factors of production and markets for goods and

ANSWER: X is markets for factors of production, Z is markets for goods and services.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Refer to Figure 23-2. Identify the location of firms and

ANSWER: W is firms, and Y is households.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Refer to Figure 23-2. List the locations associated with the flow of inputs and

ANSWER: C, D, M and K.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.111 – LO: 23-1

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Thinking Like an Economist Circular Flow Model

KEYWORDS: BLOOM’S: Knowledge

Define gross domestic

ANSWER: The market value of all final goods and services produced within a country in a given period of time.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Define GDP. Remember to be specific about what it

ANSWER: GDP is the market value of all final goods and services produced within a country in a given period of time.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

GDP excludes most of two types of production. List

ANSWER: GDP excludes most items that are produced and consumed at home.

GDP excludes most goods that are produced and sold illicitly.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Are sales of used goods included in GDP? Explain why or why not. Hint: Remember how GDP is

ANSWER: Sales of used goods are not included. GDP measures production within a given period.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Alexandria, a British citizen, owns and manages a fish and chips shop in Washington, C.

She buys fresh food produced by U.S. workers, pays utilities to a U.S. company, and employs only U.S. citizens. What part, if any, of the restaurant’s production is included in U.S. GDP? What part, if any, of the restaurant’s production is included in U.S. GNP?

ANSWER: All of the output is included in U.S. GDP. The value of the output produced by American citizens is included in U.S. GNP. The value added by Alexandria’s labor and capital is excluded from U.S. GNP.

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

A farmer sells sugar to a candy producer for $150. If the producer uses this sugar to make candy that sells for $200, what is the total contribution to GDP from these transactions?

ANSWER: $200

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

How frequently is S. GDP reported? Is GDP adjusted for seasonality?

ANSWER: GDP is reported every quarter. It is adjusted for seasonality.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.112 – LO: 23-2

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Explain how GNP differs from

ANSWER: GNP includes income from a nation’s permanent residents that are abroad, but

excludes income of foreign nationals that are located within the nation.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output Gross National Product

KEYWORDS: BLOOM’S: Knowledge

List the four components of

ANSWER: consumption, investment, government purchases, and net exports

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

What are exports, and how are they different from imports?

ANSWER: Exports are domestically produced goods that are bought by foreigners; imports differ because they are produced abroad and are purchased by domestic residents.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Identify the largest and smallest components of

ANSWER: Consumption is the largest component of GDP, net exports are the smallest.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Which component of GDP includes spending on new structures and equipment?

ANSWER: investment

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

What are transfer payments, and how do they affect the calculation of GDP?

ANSWER: Transfer payments are income benefits paid to individuals from the government. Since they are excluded from government purchases, they do not affect GDP.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:National Income Accounting

KEYWORDS: BLOOM’S: Knowledge

Consumption is $5.5 trillion, investment is $1 trillion, government expenditures are $1.5 trillion, transfer payments are $.5 trillion, exports are $.75 trillion and imports are $1.25 trillion. What is GDP?

ANSWER: GDP = C + I + G + NX = $5.5 trillion + $1 trillion + $1.5 trillion + $.75 trillion – $1.25 trillion = $7.5 trillion

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Consumption is $7 trillion, investment is $1.5 trillion, government expenditures are $2 trillion, government transfer payments are $1 trillion, exports are $1.50 trillion and imports are $1.25 trillion. What is GDP?

ANSWER: GDP = C + I + G + NX = $7 trillion + $1.5 trillion + $2 trillion + $1.5 trillion – $1.25 trillion= $10.75 trillion

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Calculate GDP for a country with investment of $2 trillion, government purchases of $3 trillion, capital depreciation of $1.5 trillion, consumption of $10 trillion, exports of $3.4 trillion, and imports of $3.9

ANSWER: $14.5 trillion

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

Calculate GDP for an economy with exports of $5 trillion, investment of $1.5 trillion, consumption spending of $11 trillion, imports of $6 trillion, and government purchases of $3

ANSWER: $14.5 trillion

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Application

What three types of goods are included in investment spending?

ANSWER: capital equipment, inventories, and structures which includes residential construction

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Consumption, Saving, and Investment Investment

KEYWORDS: BLOOM’S: Knowledge

Last quarter Newton computers produced 3,000 computers. Two thousand of these computers were sold to households, 750 were sold to businesses, and 250 were added to Newton’s inventory. How many of the computers should have been included in last quarter’s GDP?

ANSWER: 3,000

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Comprehension

Identify which of the following are included in the government purchases component of the salary paid to a state court judge unemployment insurance benefits the payment made by the federal government for a jet fighter social security payments a county builds a jail building

ANSWER: The following are included in government expenditures: the salary paid to a state court judge the payment made by the federal government for a fighter jet a country builds a jail building

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP

KEYWORDS: BLOOM’S: Knowledge

Foreign countries buy $1.2 trillion of S. goods and services. U.S. residents purchase $1.8 trillion of foreign goods and services. What is net exports?

ANSWER: -$600 billion

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

The S. buys $500 billion of goods and $250 billion of services from foreign countries. Foreign countries buy $250 billion of goods and $300 billion of services from the U.S. What is net exports?

ANSWER: -$200 billion

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Java Hut, a S. coffee retailer, buys $10 million worth of coffee beans from Colombia. It also pays $5 million for paper cups and utilities, all produced in the U.S. It sells the coffee it produces using the above inputs to U.S. consumers for $50 million. Overall how do these expenditure affect net exports? How do these expenditures effect U.S. consumption?

ANSWER: Net exports are $10 million less than otherwise. $50 million of expenditures are included in U.S. consumption.

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

A S.-owned automobile factory uses $50 million worth of materials produced in the U.S. and $10 million worth of material purchased from foreign countries to produce $100 million of automobiles. $70 million worth of these automobiles are purchased by U.S. consumers, $25 million are sold in foreign countries, and $5 million are added to inventory. How much of this production is included in U.S. GDP? By how much do these transactions alone affect U.S. net exports?

ANSWER: $90 million is included in U.S. GDP. These transactions raise net exports by $15 million.

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Explain how real GDP differs from nominal

ANSWER: Real GDP reflects only the changes in production and is not affected by the changes in prices.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

What measure of GDP shows the value of goods and services produced if we valued these good and services at the prices that prevailed in some specific year in the past?

ANSWER: real GDP

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

Write the formula for calculating a GDP deflator using only nominal and real

ANSWER: POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

Write the formula for calculating a country’s inflation rate using the GDP

ANSWER: POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Knowledge

Calculate the inflation rate for a country where the GDP deflator rises from 120 to

ANSWER: 37.5%

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Nominal GDP is $15 trillion and real GDP is $10 trillion. What is the GDP deflator? Show your

ANSWER: The GDP Deflator = Nominal GDP/Real GDP = 100 x $15 trillion/$10 trillion = 150.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Nominal GDP is $12 trillion and real GDP is $15 trillion. What is the GDP deflator? Show your

ANSWER: The GDP Deflator = 100 x Nominal GDP/Real GDP = 100 x $12 trillion/$15 trillion = 80.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

In 2012 a country had a real GDP $15.4 trillion and GDP deflator of 125. If that country’s GDP deflator equals 115 in 2013, what is the rate of inflation in 2013?

ANSWER: -8%

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

In 2011 a country had a real GDP of $13.89 trillion and GDP deflator of 110. In 2012 it had a nominal GDP of $17.8 trillion and real GDP of 24 trillion. What is the rate of inflation in 2012?

ANSWER: 13.6%

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

In 2010 a country had nominal GDP of 6 trillion euro and real GDP of 5 trillion euro. In 2011 it had nominal GDP of 5 trillion euro and real GDP of 5.2 trillion euro. What was its inflation rate in 2011? Show your work.

ANSWER: The GDP deflator for 2010 was 100 x 6/5 = 120.

The GDP deflator for 2011 was 100 x 6.5/5.2 = 125. The inflation rate was (125-120)/120 = 5/120 = 4.167.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

Table 23-11

The country of Batavia produces only chocolates and watches. Below is a table with recent information on Batavia production and prices. The base year is 2009.

Prices and Quantities

Year	Price of A Box of Chocolates	Boxes of Chocolates	Price of Watches Quantity of Watches
2008	$4	100	$50	10
2009	$5	90	$50	15
2010	$5	100	$60	15
2011	$6	80	$65	12

Refer to Table 23-11.

What was nominal GDP, real GDP, and the GDP deflator for 2008?

ANSWER: Nominal GDP was $4×100 + $50X10 = $900. Real GDP was $5×100 + $50×10 =$1,000. The GDP deflator = Nominal GDP/Real GDP = $900/$1,000 = 90.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

41. Refer to Table 23-11.

What was nominal GDP, real GDP, and the GDP deflator for 2009? Show your work.

ANSWER: Nominal GDP was $5×90 + $50×15 = $1,200. Real GDP was $5×90 + $50×15 =$1,200 The GDP Deflator = 100 x Nominal GDP/Real GDP = 100.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

42. Refer to Table 23-11.

What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work.

ANSWER: Nominal GDP was $5×100 + $60×15 = $1,400. Real GDP was $5×100 + $50×15 = $1,250. The GDP deflator = 100 x nominal GDP/real GDP = 100 x $1,400/$1,250 = 112

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Knowledge

43. Refer to Table 23-11.

What was nominal GDP, real GDP, and the GDP deflator for 2011? Show your work.

ANSWER: Nominal GDP was $6×80 + $65×12 = $1,260. Real GDP was $5×80 + $50×12 = $1000 The GDP deflator = 100 x $1260/$1000 = 126.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

44. Refer to Table 23-11.

What was the inflation rate for 2010? Show your work.

ANSWER: 2009 is the base year so the GDP Deflator is 100.

Nominal GDP was $5×90 + $50×15 = $1,200. Real GDP was $5×90 + $50×15 = $1,200. The GDP Deflator = 100 x Nominal GDP/Real GDP = 100. For 2010 Nominal GDP was $5×100 + $60×15 = $1,400. Real GDP was $5×100 + $50×15 = $1,250. The GDP deflator = 100 x nominal GDP/real GDP = 100 x $1,400/$1,250 = 112.

The inflation rate for 2010 = (2010 GDP Deflator – 2009 GDP Deflator)/2009 GDP Deflator

= (112 – 100)/100 = 12/100 = 12%

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Analysis

45. Refer to Table 23-11.

What was the inflation rate for 2011? Show your work.

ANSWER: For 2010 the GDP Deflator was 112. Nominal GDP was $5×100 + $60×15 = $1,400. Real GDP was $5×100 + $50×15 = $1,250. The GDP deflator = 100 x nominal GDP/real GDP = 100 x $1,400/$1,250 = 112. For 2011 the GDP Deflator was 126.

Nominal GDP was $6×80 + $65×12 = $1,260. Real GDP was $5×80 + $50×12 = $1000. The GDP deflator = 100 x $1260/$1000 = 126. The inflation rate for 2011 = (GDP Deflator for 2011 – GDP Deflator for 2010)/GDP Deflator for 2010 = (126 -112)/112 = 14/112 = 12.5%

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.116 – LO: 23-3

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Analysis

Table 23-12

A country produces only ice cream and cake in the quantities and prices listed below. Use 2011 as the base year.

Year	Price of Ice Cream	Quantity of Ice Cream	Price of Cake	Quantity of Cake
2011	$2.00	200	$10	40
2012	$2.30	250	$14	50
2013	$2.75	280	$18	80

Refer to Table 23-12. Calculate real and nominal GDP for the year

ANSWER: Nominal GDP is $1,275 and real GDP is $1,000.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Refer to Table 23-12. Calculate real and nominal GDP for the year

ANSWER: Nominal GDP is $2,210 and real GDP is $1,360.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Refer to Table 23-12. Calculate the GDP deflator for 2012 and

ANSWER: GDP deflator is 127.5 for 2012, and 162.5 for 2013.

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output GDP Deflator

KEYWORDS: BLOOM’S: Application

Refer to Table 23-12. Calculate the rate of inflation for

ANSWER: 27.5%

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: ECON.MANK.15.114 – LO: 23-4

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Price Level Concepts Inflation

KEYWORDS: BLOOM’S: Application

Explain the pattern seen between GDP per person and quality of life measures such as life expectancy, literacy, and Internet

ANSWER: They are closely associated; countries with high GDP per person have high quality of life measures, while countries with low GDP per person have low quality of life measures

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: ECON.MANK.15.115 – LO: 23-5

NATIONAL STANDARDS: United States – BUSPROG: Analytic

TOPICS: DISC:Measuring Output

KEYWORDS: BLOOM’S: Application

Brief Principles of Macroeconomics 7th Edition by N. Gregory Mankiw - Test Bank

Description

Additional Information

Reviews

Figure 23-1.

Table 23-1

Table 23-2

Table 23-3

Table 23-4

Table 23-5

Table 23-10

Table 23-6

Table 23-7

Table 23-8

Table 23-9

Figure 23-2.

Table 23-11

Prices and Quantities

41. Refer to Table 23-11.

42. Refer to Table 23-11.

43. Refer to Table 23-11.

44. Refer to Table 23-11.

45. Refer to Table 23-11.

Table 23-12

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Nursing Health Assessment A Best Practice Approach 3rd Edition by Jensen

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Brief Principles of Macroeconomics 7th Edition by N. Gregory Mankiw - Test Bank

Description

Additional Information

Reviews

Figure 23-1.

Table 23-1

Table 23-2

Table 23-3

Table 23-4

Table 23-5

Table 23-10

Table 23-6

Table 23-7

Table 23-8

Table 23-9

Figure 23-2.

Table 23-11

Prices and Quantities

41. Refer to Table 23-11.

42. Refer to Table 23-11.

43. Refer to Table 23-11.

44. Refer to Table 23-11.

45. Refer to Table 23-11.

Table 23-12

Additional information

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Nursing Health Assessment A Best Practice Approach 3rd Edition by Jensen

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Women’s Gynecologic Health 3rd Edition By Kerri Durnell Schuiling

Advanced Health Assessment & Clinical Diagnosis in Primary Care 5th Edition by Joyce E. Dains

Beckman And Ling's Obstetrics and Gynecology Nursing 8th Edition

Alexander's Care of the Patient in Surgery 16 Th Edition By Jane Rothrock

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