HW Chapter 07: GDP and Real GDP

Question 1 (1 point)

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.
In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion. Which of
the following statements is true?
Question 1 options:
Per-capita GDP is necessarily higher in year 2 than year 1.
People are "better off" in year 2 than in year 1 because there are more goods and services in
year 2 than year 1.
Government transfer payments were higher in year 2 than in year 1.
a and b
none of the above
Question 2 (1 point)

In the United States, the largest expenditure component in GDP is

Question 2 options:
gross private domestic investment.
government purchases of goods and services.
consumption expenditures.
net exports.
none of the above
Question 3 (1 point)

Countries with a large GDP must also have a large per-capita GDP.
Question 3 options:
TRUE
FALSE
Question 4 (1 point)

A business cycle refers to the

Question 4 options:
continued expansion in Real GDP.
recurrent swings (up and down) in Real GDP.
continued decline in Real GDP.
period when Real GDP grows at unusually high rates.
none of the above
Question 5 (1 point)

In the United States, which is the largest dollar figure?

Question 5 options:
national income
gross domestic product
net domestic product
personal income
Question 6 (1 point)

The typical U.S. business cycle, measured peak to peak, lasts approximately
Question 6 options:
4 to 5 years.
8 to 10 years.
1 to 3 years.
6 months to 2 years.
Question 7 (1 point)

Refer to Exhibit 7-3. Net exports is equal to

Question 7 options:
200
-200
600
-1400
1400
Question 8 (1 point)

Refer to Exhibit 7-1. What is the value of national income?

Question 8 options:
4351
4252
4403
2996
4542
Question 9 (1 point)
Suppose that nondurable goods spending is $200 billion, durable goods spending is $400 billion,
new residential housing spending is $500 billion, and spending on services is $700 billion. What
does consumption equal?
Question 9 options:
$600 billion
$1,100 billion
$1,800 billion
$1,300 billion
There is not enough information to answer this question.
Question 10 (1 point)

GDP includes some nonmarket goods.

Question 10 options:
TRUE
FALSE
Question 11 (1 point)

In 1820 the country with the highest per capita GDP was ______________________. In 1900
the country that ranked #1 in terms of per capita GDP was ___________________ and fifty
years later the top ranking was held by _________________________.
Question 11 options:
the Netherlands; New Zealand; the United States.
the Netherlands; Australia; Switzerland.
the United States; the United States; the United States.
Austria; Australia; New Zealand.
Question 12 (1 point)

What is the proper sequence of the phases of a business cycle?

Question 12 options:
peak, contraction, trough, expansion, recovery
peak, contraction, recovery, trough, expansion
peak, contraction, trough, recovery, expansion
contraction, peak, trough, recovery, expansion
recovery, trough, peak, expansion, contraction
Question 13 (1 point)

Refer to Exhibit 7-2. GDP in 1990 is

Question 13 options:
 49
51
86
92
impossible to calculate without the CPI.
Question 14 (1 point)

Which of the following would not be included in the calculation of this year's GDP?
Question 14 options:
a headlight bulb purchased at Joe's Auto Supply by Olivia to replace a burnt out bulb in her
car
a headlight bulb purchased by Ford Motor Co. from a supplier
a headlight bulb produced but not sold this year and thus ending up as inventory
none of the above, i.e., all would be included
Question 15 (1 point)

Personal income is
Question 15 options:
equal to GDP.
that portion of national income that can be used for consumption and saving.
the sum of all payments to suppliers of the factors of production.
the amount of income that individuals actually receive.
another term for disposable income.
Question 16 (1 point)

The standard definition of "recession" is

Question 16 options:
a period of a positive frictional unemployment rate.
two consecutive quarters of falling Real GDP.
the lowest point in a business cycle.
a period of negative inflation.
Question 17 (1 point)

Refer to Exhibit 7-4. Did Country A experience a recession (based on the standard definition) in
2012?
Question 17 options:
 Yes, because Real GDP declined during two consecutive quarters in 2012
No, because Real GDP did not decline during three consecutive quarters in 2012.
Yes, because Real GDP was lower at the end of the year than it was at the beginning of the
year.
This information cannot be determined because the determination of a recession is based
upon GDP not Real GDP.
Question 18 (1 point)

In 2011, the U.S. GDP was approximately

Question 18 options:
$15.27 trillion.
$5.15 trillion.
$10.67 trillion
$20.83 trillion
Question 19 (1 point)

Underground activities are not counted in GDP because

Question 19 options:
some underground activities are illegal and the government doesn't want to place, for
instance, drug dealers on an equal footing with small businesses.
there are no written records of underground activities.
of a decision made in the 1930s and no one has gotten around to changing it yet.
although it is possible to accurately measure underground activities, it is harder than
measuring above-ground activities because with the latter, one doesn't have to dig as deep.
Question 20 (1 point)

To derive net domestic product (NDP) from gross domestic product (GDP), we must subtract
Question 20 options:
depreciation or capital consumption allowance from GDP.
gross private domestic investment from GDP.
imports from GDP.
inventory investment from GDP.
the statistical discrepancy from GDP.
Question 21 (1 point)

In 1900, the country with the highest per capita GDP was
Question 21 options:
Australia.
 New Zealand.
the United States.
Belgium.
the Netherlands.
Question 22 (1 point)

Suppose that net exports are -$300 billion and exports are $500 billion. Imports equals
Question 22 options:
$800 billion.
$400 billion.
$200 billion.
-$200 billion.
There is not enough information to answer this question.
Question 23 (1 point)

Why do economists prefer to compare Real GDP figures for various years instead of GDP
figures?
Question 23 options:
Because when GDP in one year is higher than in another year, there is no way to tell why it
is higher. Is it because output is higher, prices are higher, etc.? This is not the case with Real
GDP. If Real GDP is higher in one year than in another year, it is because output is higher.
Because when GDP in one year is higher than in another year, there is no way of knowing if
the quality of goods produced is higher in one year than the other. This is not the case with
Real GDP. If Real GDP is higher in one year than in another year, it is because the quality
of the goods produced is higher.
Actually the question is incorrect. Economists prefer to compare GDP figures instead of
Real GDP figures.
Because Real GDP is easier to compute than GDP.
Because when GDP in one year is higher than in another year, there is no way to tell if the
quality of life is higher in one year than the other. This is not the case with Real GDP. If
Real GDP is higher in one year than in another year, it is because the quality of life is
higher.
Question 24 (1 point)

Refer to Exhibit 7-1. What is the value of disposable income?

Question 24 options:
3618
4795
 3727
4207
4017
Question 25 (1 point)

Which of the following does GDP omit?

Question 25 options:
Jack purchases $2,300 worth of stock in company X.
Bob mows his lawn and washes and irons his shirts.
Helen receives $4,000 a year in Social Security payments.
a and b
a, b, and c
Question 26 (1 point)

The largest component of national income in the United States is

Question 26 options:
rental income.
proprietors' income.
compensation of employees.
corporate profits.
net interest.
Question 27 (1 point)

Government purchases consist of the total dollar amount(s) spent on goods and services by the
Question 27 options:
federal government only.
state governments only.
local governments only.
state and local governments.
federal, state, and local governments.
Question 28 (1 point)

If a person receives a (stock) dividend check, in the calculation of national income this is part of
Question 28 options:
compensation of employees.
proprietors' income.
 rental income.
net interest.
corporate profits.
Question 29 (1 point)

Which of the following is a macroeconomic measurement used to gauge macroeconomic

activity?
Question 29 options:
Net domestic product
National income
Personal income
Disposable income
all of the above
Question 30 (1 point)

Which of the following is the correct equation for computing personal income?
Question 30 options:
Personal income = National income + undistributed profits - social insurance taxes -
corporate profits taxes + transfer payments.
Personal income = National income - undistributed profits - social insurance taxes +
corporate profits taxes + transfer payments
Personal income = National income - taxes
Personal income = National income - undistributed corporate profits - social insurance taxes
- corporate profits taxes + transfer payments
none of the above