CB2402 Macroeconomics

Self-study Exercise - Week 1

Chapter 19 GDP: Measuring Total Production and Income

1) Gross domestic product is calculated by summing up

A) the total quantity of goods and services in the economy.
B) the total quantity of goods and services produced in the economy during a period
of time.
C) the total market value of goods and services in the economy.
D) the total market value of final goods and services produced in the economy during
a period of time.

Table 19-2
Product Quantity Price
Shoes 40 $60.00
DVDs 100 18.00
Tomatoes 2,000 1.00
Ketchup 300 4.00

2) Refer to Table 19-2. Suppose that a simple economy produces only four goods and
services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are
used in making the ketchup and the other half of the tomatoes are purchased by
households. Using the information in the above table, nominal GDP for this simple
economy equals
A) $7,400.
B) $6,400.
C) $5,800.
D) 2,440 units.

3) The purchase of a new house is included in

A) consumption expenditures.
B) investment expenditures.
C) government purchases.
D) net exports.

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4) How are intermediate goods treated in the calculation of GDP?
A) Their value is not counted separately, but included as part of the value of the final
good for which they are an input.
B) Their value is counted separately, and their value is also included as part of the
value of the final good for which they are an input.
C) Their value is counted separately, but is not included as part of the value of the
final good for which they are an input.
D) They are included only if they are imported.

5) The size of the underground economy would tend to increase if the government of
a country
A) decreased government regulations on businesses.
B) increased income tax rates.
C) legalized prostitution.
D) legalized marijuana.

6) Which of the following is likely to increase measured GDP?

A) A greater number of women decide to stay at home and provide day care for their
children under age 5.
B) Marijuana becomes legal to grow and sell.
C) Tax rates increase and more people attempt to underreport their income for tax
purposes.
D) More people decide to do their own lawn maintenance and give up using a
professional service.

7) If GDP calculations included measurements of pollution and environmental

damage, GDP values would most likely be
A) greater than their values without these measurements.
B) less than their values without these measurements.
C) unchanged from their values without these measurements.
D) meaningless, since GDP values without these measurements would no longer be of
value.

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Table 19-13
Oranges Price of Shirts Price of
Year Produced Oranges Produced Shirts

2013 1,800 $0.90 110 $30.00

2015 2,000 1.00 110 35.00

Consider the data shown above for Vicuna, a country that produces only two
products: oranges and shirts.

8) Refer to Table 19-13. Real GDP for Vicuna for 2013 using 2015 as the base year
equals
A) $4,620.
B) $5,100.
C) $5,650.
D) $5,850.

9) Which of the following could cause nominal GDP to decrease, but real GDP to
increase?
A) The price level rises and the quantity of final goods and services produced rises.
B) The price level falls and the quantity of final goods and services produced rises.
C) The price level rises and the quantity of final goods and services produced falls.
D) The price level falls and the quantity of final goods and services produced falls.

Table 19-19
2015 2016

Nominal GDP $10,000 $12,000

Real GDP 9,500 10,500

10) Refer to Table 19-19. Given the information above, calculate the GDP deflator in
2016.
A) 114
B) 105
C) 95
D) 87

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Answer to Self-study Exercise – Week 1

MCQ Answer

1 D

2 B

3 B

4 A

5 B

6 B

7 B

8 C

9 B

10 A