Macro Chapter 7 study guide questions

Size: px
Start display at page:

Download "Macro Chapter 7 study guide questions"

Transcription

1 Macro Chapter 7 study guide questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Real GDP refers to nominal GDP a. minus gifts to other countries. b. minus total unemployment compensation. c. adjusted for price changes. d. adjusted for unemployment changes. 2. Assume that between 1995 and 2000 nominal GDP increased from $1,000 to $2,500, and the index of prices increased from 100 to 200. Which of the following expresses GDP for 2000 in terms of 1995 prices? a. $1,000 b. $1,250 c. $2,500 d. $5, Which of the following transactions would be counted toward this year's GDP? a. General Motors purchases 10,000,000 tires from Firestone. b. A 300-year-old painting is sold for $12 million. c. A street gang earns $2 million from selling illegal drugs. d. Your real estate agent earns $5,000 commission when you sell your 100-year-old house for $100, The consumer price index (CPI) and the GDP deflator are designed to measure the degree to which a. there have been changes in the proportions of national income generated by (and thus earned by) the rich relative to the poor. b. the cost of purchasing a bundle of goods has changed over time. c. consumption patterns have changed with time. d. consumer prices have risen over and above increases in worker wages. 5. Which of the following would not be counted as part of this year's GDP? a. the increase in the value of an antique automobile that was restored this year b. the value of a new automobile at its sale price c. the value of a used car at its sale price d. a family's replacement of a worn-out washing machine with a new one 6. Jim, a U.S. citizen, gets a summer job working in Germany. His summer earnings a. would count as part of U.S. GDP and German GNP. b. would count as part of U.S. GNP and German GDP. c. would count as part of U.S. GDP but would have no effect on Germany's GNP or GDP. d. would be double-counted, raising both U.S. GDP and German GDP.

2 7. Which of the following is not a problem or shortcoming of GDP? a. Goods produced in one period that are sold in the following period fail to get counted in any period. b. It tends to understate the growth of economic welfare because it does not fully and accurately account for improvements in the quality of products. c. GDP is not an accurate measure of welfare because it makes no adjustment for harmful side effects (such as pollution) or destructive acts of nature. d. GDP understates output because it fails to include nonmarket production such as that which takes place in the household or in illegal markets. 8. If you were required to write a paper for your history class (or a report for your job) in which you were using dollar valued data across different years, you would a. use a price index to remove the effects of inflation to have reliable data measuring changes in the real value of things. b. never attempt to correct for inflation because inflation is a key indicator of economic activity. c. tell your teacher or boss that you never learned how to correct data for inflation. d. assume that prices did not change during the period you are studying. 9. Suppose that nominal GDP increased by 3 percent, but the real GDP increased by only 1 percent during that same period. Which of the following best explains the phenomenon? a. Prices increased by approximately 1 percent. b. Prices increased by approximately 2 percent. c. Prices increased by approximately 3 percent. d. Prices increased by approximately 4 percent. 10. Which of the following would increase U.S. GDP? a. The city government of New York buys file cabinets directly from a Mexican company. b. A Mexican citizen buys stock in a U.S. company. c. A Japanese automobile company produces cars within the U.S. d. A U.S. automobile company produces cars in a foreign country. 11. You buy one hundred shares of IBM stock at $100 per share and pay $250 commission. How much will this transaction add to GDP? a. zero b. $250 c. $10,000 d. $10, If a used-car dealer purchases a used car for $1,000, restores it, and resells it for $1,500, the dealer contributes a. value added equal to $500, but nothing is added to GDP. b. value added equal to $500, and consequently $500 is added to GDP. c. nothing to production because only existing goods are involved. d. value added equal to $1,500, but only $500 is added to GDP. 13. Your grandfather tells you he earned $0.65 per hour at his job when he was a boy in Given that the CPI was 17.1 in 1929 and in 2008, how much would you have had to make in 2008 to have the same real hourly wage as your grandfather? a. $0.65 b. $5.14 c. $8.18 d. $11.12

3 14. Assume that between 2000 and 2010 the money GDP of an economy increased from $3 trillion to $8 trillion and that the appropriate index of prices increased from 100 to 200. Which of the following expresses GDP for 2000 in terms of 2010 prices? a. $1 trillion b. $3 trillion c. $4 trillion d. $6 trillion 15. Suppose that Mike earned $15,000 in 2008 and $15,600 in If the consumer price index was 100 in 2008 and 103 in 2009, by approximately what percent did Mike's real salary increase? a. 1 percent b. 3 percent c. 4 percent d. 5 percent 16. In a country where many families make their own clothes, GDP will be understated because the clothes making represents a. economic bads. b. leisure. c. the underground economy. d. nonmarket production. 17. The primary value of GDP lies in its ability to a. reflect the welfare of a society relative to a previous period. b. compare the quality of a nation's products between two periods widely separated in time. c. indicate short-term changes in the output rate of a nation. d. indicate how much leisure time the people of a nation have. 18. If the Consumer Price Index in 2008 was 150 and the CPI in 2009 was 165, the rate of inflation between 2008 and 2009 would be a percent. b. 10 percent. c. 15 percent. d. 110 percent. Critical Thinking and Application 19. Answer the following questions: a. What does GDP measure, and why is it a useful tool for economists, business decision makers, and government policy makers? b. Explain at least two important things GDP does not measure. 20. Explain the two approaches to calculating GDP. 21. What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why? 22. The consumer price index is calculated using a fixed basket of goods. Will this always give an accurate representation of the changing cost of living to consumers? Why or why not?

4 23. Indicate whether the following transactions would be included in GDP. If they are included, indicate which component (consumption, investment, government consumption and gross investment, or net exports) of GDP would be affected. a. A Czech student attending school in Florida takes a summer job as a lifeguard. b. A New York company buys welding equipment from a St. Louis firm to help it build jet fighters. c. The IRS purchases a new computer from the GATS computer company (an American-owned business producing and operating in Germany) that will allow it to better detect income tax evasion. 24. Your grandfather tells you that he earned $.50 per hour at his job when he was a boy in a. Given that the CPI was 17.1 in 1929 and in 2003, how much would you have to make in 2003 to have the same real hourly wage? b. You made $5.50 an hour working during Were you better off than your grandfather in terms of purchasing power? Explain. c. Your grandfather also tells you that a soda cost $.05 in 1929, and you know a soda cost $.55 in You decide to use the price of a soda as the price index. How much would the 2003 "soda equivalent" of $.50 per hour in 1929 be? 25. Answer the following questions: a. What is the difference between gross domestic product and gross national product? b. Give an example of a transaction that would be counted in GDP but not in GNP. c. Give an example of a transaction that would be counted in GNP but not GDP. 26. Discuss the problems with GDP as a measure of a country's current production and income. 27. What is meant by a final good or service as opposed to an intermediate good or service? Why are only final goods and services included in the calculation of GDP?

5 Macro Chapter 7 study guide questions Answer Section MULTIPLE CHOICE 1. C 2. B 3. D 4. B 5. C 6. B 7. A 8. A 9. B 10. C 11. B 12. B 13. C 14. D 15. A 16. D 17. C 18. B

7. Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income

7. Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income Name: Date: 1. GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services.

More information

Name: Date: 3. Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income

Name: Date: 3. Which of the following is a flow variable? A) wealth B) the number unemployed C) government debt D) income Name: Date: 1. GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services.

More information

Measuring National Output and National Income

Measuring National Output and National Income Measuring National Output and National Income 6 C H A P T E R O U T L I N E Gross Domestic Product Final Goods and Services Exclusion of Used Goods and Paper Transactions Exclusion of Output Produced Abroad

More information

Macroeconomics Instructor Miller GDP Practice Problems

Macroeconomics Instructor Miller GDP Practice Problems Macroeconomics Instructor Miller GDP Practice Problems 1. Gross domestic product in the economy is measured by the A) total number of goods and services produced in the economy. B) dollar value of all

More information

Macroeconomics: GDP, GDP Deflator, CPI, & Inflation

Macroeconomics: GDP, GDP Deflator, CPI, & Inflation HOSP 2207 (Economics) Learning Centre Macroeconomics: GDP, GDP Deflator, CPI, & Inflation Macroeconomics is the big picture view of an economy. Microeconomics looks at the market for a specific good, like

More information

Measuring the Aggregate Economy

Measuring the Aggregate Economy CHAPTER 25 Measuring the Aggregate Economy The government is very keen on amassing statistics... They collect them, add them, raise them to the n th power, take the cube root and prepare wonderful diagrams.

More information

Macroeconomics Instructor: Jen Dinsmore Hanson Homework Assignment Chapter 9. Multiple Choice Questions

Macroeconomics Instructor: Jen Dinsmore Hanson Homework Assignment Chapter 9. Multiple Choice Questions Macroeconomics Instructor: Jen Dinsmore Hanson Homework Assignment Chapter 9 Multiple Choice Questions 1. Net domestic product is usually preferred to GDP by economists because net national product A.

More information

11.1 Estimating Gross Domestic Product (GDP) Objectives

11.1 Estimating Gross Domestic Product (GDP) Objectives 11.1 Estimating Gross Domestic Product (GDP) Objectives Describe what the gross domestic product measures. Learn two ways to calculate the gross domestic product, and explain why they are equivalent. 11.1

More information

Unit 4: Measuring GDP and Prices

Unit 4: Measuring GDP and Prices Unit 4: Measuring GDP and Prices ECO 120 Global Macroeconomics 1 1.1 Reading Reading Module 10 - pages 106-110 Module 11 1.2 Goals Goals Specific Goals: Understand how to measure a country s output. Learn

More information

6. Real GDP means the value of goods and services is measured in prices. A) current B) actual C) constant D) average

6. Real GDP means the value of goods and services is measured in prices. A) current B) actual C) constant D) average Name: Date: 1. Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of GDP is: A) 10 pieces of fruit. B) $7. C)

More information

CHAPTER 20 GROSS DOMESTIC PRODUCT ACCOUNTING

CHAPTER 20 GROSS DOMESTIC PRODUCT ACCOUNTING CHAPTER 20 GROSS DOMESTIC PRODUCT ACCOUNTING Chapter in a Nutshell Gross domestic product was introduced in the previous chapter as a basic measure of macroeconomic performance. This chapter identifies

More information

Measuring a Nation s Income

Measuring a Nation s Income Measuring a Nation s Income I. Review of the Definitions of Microeconomics and Macroeconomics A. Definition of microeconomics: the study of how households and firms make decisions and how they interact

More information

Chapter 20. The Measurement of National Income. In this chapter you will learn to. National Output and Value Added

Chapter 20. The Measurement of National Income. In this chapter you will learn to. National Output and Value Added Chapter 20 The Measurement of National Income In this chapter you will learn to 1. Use the concept of value added to solve the problem of double counting when measuring national income. 2. Describe the

More information

Reference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapters 10 and 11. Gross Domestic Product

Reference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapters 10 and 11. Gross Domestic Product Macroeconomics Topic 1: Define and calculate GDP. Understand the difference between real and nominal variables (e.g., GDP, wages, interest rates) and know how to construct a price index. Reference: Gregory

More information

This is the on-line Multiple Choice Quiz for Chapter 4. Please do the following. Go to the special codes section on your score sheet

This is the on-line Multiple Choice Quiz for Chapter 4. Please do the following. Go to the special codes section on your score sheet Instructions: This is the on-line Multiple Choice Quiz for Chapter 4. Please do the following. Step I - Go to the special codes section on your score sheet Write your section number (1, or 4, or 5) under

More information

Chapter 12 Gross Domestic Product and Growth

Chapter 12 Gross Domestic Product and Growth Chapter 12 Gross Domestic Product and Growth 1. Gross Domestic Product 2. Business Cycles 3. Economic Growth How do we know if the economy is healthy... Economists measure Gross Domestic and Gross National

More information

Supplement Unit 3. Gross Domestic Product (GDP): What Is It and How Is It Measured?

Supplement Unit 3. Gross Domestic Product (GDP): What Is It and How Is It Measured? 1 Supplement Unit 3. Gross Domestic Product (GDP): What Is It and How Is It Measured? Gross Domestic Product (GDP) is the market value of all final user goods and services produced domestically during

More information

1. A glimpse of the real sector: GDP, inflation rate, macroeconomic identities

1. A glimpse of the real sector: GDP, inflation rate, macroeconomic identities 1. A glimpse of the real sector: GDP, inflation rate, macroeconomic identities 1. Real sector and financial sector Macroeconomics studies the aggregate effects of what people do. Most of what people do

More information

Exam 1 Review. 3. A severe recession is called a(n): A) depression. B) deflation. C) exogenous event. D) market-clearing assumption.

Exam 1 Review. 3. A severe recession is called a(n): A) depression. B) deflation. C) exogenous event. D) market-clearing assumption. Exam 1 Review 1. Macroeconomics does not try to answer the question of: A) why do some countries experience rapid growth. B) what is the rate of return on education. C) why do some countries have high

More information

CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH

CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate

More information

MEASURING GDP AND ECONOMIC GROWTH*

MEASURING GDP AND ECONOMIC GROWTH* Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Gross Domestic Product Topic: GDP 1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final and

More information

Lecture 3: National Income Accounting Reference - Chapter 5. 3) The Income Approach

Lecture 3: National Income Accounting Reference - Chapter 5. 3) The Income Approach Lecture 3: National Income Accounting Reference - Chapter 5 3) The Income Approach The income approach defines GDP in terms of the income derived or created from producing final goods and services. Net

More information

Exam 1 Review. Page 1

Exam 1 Review. Page 1 Exam 1 Review 1. When a firm sells a product out of inventory, GDP: A) increases. B) decreases. C) is not changed. D) increases or decreases, depending on the year the product was produced. 2. An economy's

More information

GDP: Measuring Total Production and Income

GDP: Measuring Total Production and Income Chapter 7 (19) GDP: Measuring Total Production and Income Chapter Summary While microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government

More information

Chapter 5: National Income Accounting John Petroff

Chapter 5: National Income Accounting John Petroff Chapter 5: National Income Accounting John Petroff INTRODUCTION The purpose of this topic is to study how the gross national product is measuring the economic activity of a nation. The concept is defined

More information

I. Measuring Output: GDP

I. Measuring Output: GDP University of California-Davis Economics 1B-Intro to Macro Handout 3 TA: Jason Lee Email: jawlee@ucdavis.edu I. Measuring Output: GDP As was mentioned earlier, the ability to estimate the amount of production

More information

Chapter 8. GDP : Measuring Total Production and Income

Chapter 8. GDP : Measuring Total Production and Income Chapter 8. GDP : Measuring Total Production and Income Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Related Economic Terms Macroeconomics:

More information

Chapter 24 Measuring Domestic Output and National Income QUESTIONS. 1. In what ways are national income statistics useful? LO1

Chapter 24 Measuring Domestic Output and National Income QUESTIONS. 1. In what ways are national income statistics useful? LO1 Chapter 24 Measuring Domestic Output and National Income QUESTIONS 1. In what ways are national income statistics useful? LO1 Answer: National income accounting does for the economy as a whole what private

More information

Chapter 5: GDP and Economic Growth

Chapter 5: GDP and Economic Growth Chapter 5: GDP and Economic Growth Be Mean Green! Please consider the environment before printing this Chapter Outline. It ll be available online throughout the semester. For Firms private accounting measures

More information

Macroeconomia Capitolo 7. Seguire l andamento della macroeconomia. What you will learn in this chapter:

Macroeconomia Capitolo 7. Seguire l andamento della macroeconomia. What you will learn in this chapter: Macroeconomia Capitolo 7 Seguire l andamento della macroeconomia PowerPoint Slides by Can Erbil 2006 Worth Publishers, all rights reserved What you will learn in this chapter: How economists use aggregate

More information

The Basics of National Income Accounting. Macroeconomics

The Basics of National Income Accounting. Macroeconomics The Basics of National Income Accounting Macroeconomics National Income Accounting A variety of measures of national income and output are used in economics to estimate total economic activity in a country

More information

Chapter 20. The Measurement of National Income

Chapter 20. The Measurement of National Income Chapter 20 The Measurement of National Income National Output and Value Added -many production processes involve multiple stages, only some which are done within the same firm -this raises an important

More information

Economics 212 Principles of Macroeconomics Study Guide. David L. Kelly

Economics 212 Principles of Macroeconomics Study Guide. David L. Kelly Economics 212 Principles of Macroeconomics Study Guide David L. Kelly Department of Economics University of Miami Box 248126 Coral Gables, FL 33134 dkelly@miami.edu First Version: Spring, 2006 Current

More information

Chapter 11: Activity

Chapter 11: Activity Economics for Managers by Paul Farnham Chapter 11: Measuring Macroeconomic Activity 11.1 Measuring Gross Domestic Product (GDP) GDP: the market value of all currently yproduced final goods and services

More information

31. Gross Domestic Product equals a. Y = C + I G + NX. b. Y = C I + G + NX. c. Y = C + I + G + NX.

31. Gross Domestic Product equals a. Y = C + I G + NX. b. Y = C I + G + NX. c. Y = C + I + G + NX. GDP Review Questions 13. Gross Domestic Product measures the a. quantity of the goods and services produced in a given year, listed item by item, within a country. b. income of the business sector within

More information

At the end of Chapter 10, you will be able to answer the following:

At the end of Chapter 10, you will be able to answer the following: 1 Objectives for Chapter 10 The Circular Flow Model At the end of Chapter 10, you will be able to answer the following: 1. Explain the basic circular flow model. 2. Define "consumption" and "saving" 3.

More information

Measuring a Nation s Income THE MEASUREMENT OF GROSS DOMESTIC PRODUCT. In this chapter, look for the answers to these questions:

Measuring a Nation s Income THE MEASUREMENT OF GROSS DOMESTIC PRODUCT. In this chapter, look for the answers to these questions: In this chapter, look for the answers to these questions: What is Gross Domestic Product (GDP)? 5 How is GDP related to a nation s total income and spending? What are the components of GDP? How is GDP

More information

Measuring Economic Performance. Chapter 2

Measuring Economic Performance. Chapter 2 Measuring Economic Performance Chapter 2 Outline Gross Domestic Product Measuring GDP Through Spending Measuring GDP Through Production Measuring GDP Through Income Saving and Investment Transactions with

More information

Economic Output. Economic Output. GDP: Definition. GDP: Definition. GDP: Definition. GDP: Definition. Agenda. Gross Domestic Product (GDP)

Economic Output. Economic Output. GDP: Definition. GDP: Definition. GDP: Definition. GDP: Definition. Agenda. Gross Domestic Product (GDP) Economic Output Economic Output Agenda Defining GDP Measuring Real GDP The Expenditure Side The Income Side Economic Output Gross Domestic Product (GDP) The official measure of a country s economic output.

More information

4. In the G of the GDP formula why do we not count Welfare and Social Security payments?

4. In the G of the GDP formula why do we not count Welfare and Social Security payments? DUE DATE: NAME: ECONOMIC HEALTH INDICATORS: GDP AND CPI WORKSHEET CHAPTER 11 USE THE ATTACHED NOTES OR THE POWERPOINTS TO ANSWER THE FOLLOWING QUESTIONS.!!!KEEP THE ATTACHED NOTES. DO NOT TURN IN THE NOTES!!!!

More information

Week 2 Tutorial Question Solutions (Ch1 & 2)

Week 2 Tutorial Question Solutions (Ch1 & 2) Q1: Here are some macroeconomic data for the country of Oz for the years 2011 and 2012. 2011 2012 Output 12,000 tonnes of potatoes 14,300 tonnes of potatoes Employment 1,000 workers 1,100 workers Unemployment

More information

ECONOMIC GROWTH* Chapter. Key Concepts

ECONOMIC GROWTH* Chapter. Key Concepts Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Key Concepts Gross Domestic Product Gross domestic product, GDP, is the market value of all the final goods and services produced within in a country in a given

More information

Chapter 2. The Measurement and Structure of the National Economy Pearson Addison-Wesley. All rights reserved

Chapter 2. The Measurement and Structure of the National Economy Pearson Addison-Wesley. All rights reserved Chapter 2 The Measurement and Structure of the National Economy Chapter Outline National Income Accounting: The Measurement of Production, Income, and Expenditure Gross Domestic Product Saving and Wealth

More information

NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY

NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY 1. NIPA: GNP and GDP 2. Saving and Wealth 3. Prices and Inflation 4. Unemployment 5. Problems with Measuring the Macroeconomy There are

More information

National Income Accounting. Courtesy : www. carlprosper4nugs.yolasite.com

National Income Accounting. Courtesy : www. carlprosper4nugs.yolasite.com National Income Accounting Courtesy : www. Introduction to Economy of Ghana Measuring the Economy - National Income Accounting Structure of the Economy and Sectoral Outlook Economic History of Ghana: preindependence,

More information

Big Concepts. Measuring U.S. GDP. The Expenditure Approach. Economics 202 Principles Of Macroeconomics

Big Concepts. Measuring U.S. GDP. The Expenditure Approach. Economics 202 Principles Of Macroeconomics Lecture 6 Economics 202 Principles Of Macroeconomics Measuring GDP Professor Yamin Ahmad Real GDP and the Price Level Economic Growth and Welfare Big Concepts Ways to Measure GDP Expenditure Approach Income

More information

GDP M A C R O E C O N O M I C S

GDP M A C R O E C O N O M I C S GDP M A C R O E C O N O M I C S Gross Domestic Product GDP The market value of all final goods and services produced within a country during a given period of time. Breaking down the definition: 1. Market

More information

Households Wages, profit, interest, rent = $750. Factor markets. Wages, profit, interest, rent = $750

Households Wages, profit, interest, rent = $750. Factor markets. Wages, profit, interest, rent = $750 KrugmanMacro_SM_Ch07.qxp 11/9/05 4:47 PM Page 87 Tracking the Macroeconomy 1. Below is a simplified circular-flow diagram for the economy of Micronia. a. What is the value of GDP in Micronia? b. What is

More information

Chapter Outline. Chapter 2. National Income Accounting. National Income Accounting

Chapter Outline. Chapter 2. National Income Accounting. National Income Accounting Chapter 2 The Measurement and Structure of the National Economy Chapter Outline National Income Accounting: The Measurement of Production, Income, and Expenditure Real GDP, Price Indexes, and Inflation

More information

Chapter 24. What will you learn in this chapter? Valuing an economy. Measuring the Wealth of Nations

Chapter 24. What will you learn in this chapter? Valuing an economy. Measuring the Wealth of Nations Chapter 24 Measuring the Wealth of Nations 2014 by McGraw-Hill Education 1 What will you learn in this chapter? How to calculate gross domestic product (GDP). Why each component of GDP is important. What

More information

Chapter 2 The Measurement and Structure of the National Economy

Chapter 2 The Measurement and Structure of the National Economy Chapter 2 The Measurement and Structure of the National Economy Multiple Choice Questions 1. The three approaches to measuring economic activity are the (a) cost, income, and expenditure approaches. (b)

More information

Chapter 4 Measuring GDP and Economic Growth

Chapter 4 Measuring GDP and Economic Growth Chapter 4 Measuring GDP and Economic Growth 1 Gross Domestic Product 1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final and intermediate

More information

VANCOUVER ISLAND UNIVERSITY. ECON212: PRINCIPLES OF MACROECONOMICS, Spring 2013 SAMPLE MIDTERM EXAM. Name (Last, First): ID #: Signature:

VANCOUVER ISLAND UNIVERSITY. ECON212: PRINCIPLES OF MACROECONOMICS, Spring 2013 SAMPLE MIDTERM EXAM. Name (Last, First): ID #: Signature: Important: Please remember it is a sample exam. Number of questions in each section and structure of questions in section b and c would vary as discussed in class VANCOUVER ISLAND UNIVERSITY ECON212: PRINCIPLES

More information

ANSWERS TO END-OF-CHAPTER QUESTIONS

ANSWERS TO END-OF-CHAPTER QUESTIONS ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms

More information

CHAPTER 7 Measuring Domestic Output, National Income, and the Price Level

CHAPTER 7 Measuring Domestic Output, National Income, and the Price Level CHAPTER 7 Measuring Domestic Output, National Income, and the Price Level Topic Question numbers 1. GDP concept 1-15 2. C, I, G, and X n components 16-43 3. Investment and the capital stock 44-57 4. GDP

More information

ECON 101 Exam 2. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.

ECON 101 Exam 2. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question. Name: Class: Date: ECON 101 Exam 2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Al s Aluminum Company sells $1 million worth of aluminum to Shiny Foil

More information

Lesson 3 - National Income Accounting

Lesson 3 - National Income Accounting Lesson 3 - National Income Accounting Acknowledgement: Ed Sexton and Kerry Webb were the primary authors of the material contained in this lesson. Section 1 - National Income Accounting History of National

More information

MEASURING NATIONAL INCOME. Unit 5 Theory and measurement in the macroeconomy

MEASURING NATIONAL INCOME. Unit 5 Theory and measurement in the macroeconomy MEASURING NATIONAL INCOME Unit 5 Theory and measurement in the macroeconomy We need information on how much spending, income and output is being created in an economy over a period of time. National income

More information

Chapter 06 Every Macroeconomic Word You Ever Heard: Gross...

Chapter 06 Every Macroeconomic Word You Ever Heard: Gross... Chapter 06 Every Macroeconomic Word You Ever Heard: Gross... Multiple Choice Questions 1. The reason that only final sales are counted in GDP is A. To avoid double counting goods that are sold so as to

More information

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Aggregate Supply

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Aggregate Supply Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Aggregate Supply Topic: Aggregate Supply/Aggregate Demand Model 1) The aggregate supply/aggregate demand model is used to help understand all of the following

More information

MEASURING A NATION S INCOME

MEASURING A NATION S INCOME 10 MEASURING A NATION S INCOME WHAT S NEW IN THE FIFTH EDITION: There is more clarification on the GDP deflator. The Case Study on Who Wins at the Olympics? is now an FYI box. LEARNING OBJECTIVES: By the

More information

Why expenditure = income. The Circular Flow. Circular flow. Gross Domestic Product

Why expenditure = income. The Circular Flow. Circular flow. Gross Domestic Product Gross Domestic Product Why expenditure = income Two definitions: 1. Total expenditure on final goods and services 2. Total income earned by factors of production In In every transaction, the the buyer

More information

These are some practice questions for CHAPTER 19. Each question should have a single answer. But be careful. There may be errors in the answer key!

These are some practice questions for CHAPTER 19. Each question should have a single answer. But be careful. There may be errors in the answer key! These are some practice questions for CHAPTER 19. Each question should have a single answer. But be careful. There may be errors in the answer key! 1. Real national income is also known as a. nominal national

More information

Solutions to Week 3 Tutorial Questions (Ch2)

Solutions to Week 3 Tutorial Questions (Ch2) Chapter 2: Q1: Macroeconomics P.51 Review Questions #1 Q2: Macroeconomics P.51 Review Questions #5 Q3: Macroeconomics P.52 Numerical Problems #5 Q4: Macroeconomics P.52 Numerical Problems #6 Q5: Macroeconomics

More information

Chapter 12: Gross Domestic Product and Growth Section 1

Chapter 12: Gross Domestic Product and Growth Section 1 Chapter 12: Gross Domestic Product and Growth Section 1 Key Terms national income accounting: a system economists use to collect and organize macroeconomic statistics on production, income, investment,

More information

Douglas, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam.

Douglas, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. , Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Midterm 1 1. What will happen to the equilibrium price of hamburgers

More information

Economics 101 Multiple Choice Questions for Final Examination Miller

Economics 101 Multiple Choice Questions for Final Examination Miller Economics 101 Multiple Choice Questions for Final Examination Miller PLEASE DO NOT WRITE ON THIS EXAMINATION FORM. 1. Which of the following statements is correct? a. Real GDP is the total market value

More information

Exam 1 ECON 2105 Dr. Susan Laury. Thurs. Feb. 6, :00 p.m. Form B. There are 40 multiple choice questions, worth 2.

Exam 1 ECON 2105 Dr. Susan Laury. Thurs. Feb. 6, :00 p.m. Form B. There are 40 multiple choice questions, worth 2. Exam 1 ECON 2105 Dr. Susan Laury Thurs. Feb. 6, 2003 1:00 p.m. Form B There are 40 multiple choice questions, worth 2.5 points each Please follow these instructions carefully! Feel free to write on this

More information

A. GDP, Economic Growth, and Business Cycles

A. GDP, Economic Growth, and Business Cycles ECON 3023 Hany Fahmy FAll, 2009 Lecture Note: Introduction and Basic Concepts A. GDP, Economic Growth, and Business Cycles A.1. Gross Domestic Product (GDP) de nition and measurement The Gross Domestic

More information

National Income Accounting

National Income Accounting Chapter 2 The Measurement and Structure of the Canadian Economy Economics 282 University of Alberta National Income Accounting The national income accounts is an accounting framework used in measuring

More information

MEASURING GDP AND ECONOMIC GROWTH CHAPTER

MEASURING GDP AND ECONOMIC GROWTH CHAPTER MEASURING GDP AND ECONOMIC GROWTH CHAPTER Objectives After studying this chapter, you will able to Define GDP and use the circular flow model to explain why GDP equals aggregate expenditure and aggregate

More information

Lecture 1: Gross Domestic Product

Lecture 1: Gross Domestic Product Lecture 1: Gross Domestic Product August 28, 2014 Prof. Wyatt Brooks MEASURING A NATION S INCOME 0 Structure of the Course First Part of the Class: The macroeconomy in the long run Why are countries rich

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from

More information

Name (Please print) Assigned Seat. ECO202: PRINCIPLES OF MACROECONOMICS FIRST MIDTERM EXAM SPRING 2011 Prof. Bill Even FORM 1.

Name (Please print) Assigned Seat. ECO202: PRINCIPLES OF MACROECONOMICS FIRST MIDTERM EXAM SPRING 2011 Prof. Bill Even FORM 1. Name (Please print) Assigned Seat ECO202: PRINCIPLES OF MACROECONOMICS FIRST MIDTERM EXAM SPRING 2011 Prof. Bill Even FORM 1 Directions 1. Fill in your scantron with your unique id and form number. Doing

More information

GDP and Fiscal Policy Monopoly

GDP and Fiscal Policy Monopoly GDP and Fiscal Policy Monopoly Overview In this lesson, students will gain an understanding of the economic measure of gross domestic product (GDP) and fiscal policy by playing the board game Monopoly

More information

Chapter 5 Measuring Economic Activity: GDP and Unemployment

Chapter 5 Measuring Economic Activity: GDP and Unemployment Chapter 5 Measuring Economic Activity: GDP and Unemployment Overview This chapter looks in detail at how economists measure two major macroeconomic variables: gross domestic product (GDP) and the unemployment

More information

Introduction to Macroeconomics

Introduction to Macroeconomics Introduction to Macroeconomics Macroeconomics the study of the economy as a whole We measure performance to track the development of the economy Why Measure Performance Helps the government develop tax

More information

Tracking the Macroeconomy

Tracking the Macroeconomy chapter 7(23) Tracking the Macroeconomy Chapter Objectives Students will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product,

More information

Pre-Test Chapter 6 ed17 2

Pre-Test Chapter 6 ed17 2 Pre-Test Chapter 6 ed17 2 Multiple Choice Questions 1. (Last Word) The U.S. government agency responsible for compiling the national income accounts is the: A. Census Bureau. B. Bureau of Labor Statistics

More information

Open-Economy Macroeconomics: Basic Concepts. Open-Economy Macroeconomics: Basic Concepts Open and Closed Economies

Open-Economy Macroeconomics: Basic Concepts. Open-Economy Macroeconomics: Basic Concepts Open and Closed Economies In this chapter, look for the answers to these questions: 3 Open-Economy Macroeconomics: Basic Concepts How are international flows of goods and assets related? What s the difference between the real and

More information

Chapter: Practice Exam for Macro Indicators. Instruction: Name: Date: Multiple Choice

Chapter: Practice Exam for Macro Indicators. Instruction: Name: Date: Multiple Choice Chapter: Practice Exam for Macro Indicators Instruction: Name: Date: Multiple Choice 1. GDP does not include A) vegetables grown and consumed by a nonfarm family. B) the purchase of a new Porsche. C) the

More information

National Income and Balance of Payments Accounting. Chapter 13

National Income and Balance of Payments Accounting. Chapter 13 National Income and Balance of Payments Accounting Chapter 13 Outline GNP Government budget National saving National wealth Balance of payments accounting Gross National Product (GNP) Product Approach

More information

EC201 Intermediate Macroeconomics. EC201 Intermediate Macroeconomics Problem Set 1 Solution

EC201 Intermediate Macroeconomics. EC201 Intermediate Macroeconomics Problem Set 1 Solution EC201 Intermediate Macroeconomics EC201 Intermediate Macroeconomics Problem Set 1 Solution 1) Given the difference between Gross Domestic Product and Gross National Product for a given economy: a) Provide

More information

Econ 102 Measuring National Income and Prices Solutions

Econ 102 Measuring National Income and Prices Solutions Econ 102 Measuring National Income and Prices Solutions 1. Measurement of National Income and Decomposing GDP This question is designed to see if you understand how Gross Domestic Product (GDP) is measured.

More information

2009 CHAPTER 11 Self Study Questions

2009 CHAPTER 11 Self Study Questions CHAPTER 11 Self Study Questions 1) The aggregate supply/aggregate demand model is used to help understand all of the following except A) inflation. B) business cycle fluctuations. C) the aggregate value

More information

Chapter 15: Spending, Income and GDP

Chapter 15: Spending, Income and GDP Chapter 15: Spending, Income and GDP By the end of this chapter, you will be able to: Define GDP Calculate GDP by: adding up value added of production. adding up expenditure. adding up income. Distinguish

More information

Name: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed.

Name: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed. Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D market-clearing rate 2 Compared with a recession, real GDP during a

More information

ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2. DUE DATE : 3:00 p.m.

ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2. DUE DATE : 3:00 p.m. Page 1 of 13 ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2 DUE DATE : 3:00 p.m. 19 MARCH 2013 TOTAL MARKS : 100 INSTRUCTIONS TO CANDIDATES

More information

Open-Economy Macroeconomics: Basic Concepts

Open-Economy Macroeconomics: Basic Concepts Open-Economy Macroeconomics: Basic Concepts Chapter 31 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions

More information

The level of price and inflation Real GDP: the values of goods and services measured using a constant set of prices

The level of price and inflation Real GDP: the values of goods and services measured using a constant set of prices Chapter 2: Key Macroeconomics Variables ECON2 (Spring 20) 2 & 4.3.20 (Tutorial ) National income accounting Gross domestic product (GDP): The market value of all final goods and services produced within

More information

ECON300, Spring 2012 Intermediate Macroeconomics Professor: Hui He. Homework 1 Suggested Answer (Total points: 100)

ECON300, Spring 2012 Intermediate Macroeconomics Professor: Hui He. Homework 1 Suggested Answer (Total points: 100) ECON300, Spring 2012 Intermediate Macroeconomics Professor: Hui He Homework 1 Suggested Answer (Total points: 100) Understanding the growth rate and how to measure it Problem no. 1 on page 35. (10 points)

More information

CHAPTER 7 CONCEPT OF NATIONAL INCOME

CHAPTER 7 CONCEPT OF NATIONAL INCOME CHAPTER 7 CONCEPT OF NATIONAL INCOME 171 172 NATIONAL INCOME s CIRCULAR FLOW The concept of circular flow of national income involves two principles. In every economic exchange, the seller receives exactly

More information

Review for the Midterm Exam.

Review for the Midterm Exam. Review for the Midterm Exam. 1. Chapter 1 The principles of decision making are: o People face tradeoffs. o The cost of any action is measured in terms of foregone opportunities. o Rational people make

More information

Introduction to Macroeconomics. Sebastian Koch Lauder Business School Summer term 2016

Introduction to Macroeconomics. Sebastian Koch Lauder Business School Summer term 2016 Introduction to Macroeconomics Sebastian Koch Lauder Business School Summer term 2016 Course Outline 2 LBS Intranet CIS Access to course description via LBS Intranet: https://cis.lbs.ac.at/ Check the course

More information

ECON 1010 Principles of Macroeconomics Practice Test 2 Solutions

ECON 1010 Principles of Macroeconomics Practice Test 2 Solutions ECON 1010 Principles of Macroeconomics Practice Test 2 Solutions Section A: Multiple Choice Questions. (40 points; 2 pts each) 1. The unemployment rate is the ratio of all of the people: A) out of work

More information

The Data of Macroeconomics

The Data of Macroeconomics CHAPTER 2 The Data of Macroeconomics Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN:... the meaning and measurement of the most important

More information

Introduction to Macroeconomics. TOPIC 1: Introduction, definition, measures

Introduction to Macroeconomics. TOPIC 1: Introduction, definition, measures TOPIC 1: Introduction, definitions, measures Annaïg Morin CBS - Department of Economics August 2013 What is macroeconomics about? Understanding the behavior of an economy as a whole. studying aggregated

More information

Chap 11 & 12. Measuring the Cost of Living THE CONSUMER PRICE INDEX

Chap 11 & 12. Measuring the Cost of Living THE CONSUMER PRICE INDEX Chap 11 & 12 Chap 10: Measuring a Nation s Income: GDP, Nominal GDP, Real GDP, and GDP Deflator Next topic: Chap 11: Measuring the Cost of Living: CPI GDP from an whole economy point of view CPI from a

More information

Aggregate Demand and Aggregate Supply

Aggregate Demand and Aggregate Supply Demand and Supply Chapter 31 Copyright 21 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College

More information

The Circular Flow 1/15/2013. Gross Domestic Product: Expenditure and Income

The Circular Flow 1/15/2013. Gross Domestic Product: Expenditure and Income IN THIS CHAPTER, YOU WILL LEARN: ECON 3010 Intermediate Macroeconomics Chapter 2 The Data of Macroeconomics the meaning and measurement of the most important macroeconomic statistics: gross domestic product

More information