Test Bank and Solutions For Macroeconomics 11 Edition Part 2

37. If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately percent. A) 2 B) 3 C) 5 D) 8 38. If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP by percent. A) increased; 2 B) decreased; 2 C) increased; 8 D) decreased; 8 39. Real GDP is a better measure of economic well-being than nominal GDP because real GDP: A) excludes the value of goods and services exported abroad. B) includes the value of government transfer payments. C) measures changes in the quantity of goods and services produced by holding prices constant. D) adjusts the value of goods and services produced for changes in the foreign exchange rate. 40. Chain-weighted measures of real GDP make use of prices from: A) an unchanging base year. B) a continuously changing base year. C) a base year that is changed approximately every 5 years. D) a base year that is changed approximately every 10 years. 41. The national income accounts identity for an open economy is: A) Y = C + I + G – NX. B) Y = C + I + G + NX. C) Y = C + I + G. D) Y = C + I – G. 42. If GDP measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are: A) $131. B) –$131. C) $31. D) –$31. 43. If GDP measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and net exports are –$1,910, then government purchases are: A $2,97 B $1,91 C – D $1,06 ) 7 44. If real GDP grew by 6 percent and population grew by 2 percent, then real GDP per person grew by approximately percent. A) 2 B) 3 C) 4 D) 8 45. In the national income accounts, consumption expenditures include all of the following except household purchases of: A) durable goods. B) nondurable goods. C) new residential housing. D) services. 46. In the national income accounts, the purchases of durables, nondurables, and services by households are classified as: A) consumption. B) investment. C) government purchases. D) net exports. 47. In the national income accounts, goods bought for future use are classified as which type of expenditure? A) services B) investment C) government purchases D) net exports 48. If total investment measured in billions of current dollars equals $741, business fixed investment is $524, and residential fixed investment is $222, then inventory investment is: A) $5. B) –$5. C) $15. D) –$15. 49. In the national income accounts, all of the following are classified as government purchases except: A) payments made to Social Security recipients. B) services provided by police officers. C) purchases of military hardware. D) services provided by U.S. senators. 50. In the national income accounts, government purchases are goods and services purchased by: A) the federal government. B) the federal and state governments. C) the state and local governments. D) the federal, state, and local governments. 51. In the national income accounts, net exports equal: A) exported goods minus imported goods. B) exported goods and services minus imported goods and services. C) exported goods minus imported services. D) exported goods and services plus imported goods and services. 52. If GDP measured in billions of current dollars is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are: A) $673. B) –$673. C) $704. D) –$704. 53. All of the following actions are investments in the sense of the term used by macroeconomists except: A) Apple's building a new factory. B) a corner candy store's buying a new computer. C) John Smith's buying a newly constructed home. D) Sandra Santiago's buying 100 shares of Apple stock. 54. In 2013, the GDP of the United States totaled about: A) $16.8 billion. B) $168 billion. C) $16.8 trillion. D) $168 trillion. 55. GNP equals GDP nationals earn abroad. A) plus; plus B) minus; minus C) minus; plus D) plus; minus income earned domestically by foreigners 56. Net national product equals GNP: A) plus net investment. B) minus net investment. C) plus depreciation. D) minus depreciation. 57. National income differs from net national product by an amount called: A) depreciation. B) indirect business taxes. C) statistical discrepancy. D) net foreign factor income payments. income that 58. The largest component of national income is: A) corporate profits. B) compensation of employees. C) proprietors' income. D) net interest. 59. Disposable personal income: A) is computed by subtracting personal tax from personal income. B) is generally greater than personal income. C) includes corporate profits but not dividends. D) does not include government transfers to individuals. 60. According to the usual seasonal pattern of the U.S. economy, GDP is highest in the quarter of the year that includes: A) January, February, and March. B) April, May, and June. C) July, August, and September. D) October, November, and December. 61. The CPI is determined by computing: A) an average of prices of all goods and services. B) the price of a basket of goods and services that changes every year, relative to the same basket in a base year. C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year. D) nominal GDP relative to real GDP. 62. Prices of items included in the CPI are: A) averaged, with the price of every item weighted equally. B) weighted according to the amount of the item produced in GDP. C) weighted according to the quantity of the item purchased by the typical household. D) chained to the base year by the year-to-year growth rate of the item. 63. The core inflation rate: A) measures the change in producer prices. B) is measured using a Paasche index. C) excludes food and energy prices. D) includes the price of exports and includes the price of imports. 64. Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation, A) provides a real, rather than a nominal, rate of inflation. B) gives a better measure of ongoing, sustained price changes. C) is more consistent with measures of inflation used in other countries. D) fluctuates more than measures of inflation that include food and energy prices. 65. An increase in the price of goods bought by firms and the government will show up in: A) the CPI but not in the GDP deflator. B) the GDP deflator but not in the CPI. C) both the CPI and the GDP deflator. D) neither the CPI nor the GDP deflator. 66. An increase in the price of imported goods will show up in: A) the CPI but not in the GDP deflator. B) the GDP deflator but not in the CPI. C) both the CPI and the GDP deflator. D) neither the CPI nor the GDP deflator. 67. Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given these data, a Laspeyres price index of 2009 prices using 2004 as the base year would be: A) 1.05. B) approximately 1.07. C) approximately 1.33. D) 1.50. 68. Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given these data, a Paasche index for 2009 using 2004 prices would be: A) 1.05. B) approximately 1.07. C) approximately 1.33. D) 1.50. 69. The CPI is a: A) Laspeyres price index. B) Paasche price index. C) Laspeyres quantity index. D) Paasche quantity index. 70. The GDP deflator is a: A) Laspeyres price index. B) Paasche price index. C) Laspeyres quantity index. D) Paasche quantity index. 71. When prices of different goods are increasing by different amounts, the price index that will rise the fastest is: A) the PCE index. B) the CPI. C) the GDP deflator. D) a Paasche index. 72. The panel of economists appointed by the Senate Finance Committee estimated that the CPI inflation by approximately percentage point(s) per year. A) overestimates; 1 B) overestimates; 10 C) underestimates; 1 D) underestimates; 10 73. According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person: A) is going to school full time. B) is temporarily absent from a job because of illness. C) has been temporarily laid off. D) is out of a job and was looking for work during the previous four weeks. 74. According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they: A) are out of a job but not looking for work. B) retired from the labor force before age 65. C) do not have a job but have looked for work in the past four weeks. D) are absent from work because of bad weather or illness. 75. The labor force equals the: A) adult population. B) number of employed individuals. C) number of unemployed individuals. D) number of employed and unemployed individuals. 76. If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately percent. A) 3.5 B) 4.7 C) 4.9 D) 7 77. The labor-force participation rate is the percentage of the: A) adult population that is employed. B) adult population that is in the labor force. C) labor force that is employed. D) labor force that is unemployed. 78. If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals million. A) 11.28 B) 176.72 C) 188 D) 200 79. If an increasing proportion of the adult population is retired, then the laborforce participation rate: A) will increase. B) will decrease. C) will remain constant. D) may increase, decrease, or remain constant. 80. If the adult population equals 250 million, of which 145 million are employed and 5 million are unemployed, the labor-force participation rate equals percent. A) 50 B) 58 C) 60 D) 67 81. If the number of employed increases while the number of unemployed does not change, the unemployment rate: A) will increase. B) will decrease. C) will not change. D) may either increase or decrease. 82. In the United States since the end of World War II: A) the labor-force participation rates of both men and women have increased. B) the labor-force participation rates of both men and women have decreased. C) the labor-force participation rate of men has increased, while the labor-force participation rate of women has decreased. D) the labor-force participation rate of men has decreased, while the labor-force participation rate of women has increased. 83. The household survey conducted by the Bureau of Labor Statistics provides estimates of the number of workers , while the establishment survey provides estimates of the number of workers . A) self-employed; unemployed B) unemployed; self-employed C) with jobs; on firms' payrolls D) on firms' payrolls; with jobs 84. The employment statistics computed from the establishment survey do not include: A) workers with two jobs. B) those who are self-employed. C) workers on firms' payrolls. D) part-time workers on firms' payrolls. 85. A worker with two jobs is counted: A) once in both the household and the establishment surveys. B) once in the household survey but twice in the establishment survey. C) once in the establishment survey but twice in the household survey. D) twice in both the household survey and the establishment survey. 86. An estimate of the number of unemployed workers in the economy can be obtained from: A) both the household survey and the establishment survey. B) the household survey but not from the establishment survey. C) the establishment survey but not from the household survey. D) neither the household survey nor the establishment survey. 87. Economists can calculate the U.S. unemployment rate by using: A) both the household survey and the establishment survey. B) the household survey but not the establishment survey. C) the establishment survey but not the household survey. D) neither the household survey nor the establishment survey. 88. A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is: A $ B $ C $ D $ ) 6 89. A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. The marriage: A) does not change GDP. B) decreases GDP by $60,000. C) increases GDP by $60,000. D) increases GDP by more than $60,000. the change in the cost of living because it 90. A fixed-weight price index like the CPI take into account that people can substitute less expensive goods for ones that have become more expensive. A) underestimates; does not B) overestimates; does C) accurately estimates; does D) overestimates; does not