Gross Domestic Product

1. Because every transaction has a buyer and a seller, a. GDP is more closely associated with an economy’s income than it is with an economy’s expenditure. b. every transaction contributes equally to an economy’s income and to its expenditure. c. the number of firms must be equal to the number of households in a simple circular-flow diagram. d. firms’ profits are necessarily zero in a simple circularflow diagram. 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 1. 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 a. reduced measured GDP. b. not affected measured GDP. c. increased measured GDP by the value of the restaurant meals. d. increased measured GDP by the value added by the restaurant’s preparation and serving of the meals. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.15.112 - LO: 23-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic TOPICS: KEYWORDS: 2. a. DISC:Measuring Output GDP BLOOM'S: Application 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? The 2014 sale increased 2014 GDP by $260,000 and had no effect on 2011 GDP. b. The 2014 sale increased 2014 GDP by $20,000 and had no effect on 2011 GDP. c. The 2014 sale increased 2014 GDP by $260,000; furthermore, the 2014 sale caused 2011 GDP to be revised upward by $20,000. d. The 2014 sale affected neither 2014 GDP nor 2011 GDP. ANSWER: d POINTS: 1 3. Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is a. included in both U.S. GDP and U.S. GNP. b. included in U.S. GDP, but it is not included in U.S. GNP. c. included in U.S. GNP, but it is not included in U.S. GDP. d. included in neither U.S. GDP nor U.S. GNP. 1. ANSWER: c POINTS: 1 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? a. $830 b. $1230 c. $1370 d. $1770 ANSWER: POINTS: 1. c 1 Which of the following statements about nominal GDP and real GDP is correct? a. Nominal GDP is a better gauge of economic well-being than real GDP. b. Real GDP is a better gauge of economic well-being than nominal GDP. c. Real GDP and nominal GDP are equally good measures of economic well-being. d. Neither nominal nor real GDP provide a measure of economic well-being. 2. a. ANSWER: b POINTS: 1 When an American household purchases a bottle of Italian wine for $100, U.S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by $100. b. U.S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by $100. c. U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change. d. U.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 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 2008 2009 $4 $5 100 90 $50 $50 2010 $5 100 $60 15 2011 $6 80 $65 12 Watches 1. 10 15 Refer to Table 23-11. What was nominal GDP, real GDP, and the GDP deflator for 2008? ANSWER: Nominal GDP was $4x100 + $50X10 = $900. Real GDP was $5x100 + $50x10 =$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 2. Refer to Table 23-11. What was nominal GDP, real GDP, and the GDP deflator for 2009? Show your work. ANSWER: Nominal GDP was $5x90 + $50x15 = $1,200. Real GDP was $5x90 + $50x15 =$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 3. TOPICS: DISC:Measuring Output KEYWORDS: BLOOM'S: Application Refer to Table 23-11. What was nominal GDP, real GDP, and the GDP deflator for 2010? Show your work. ANSWER: Nominal GDP was $5x100 + $60x15 = $1,400. Real GDP was $5x100 + $50x15 = $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 4. TOPICS: DISC:Measuring Output KEYWORDS: BLOOM'S: Knowledge Refer to Table 23-11. What was nominal GDP, real GDP, and the GDP deflator for 2011? Show your work. ANSWER: Nominal GDP was $6x80 + $65x12 = $1,260. Real GDP was $5x80 + $50x12 = $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