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Real gross domestic product

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is a measure of inflation.

• will increase if the price level increases.

• will increase if the level of output increases.

• can change from one year to the next even if there is no change in output.

One principle of economic growth is the notion that, to raise living standards over time, an economy must

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• have full employment of its labor force.

• devote some portion of its current output to increasing its future output.

• maintain low inflation over the years.

• have a small population so that its GDP per person will be high.

Macroeconomics is primarily concerned with studying two broad topics:

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• long-run economic growth and short-run business cycles.

• the price of oil and gas abroad and prices of energy in the domestic market.

• the stock market and the housing market.

• household incomes and firms' profits.

Refer to the accompanying national income data for the economy. All figures are in billions of dollars. The national income is

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• $561.

• $573.

• $580.

• $530.

Prices tend to be sticky because

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• firms are worried that frequent price changes would annoy consumers.

• most firms have agreements with each other to fix prices at profit-maximizing levels.

• government controls most prices.

• foreign competition discourages domestic firms from price changes.

If real GDP falls from one period to another, we can conclude that

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• deflation occurred.

• inflation occurred.

• nominal GDP fell.

• none of these necessarily occurred.

GDP measured using current prices is called

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• nominal GDP.

• real GDP.

• constant GDP.

• deflated GDP.

Personal income will equal disposable income when

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• corporate profits are zero.

• personal taxes are zero.

• transfer payments are zero.

• Social Security contributions are zero.

Real GDP measures the

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• total dollar value of all goods and services produced within the borders of a country using current prices.

• value of final goods and services produced within the borders of a country, adjusted for price changes.

• total dollar value of all goods and services consumed within the borders of a country, corrected for price changes.

• value of all goods and services produced in the world, using current prices.

Refer to the figures. Which figure(s) represent(s) a situation where prices are sticky?

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• A only

• B only

• both A and B

• neither A nor B

The amount of new output produced per year for both consumption and additions to capital stock is measured by

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• GDP.

• net investment.

• NDP.

• net exports.

Refer to the figure. Assuming this market is representative of the economy as a whole, a positive demand shock will

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• increase both the price level and the quantity of output produced.

• increase output but leave prices unchanged.

• lower the price level but leave output unchanged.

• raise the price level but leave output unchanged.

In national income accounting, government purchases include

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• purchases by federal, state, and local governments.

• purchases by the federal government only.

• government transfer payments.

• purchases of goods for consumption but not public capital goods.

Refer to the figure. Assuming this market is representative of the economy as a whole, a positive demand shock will

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• increase both the price level and the quantity of output produced.

• increase output but leave prices unchanged.

• lower the price level but leave output unchanged.

• raise the price level but leave output unchanged.

An economy is enlarging its stock of capital goods

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• when net investment exceeds gross investment.

• when gross investment exceeds depreciation.

• whenever gross investment is positive.

• when depreciation exceeds gross investment.

Consider This) What is the difference between financial investment and economic investment?

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• There is no difference between the two.

• Financial investment refers to the purchase of financial assets only; economic investment refers to the purchase of any new or used capital goods.

• Economic investment is adjusted for inflation; financial investment is not.

• Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

Corporate profits" in the national income accounts consists of the following, except

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• retained earnings.

• interest.

• dividends.

• corporate income taxes.

Which of the following is not an effect of inflation that is troublesome to consumers?

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• Household incomes may be rising slower than the overall prices.

• The purchasing power of people's savings would decrease.

• Workers' wages may be rising faster than the overall price level.

• Their standard of living will fall if their household has a fixed nominal income.

Gross output (GO) for an economy in a given year

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• will always be less than GDP for that economy in the same year.

• will always equal GDP for that economy in the same year.

• may be greater than or less than GDP for that economy in the same year.

• will always exceed GDP for that economy in the same year.

If nominal GDP in some year is $280 and real GDP is $160, then the GDP price index for that year is

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• 175.

• 57.

• 160.

• 280.

MC Qu. 26-166 (Algo) Refer to the graphs. Which...

Refer to the graphs. Which of the following best represents a negative demand shock when prices are flexible?

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• the shift from D2 to D1 in graph B

• the shift from D2 to D1 in graph A

• the shift from D2 to D3 in graph A

• the shift from D2 to D3 in graph B

MC Qu. 27-218 (Algo) The following are national income account...

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($40), exports ($22), personal consumption expenditures ($2,460), and government purchases ($470). What is GDP in this economy?

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• 3,250 billion

• 3,272 billion

• 3,232 billion

• 3,294 billion

Answer this question based on the given information for an economy in some year.

1. Dollar value of resource extraction activity = $20 billion

2. Dollar value of production activity = $50 billion

3. Dollar value of distribution activity = $80 billion

4. Dollar value of final output = $120 billion

Gross output for this economy equals

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• $120 billion.

• $150 billion.

• $270 billion.

• $260 billion.

Assume that a manufacturer of stereo speakers purchases $30 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is

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• $70.

• $30.

• $40.

• $2,100.

• $100.

Refer to the graphs. Suppose a firm is currently producing 500 computers per week and charging a price of $1,000. How will the firm respond to a positive demand shock if prices are flexible?

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• The firm will increase the price to $1,200.

• The firm will keep the price at $1,000.

• The firm will reduce the price to $600.

• The firm will increase production to 650 computers.

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 75,000 TVs are produced and sold at a price of $1,200 each. As a result,

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• nominal GDP fell to $90 million.

• real GDP increased.

• nominal GDP increased.

• real GDP stayed the same.

Refer to the accompanying national income data (in billions of dollars). Corporate profits are equal to

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• $654.

• $513.

• $644.

• $441.

Refer to the graphs. Suppose a firm is currently producing 500 computers per week and charging a price of $1,000. What happens to the firm's inventory of computers if there is a positive demand shock and prices are inflexible?

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• The firm’s inventory will decrease by 150 computers per week.

• The firm’s inventory will stay at their current level.

• The firm’s inventory will increase by 150 computers per week.

• The firm’s inventory will increase by 350 computers per week.

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock

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• increased by $55 billion.

• decreased by $55 billion.

• increased by $65 billion.

• may have either increased or decreased.

Suppose a family's income increases by 3 percent at the same time that inflation is 0 percent. Then the

rev: 10_17_2020_QC_CS-236105

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family will spend the same amount as they did last year to purchase the same goods and services.

family's standard of living will decrease.

purchasing power of their income will decrease.

purchasing power of their savings will decrease by 3%

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