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ECO 372T Wk 1 – Practice: Measuring Output and Income Quiz
Which of the following ly describes GDP using the income approach?
GDP = Consumption + Gross Investment + Net Exports + Government Purchases
GDP = Wages + Rents + Interest + Profits and Losses
GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income
GDP = Wages + Rents + Interest + Profits and Losses + National Income
Which of the following statements ly explains exports versus net exports?
Exports are goods, services, or resources produced domestically and sold abroad, while net exports are equal to exports minus imports.
Exports are goods, services, or resources produced domestically and sold abroad, while net exports are equal to imports minus exports.
Exports are goods, services, or resources produced abroad and sold domestically, while net exports are equal to exports minus imports.
Exports are goods, services, or resources produced abroad and sold domestically, while net exports are equal to imports minus exports.
The major difference between nominal GDP and real GDP is:
nominal GDP measures the value of output with current-year output levels, while real GDP measures output using constant output levels.
nominal GDP measures the value of output with constant output levels, while real GDP measures output using current-year output levels.
nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices.
nominal GDP measures the value of output in constant prices, while real GDP measures output using current-year prices.
Determine whether each of the following examples would be included in Gross Domestic Product (GDP).
- When Judy went to the grocery store yesterday, she bought three pounds of potatoes.
Judy’s purchase of potatoes
- Ford Motor Company buys four tires to put on a new Ford Mustang.
The purchase of the tires
- The U.S. Air Force purchases two new fighter jets from Boeing.
The purchase of the two fighter jets
- When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend.
Joey’s birthday gift of $100
Henry and his girlfriend ate dinner at the new Thai restaurant that recently opened in his neighborhood. This expenditure would be included in:
consumer durables.
services.
government purchases.
consumer nondurables.
The equation for net investment is written as:
Net Investment = Nominal GDP – Gross Investment
Net Investment = Gross Investment – Depreciation
Net Investment = Depreciation – Gross Investment
Net Investment = Consumption – Gross Investment
Which of the following measures is most often used to compare the standards of living in different countries?
Multiple Choice
daily per capita calorie supply
per capita income
life expectancy at birth
per capita energy consumption
GDP tends to overstate economic well-being because it takes into account _____.
Multiple Choice
expenditures undertaken to pollution
illegal activities of individuals and businesses
nonmarket activities, such as the productive work of homemakers
improvements in product quality over time
One common measure of the “standard of living” in a nation is _____.
Multiple Choice
real GDP per capita
population size
real GDP
the unemployment rate
What are net exports?
Multiple Choice
That portion of consumption and investment goods sent to other countries
Exports minus imports
Exports plus imports
Imports minus exports
The U.S. produces and sells millions of different products. To aggregate them together into a single measure of domestic output, the quantity of each good produced is weighted by its _____.
Multiple Choice
cost of production
contribution to corporate profits
utility to consumers
market price
“Net foreign factor income” in the national income accounts refers to the difference between the _____.
Multiple Choice
income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.
income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.
value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
value of products sold by Americans to other nations and the value of products bought by Americans from other nations.
A nation’s nominal gross domestic product (GDP) _____.
Multiple Choice
is the dollar value of all final output produced by its citizens, regardless of where they are living
is always some amount less than C + I + G + NX
can be found by summing C + I + S + NX
is the dollar value of all final output produced within the borders of the nation during a specific period of time
The value of corporate stocks and bonds traded in a given year is _____.
Multiple Choice
excluded from the calculation of GDP because it does not represent new production
included in the calculation of GDP because it is a component of gross investment
included in the calculation of net private domestic investment
included in the calculation of gross private domestic investment
Government purchases include spending on _____.
Multiple Choice
government purchases of final goods and government salaries
government salaries only
government purchases of final goods only
government purchases of final goods, government salaries, and transfer payments
Which of the following is included in GDP?
Multiple Choice
The value of an existing house sold during a year
The value of a haircut
The value of the steel and aluminum used to produce a new car
The value of a homemaker’s services
In the treatment of U.S. exports and imports, national income accountants _____.
Multiple Choice
subtract both exports and imports in calculating GDP
subtract exports but add imports in calculating GDP
add exports but subtract imports in calculating GDP
add both exports and imports in calculating GDP
Which of the following is not included in the sum of national income?
Multiple Choice
Rent
Profits and losses
Depreciation or consumption of fixed capital
Interest
The sale of a used automobile would not be included in GDP of the current year because it is _____.
Multiple Choice
not a market transaction
a private transfer payment
not current production
a purely financial transaction
GDP measured using current prices is called _____.
Multiple Choice
real GDP
deflated GDP
nominal GDP
constant GDP
Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.
| Year | Units of Output | Price per Unit |
| 1 | 8 | $2 |
| 2 | 10 | 3 |
| 3 | 15 | 4 |
| 4 | 18 | 5 |
| 5 | 20 | 6 |
In year 4, nominal GDP would be _____.
Multiple Choice
$90
$120
$316
$60
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are _____.
Multiple Choice
counted as investment spending.
counted as consumption spending.
not counted.
counted as government spending.
If real GDP declines in a given year, nominal GDP _____.
Multiple Choice
may either rise or fall
is likely to remain constant
must also be declining
must also be increasing
The broadest measure to adjust Nominal GDP for price changes is _____.
Multiple Choice
the Consumer Price Index (CPI)
the Producer Price Index (PPI)
the GDP price index
exchange rates
Which of the following is included in the expenditures approach to GDP?
Multiple Choice
The value of stocks and bonds bought by businessmen
Spending on meals by consumers at restaurants
Spending on used clothing at garage sales
Government spending on welfare payments
GDP can be calculated by summing _____.
Multiple Choice
consumption, investment, government purchases, exports, and imports
consumption, investment, government purchases, and net exports
consumption, investment, wages, and rents
consumption, investment, government purchases, and imports
What are the two ways of looking at GDP?
Multiple Choice
Income approach and saving approach
Output approach and consumption approach
Expenditures approach and income approach
Output approach and expenditures approach
What do government purchases include in national income accounting?
Multiple Choice
Purchases by the federal government only
Government transfer payments
Purchases by federal, state, and local governments
Purchases of goods for consumption but not public capital goods
Net exports is a positive number when a nation _____.
Multiple Choice
simply exports goods and services to other nations
exports fewer goods and services than it imports
increases its exports of goods and services
exports more goods and services than it imports
Nominal GDP is _____.
Multiple Choice
money GDP adjusted for inflation
the sum of all monetary transactions that occur in the economy in a year
the sum of all monetary transactions involving final goods and services that occur in the economy in a year
the amount of production that occurs when the economy is operating at full employment
Which of the following statements about economic growth is accurate?
The world’s sustained economic growth has only been occurring over the last 300 to 400 years.
Countries in Africa and South America are responsible for most of the economic growth in the world since the 1600s.
Economic growth has been shared equally among all the countries in the world since the start of the most recent generation.
Sustained economic growth has been occurring since the start of the Roman Empire.
Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000?
Instructions: Enter your answer as a whole number.
years
Suppose that Italy can produce either goods or services with its resources, and that its PPF curve is shown on the graph as PPF1.
Using the graph, for each of the following situations, determine whether the PPF curve shifts.
- Suppose that Italy increases its spending on education, which increases the amount of human capital in Italy.
Italy’s PPF curve would
- A recession causes Italy’s unemployment rate to increase above the natural rate of unemployment.
Italy’s PPF curve would
- Italy experiences an influx of immigrants from surrounding countries, which causes the population of Italy to increase.
Italy’s PPF curve would
Which of the following is a measure of economic growth that is most useful for measuring changes in the overall size of an economy?
Multiple Choice
increases in real GDP per capita
decreases in the rate of unemployment
increases in real GDP
growth in nominal GDP
Human capital refers to the
Multiple Choice
amount of financing available to start-up firms.
number of workers available in the economy.
tools and equipment available to workers.
education, training, and skills of workers.
The number of years required for real GDP to double can be found by
Multiple Choice
dividing the annual growth rate by .072.
multiplying the annual growth rate by 72.
dividing 72 by the annual growth rate.
adding 72 to annual growth rate.
Before the Industrial Revolution, living standards in the world
Multiple Choice
were declining because of rapid increases in population.
are not known, for lack of reliable records from that period.
were already rising significantly for many decades.
were relatively stagnant for long periods of time.
Which of the following will not increase a nation’s real GDP?
Multiple Choice
technological progress
average price level
number of workers
labor productivity
If labor becomes more productive, the production possibilities frontier will
Multiple Choice
remain constant, but output will increase as unemployment falls.
shift to inward, toward the origin.
shift to outward away from the origin.
remain constant, but output will fall as less labor is needed to produce the same level of output.
Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will ______ in Alpha compared to Beta, holding other factors constant.
Multiple Choice
increase output by the same amount
have no effect on output
increase output more
increase output less
Use the following diagram to answer the next question.
The most likely cause for a shift in the production possibilities frontier from AB to CD is
Multiple Choice
the use of the economy’s resources in a less efficient way.
an increase in government purchase of the economy’s output.
an increase in the quantity and quality of labor resources.
an increase in the spending of business and consumers.
Human capital is
Multiple Choice
the talents, training, and education of workers.
the factories and machinery made by workers.
the financial resources available to humans for investment.
the factories and machinery used by humans in the production process.
The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, then the greater the amount of capital in use the
Multiple Choice
less is produced.
less production is wasted.
the more an additional unit of capital adds to production.
the less an additional unit of capital adds to production.
Real GDP per capita is found by
Multiple Choice
subtracting population from real GDP.
adding real GDP and population.
dividing real GDP by population.
dividing population by real GDP.
Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause
Multiple Choice
Nepal’s production possibilities frontier to shift inward faster than the U.S’s.
the U.S.’s production possibilities frontier to shift outward faster than Nepal’s.
the U.S.’s production possibilities frontier to shift inward faster than Nepal’s.
Nepal’s production possibilities frontier to shift outward faster than the U.S.’s.
Most economists agree that ______ are the single most important source of economic growth.
Multiple Choice
technological advances
increases in physical capital
increases in human capital
discoveries of natural resources
Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.
Multiple Choice
increase; increasing
decrease; decreasing
increase; constant
increase; decreasing
The cost of a higher living standard in the future is giving up
Multiple Choice
current investment.
future consumption.
future investment.
current consumption.
Use the following diagram to answer the next question.
If CD is the economy’s current production possibilities frontier, what is the most likely reason for operating at point X?
Multiple Choice
increases in the quantity and the quality of resources
unemployment and inefficient allocation of resources
technological progress and industrial change
improvement in labor productivity and the number of work-hours
Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ labor productivity.
Multiple Choice
increase; not changing
decrease; increasing
increase; decreasing
increase; increasing