# Homework 5 MACRO

During a business cycle expansion, total production ______ and total employment ______.
a) increases; increases
b) decreases; decreases
c) decreases; increases
d) increases; decreases
increases; increases
Gross domestic product is calculated by summing up
a) the total quantity of goods and services in the economy
b) the total quantity of goods and services produced in the economy during a period of time
c) the total market value of goods and services in the economy
d) the total market value of goods and services in the economy during a period of time
the total market value of goods and services in the economy during a period of time
In the circular flow model, the value of total income for an economy ________ the value of total production.
a) equals
b) is greater than
c) is less than
d) may be greater than or less than
equals
An example of business fixed investment spending is
a) purchase of a home by a household
b) a purchase of a computer by an accounting firm
c) purchase of a bond by General Electric Corporation
d) \$200 million of unsold cars at a car dealership
a purchase of a computer by an accounting firm
In the United States in 2013, the Bureau of Economic Analysis began counting spending by firms and individuals on developing entertainment products as investment. This change will
a) take away from GDP
c) not change GDP
d) only change GDP if the development occurs within the borders of the United States
Gross domestic product (in billions of dollars) for this economy equals:
Consumption expenditures: \$800
Investment expenditures: \$200
Government purchases: \$300
Exports: \$100
Imports: \$200
Wages: \$800
\$1,200
A final good is one that
a) is used in the production of another good
b) is a natural resource used to produce a good
c) is purchased as an input in the production process
d) is purchased by its final user
is purchased by its final user
A car that is produced in 2013 is not sold until 2014. According to the definition of GDP, in which year’s GDP should it be counted?
a) 2013
b) 2014
c) half of the sales price will count as part of 2013 GDP and half will count as part of 2014 GDP
d) the production cost will count as part of 2013 GDP while the sales price will count as part of 2014 GDP
2013
Which of the following are not considered part of government purchases?
a) welfare benefits
b) teachers’ salaries paid by a local government
c) a tank purchased by the federal government
d) a bridge purchased by the state government
welfare benefits
Consumption spending is \$4.5 billion, gross private domestic investment is \$3 billion, and government expenditures are \$2 billion. If GDP is \$14 billion, which of the following could be true regarding exports and imports in the economy?
a) exports are \$4.5 billion, and imports are \$2 billion
b) exports are \$6 billion, and imports are \$8.5 billion
c) exports are \$9 billion, and imports are \$6 billion
d) exports are \$15 billion, and imports are \$10.5 billion
Exports are \$15 billion, and imports are \$10.5 billion
Gross domestic product understates the total production of final goods and services because of the omission of
a) exports
b) inflation
c) intermediate goods
d) household production
household production
GDP is not a perfect measure of well-being because
a) the value of leisure is included in GDP
b) GDP is not adjusted for pollution
c) GDP is adjusted for changes in crime rates
GDP is not adjusted for pollution
Real GDP is GDP in a given year
a) adjusted only for anticipated inflation
c) valued in the prices of that year
d) valued in the prices of the base year
valued in the prices of the base year
Suppose that nominal GDP in 2013 was less than real GDP in 2013. Given this information, we know for certain that
a) the price level in 2013 was greater than the price level in the base year
b) the price level in 2013 was less than the price level in the base year
c) real GDP in 2013 was less than the real GDP in the base year
d) real GDP in 2013 was greater than real GDP in the base year
the price level in 2013 was less than the price level in the base year
If nominal GDP is \$5 trillion and real GDP is \$4 trillion, the GDP deflator is
125
The GDP deflator for 2012 equals:
YEAR Nominal GDP Real GDP
2011 \$13,399 \$12,976
2012 \$14,078 \$13,254
2013 \$14,441 \$13,312
106.2
Given the following information, calculate the rate of increase in the price level from 2012 to 2013.
2012 2013
Nominal GDP \$10,000 \$12,000
Real GDP \$9,500 \$10,500
8.6%
Residential investment includes spending by firms on office buildings.
T/F
False
If an increase in crime causes households to spend money on police and security systems, GDP will rise.
T/F
True
If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.
T/F
False

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