Q: Suppose the nominal GDP of a country in 2022 is $$ \5$$,600 $$ and the real GDP (using 2019 as the base year) is $$ \$$4,600 . $$What is the GDP deflator for 2022?

$$ \frac{5,600}{4,600} \times 100 = 121.74 $$

Question 1

Which of the following transactions would be included in the calculation of a country's GDP for the current year?

Accepted Answer

A new car produced by a Japanese firm in the United States

Question 2

Suppose the nominal GDP of a country in 2022 is $$ \5$$,600 $$ and the real GDP (using 2019 as the base year) is $$ \$$4,600 . $$What is the GDP deflator for 2022?

Accepted Answer

$$ \frac{5,600}{4,600} 	imes 100 = 121.74 $$

Question 3

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics examines how individuals and firms respond to incentives, while macroeconomics analyzes economy-wide outcomes resulting from the actions of all agents.

Question 4

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Transfer payments such as Social Security

Question 5

A bakery buys flour for $$0.50 from a miller, uses it to bake bread, and sells the bread for 2.00 to $$consumers. What is the value added by the bakery?

Accepted Answer

$1.50

Question 6

Which of the following best explains why GDP per capita is often used as a measure of standard of living?

Accepted Answer

It reflects the average income per person, allowing for comparisons of living standards across countries.

Question 7

Which of the following is an example of an intermediate good?

Accepted Answer

Steel purchased by a car manufacturer to produce cars

Question 8

If nominal GDP increases from one year to the next, which of the following must be true?

Accepted Answer

Either the quantity of goods and services produced, the price level, or both have increased.

Question 9

Which of the following is a shortcoming of GDP as a measure of well-being?

Accepted Answer

It does not include the value of leisure time.

Question 10

Suppose a country has the following data for a given year: Consumption = $$ \10$$,000 $$, Investment = $$ \$$3,000 $$, Government Purchases = $$ \2$$,000 $$, Exports = $$ \$$1,000 $$, Imports = $$ \1$$,500 $. What is the country's GDP for that year?

Accepted Answer

$$10,000 + 3,000 + 2,000 + (1,000 - 1,500) = 14,000$$

Question 11

Which of the following would cause real GDP to increase while nominal GDP remains unchanged?

Accepted Answer

The price level decreases while output increases.

Question 12

Which of the following is included in the investment component (I) of GDP?

Accepted Answer

Spending on new machinery by firms

Question 13

If the GDP deflator in 2020 is 110 and real GDP in 2020 is $$ \4$$,800 $, what is the nominal GDP in 2020?

Accepted Answer

$$4,800 	imes 1.10 = 5,280$$

Question 14

Which of the following best describes the circular-flow diagram in macroeconomics?

Accepted Answer

It illustrates the flow of goods, services, and money among households, firms, government, and the rest of the world.

Question 15

Which of the following is an example of a government purchase included in GDP?

Accepted Answer

A teacher's salary paid by a public school

Question 16

If a country has a large underground economy, how will this affect the accuracy of its GDP measurement?

Accepted Answer

GDP will understate the country's true level of production.

Question 17

Which of the following is a reason why the sale of used goods is not included in GDP?

Accepted Answer

Their value was already counted in GDP when they were first sold as new goods.

Question 18

Suppose the following transactions occur in a year: (1) A bakery buys flour for $$ \100$$ $$ and uses it to bake bread sold for $$ \$$300 $$; (2) A farmer sells wheat to the miller for $$ \50$$ $$; (3) The miller sells flour to the bakery for $$ \$$100 . $$What is the total value added in the economy from these transactions?

Accepted Answer

$$50 + (100 - 50) + (300 - 100) = 300$$

Question 19

Which of the following is a limitation of using GDP as a measure of social welfare?

Accepted Answer

GDP does not account for negative externalities such as pollution.

macro chapter 8

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