Q: Suppose a country produces only two goods: computers and wheat. Last year, it produced 100 computers at $$1,000 each and 500 tons of wheat at 200 $$per ton. This year, it produced 120 computers at $$1,100 each and 600 tons of wheat at 220 $$per ton. If last year is the base year, what is the real GDP for this year?

$$(120 \times 1,000) + (600 \times 200) = 120,000 + 120,000 = 240,000$$

Question 1

Which of the following is an example of a capital good?

Accepted Answer

A delivery truck purchased by a logistics company

Question 2

Suppose a country produces only two goods: computers and wheat. Last year, it produced 100 computers at $$1,000 each and 500 tons of wheat at 200 $$per ton. This year, it produced 120 computers at $$1,100 each and 600 tons of wheat at 220 $$per ton. If last year is the base year, what is the real GDP for this year?

Accepted Answer

$$(120 	imes 1,000) + (600 	imes 200) = 120,000 + 120,000 = 240,000$$

Question 3

Which of the following statements is a normative statement?

Accepted Answer

The government should increase spending to reduce unemployment.

Question 4

If the price of coffee increases and, as a result, the demand for tea increases, what is the relationship between coffee and tea?

Accepted Answer

They are substitute goods.

Question 5

Which of the following would NOT be included in the calculation of a country's GDP using the expenditure approach?

Accepted Answer

The purchase of used machinery by a factory

Question 6

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied at the prevailing price.

Question 7

If the supply curve for a product shifts to the right, what will happen to the equilibrium price and quantity, all else equal?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 8

Which of the following is an example of an opportunity cost?

Accepted Answer

The income you forgo by attending college instead of working full-time.

Question 9

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

Accepted Answer

Either prices, output, or both have increased.

Question 10

Which of the following would cause a movement along the demand curve for ice cream?

Accepted Answer

A decrease in the price of ice cream.

Question 11

Suppose the government imposes a price ceiling below the equilibrium price in the market for gasoline. What is the likely result?

Accepted Answer

A shortage of gasoline.

Question 12

Which of the following is a characteristic of a centrally planned economy?

Accepted Answer

Resource allocation is determined by the government.

Question 13

If the demand for a normal good increases as income rises, which of the following is also true?

Accepted Answer

The good has a positive income elasticity of demand.

Question 14

Which of the following is an example of a positive statement?

Accepted Answer

An increase in the minimum wage will lead to higher unemployment among teenagers.

Question 15

A bakery buys flour to make bread, which it then sells to consumers. In calculating GDP, the value of the flour is:

Accepted Answer

Not included, because it is an intermediate good.

Question 16

If the supply of oranges decreases due to a hurricane destroying crops, what will happen to the equilibrium price and quantity of oranges, all else equal?

Accepted Answer

Equilibrium price will rise and equilibrium quantity will fall.

Question 17

Which of the following is NOT counted in the investment component of GDP?

Accepted Answer

The purchase of stocks and bonds by households.

Question 18

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

Accepted Answer

Output has decreased.

Question 19

Which of the following is a reason why GDP may underestimate a country's true level of economic activity?

Accepted Answer

It does not include the value of household production.

Question 20

A household purchases a new car manufactured in Germany. How is this transaction recorded in the U.S. GDP accounts?

Accepted Answer

It is included in consumption and subtracted as an import.

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