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1. macroeconomists study

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economy-wide phenomena

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2. which of the following newspaper headlines is more closely related to what microeconomists study than to what macroeconomists study?

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the price of oranges rises after an early frost

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3. which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?

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the percentage of the labor force that is out of work, and differences in average income from country to country

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4. the basic tools of supply and demand are

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central to macroeconomic analysis as well as to microeconomic analysis

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5. which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

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gross domestic product

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6. gdp

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is used to monitor the performance of the overall economy and is the single best measure of a society;s economic well-being

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7. gross domestic product measures

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income and expenditure

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8. expenditures on a nation's domestic production

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are equal to its domestic production

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9. for an economy as a whole

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income must equal expenditure

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10. which of the following statements about gdp is correct?

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all of the above are correct (gdp measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services money continuously flows from households to firms and then back to households, and gdp measures flow of money gdp is generally regarded as the best single measure of a society's economic well-being)

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11. if an economy's gdp falls, then it must be the case that the economy's

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income and expenditures both fall

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12. in a simple circular-flow diagram, total income and total expenditure are

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always equal because every transaction has a buyer and a seller

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13. in a simple circular-flow diagram

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all of the above are correct (households spend all of their income all goods and services are bought by households expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production)

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14. in a simple circular-flow diagram, households buy goods and services whit the income they get from

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all of the above are correct (wages rents profits)

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15. gdp is defined as the

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value of all final goods and services produced within a country in a given period of time

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16. gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. to do this, gdp makes use of

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market pices

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17. in computing gdp, market prices are used to value final goods and services because

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market prices reflect the values of goods and services

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18. which of the following is included in gdp

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both the market value of rental housing services and the market value of owner-occupied housing services

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19. the value of the housing services provided by the economy's owner-occupied houses is

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included in the gdp, and the estimated rental values of the house are used to place a value on these housing services

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20. most goods and services produced at home

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and most goods and services produced illegally are excluded from gdp

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21. a newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. based on this information gdp most likely

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decreased

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22. how is net national product (NNP) calculated

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depreciation losses are subtracted from the total income of a nation's citizens

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23. which of the following is an example of depreciation

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computers becoming obsolete

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24. national income is defined as

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the total income earned by a nation's permanent residents in the production of goods and services

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25. the income that households and noncorporate businesses receive

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personal income

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26. disposable personal income is the income that

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households and noncorporate businesses have left after paying taxes and non-tax payments to the government

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27. disposable income is

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it does not matter much which measure we use

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28. in the equation Y=C+I+G+NX

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Y represents the economy's total expenditure

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29. the consumption component of gdp includes spending on

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durable goods, nondurable goods, and services

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30. consumption consists of spending by households on goods and services, with the exception of

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purchases of new houses

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31. when economists refer to intangible items, they are referring to such things as

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hair styling and dental care, and the value of such items is included in GDP

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32. household spending on education is included in

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consumption, although it might be argued that it would fit better in investment

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33. household spending on education is counted in which component or subcomponent of gdp

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consumption of services

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34. which of the following is included in the consumption component of us gdp

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purchases of natural gas by us households

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35. which of the following is included in the investment component of gdp?

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all of the above are correct (households' purchases of newly constructed homes net additions to firms' inventories firms' purchases of capital equipment)

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36. which of the following examples of household spending is categorized as investment rather than consumption

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expenditures on new housing

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37. which of the following items is the one type of household expenditure that is categorized as investment rather than consumption

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the purchase of a new house

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38. which of the following is included in the investment component of gdp?

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all of the above are included in the investment component (spending to build new houses spending to build new factories spending on business equipment such as welding equipment)

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39. Which of the following is included in the investment component of GDP?

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spending on new residential construction but not spending on stocks and bonds

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40. The value of goods added to a firm's inventory in a certain year is treated as

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investment, since GDP aims to measure the value of the economy's production that year

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41. Consumer goods that are produced, go into inventory, and are not sold during the current period are

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included in current period GDP as inventory investment

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42. Government purchases include spending on goods and services by

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federal, state, and local governments

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43. Which of the following items is counted as part of government purchases?

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all of the above are correct (The federal government pays the salary of a Navy officer. The state of Nevada pays a private firm to repair a Nevada state highway. The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.)

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44. If total spending rises from one year to the next, then

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either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

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45. Changes in nominal GDP reflect

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both changes in prices and changes in the amounts being produced

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46. Changes in real GDP reflect

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only changes in the amounts being produced

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47. Real GDP is the yearly production of final goods and services valued at

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constant prices

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48. If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?

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$10 trillion

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49. If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP?

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$40 billion

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50. If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator ?

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250

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51. Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

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one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931

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52. The consumer price index is used to

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monitor changes in the cost of living over time

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53. When the consumer price index rises, the typical family

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has to spend more dollars to maintain the same standard of living

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54. Economists use the term inflation to describe a situation in which

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the economy's overall price level is rising

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55. When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

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inflation

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56. The economy's inflation rate is the

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percentage change in the price level from the previous period

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57. Which of the following is correct?

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The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers

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58. The CPI is a measure of the overall cost of

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the goods and services purchased by a typical consumer

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59. The CPI is a measure of the overall cost of the goods and services bought by

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a typical consumer

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60. The inflation rate is calculated

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by determining the percentage increase in the price index from the preceding period

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61. The inflation rate is calculated

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by determining the percentage change in the price index from the preceding period

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62. If 2004 is the base year, then the inflation rate for 2005 equals

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(CPI in 2005 - CPI in 2004)/(CPI in 2004) x100

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63. Refer to Table 11-1. The cost of the basket in 2005 was

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$200

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64. Refer to Table 11-1. The cost of the basket in 2006 was

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$240

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65. Refer to Table 11-1. If 2005 is the base year, then the CPI for 2005 was

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100

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66. Refer to Table 11-1. If 2005 is the base year, then the CPI for 2006 was

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120

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67. Refer to Table 11-1. If 2006 is the base year, then the CPI for 2005 was

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83.3

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68. Refer to Table 11-1. If 2006 is the base year, then the CPI for 2006 was

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100

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69. Refer to Table 11-1. If 2005 is the base year, then the inflation rate in 2006 was

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20 percent

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70. Refer to Table 11-1. If 2006 is the base year, then the inflation rate in 2006 was

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20 percent

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71. The primary purpose of measuring the overall level of prices in the economy is to

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allow for the comparison of dollar figures from different points in time

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72. Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 214.5 for 2009. Ruth's 1931 salary was equivalent to a 2009 salary of about

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$1,128,947

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73. When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is

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more than four times Ruth's salary

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74. In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 214.5 for 2009. President Hoover's 1931 salary was equivalent to a 2009 salary of about

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$1,058,388

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75. You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in today's prices?

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five cents (today's CPI / 1962 CPI)

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