Macro Qch2
Macro Qch2
Macro Qch2
Chapter 2
Q1: MCQ
1. A nation's gross domestic product (GDP):
A) is the dollar value of the total output produced within the borders of the nation.
B) is the dollar value of the total output produced by its citizens, regardless of where they are
living.
C) can be found by summing C + I + S + Xn.
D) is always some amount less than its C + I + G + Xn.
Answer: A
A) monetary value of all final goods and services produced within a nation in a particular year.
B) national income minus all non income charges against output.
C) monetary value of all economic resources used in producing a year's output.
D) monetary value of all goods and services, final and intermediate, produced in a specific
year.
Answer: A
4. GDP includes:
A) neither intermediate nor final goods. C) intermediate, but not final, goods.
B) both intermediate and final goods. D) final, but not intermediate, goods.
Answer: D
5. Suppose the total market value of all final goods and services produced in a particular
country in 2004 is $500 billion and the total market value of final goods and services sold
is $450 billion. We can conclude that:
A) as an index number.
B) in percentage terms.
C) in dollar amounts.
D) in quantities of physical units (for example, pounds, gallons, and bushels).
Answer: C
8. GDP is:
A) the monetary value of all goods and services (final, intermediate, and non-market) produced
in a given
year.
B) total resource income less taxes, saving, and spending on exports.
C) the economic value of all economic resources used in the production of a year's output.
D) the market value of all final goods and services produced within a nation in a specific year.
Answer: D
9. By summing the dollar value of all market transactions in the economy we would:
A) be determining the market value of all resources used in the production process.
B) obtain a sum substantially larger than the GDP.
C) be determining value added for the economy.
D) be measuring GDP.
Answer: B
A) goods and services that are unsold and therefore added to inventories.
B) goods and services whose value has been adjusted for changes in the price level.
C) goods and services purchased by ultimate users, rather than for resale or further processing.
D) the excess of U.S. exports over U.S. imports.
Answer: C
A) the GDP would then have to be deflated for changes in the price level.
B) nominal GDP would exceed real GDP.
C) the GDP would be overstated.
D) the GDP would be understated.
14. Tom Atoe grows tomatoes for home consumption. This activity is:
Answer the next question(s) on the basis of the following data. All figures are in billions of
dollars.
Gross investment $ 18
National income 100
Net exports 2
Personal income 85
Personal consumption expenditures 70
Saving 5
Government purchases 20
23. The gross domestic product for the above economy is:
26. Refer to the above data. From this information we can conclude that the sum of indirect
business taxes and net foreign factor income is.
A) any increase in GDP that has been adjusted for adverse environmental effects.
B) the excess of gross investment over net investment.
C) the difference between the value of a firm's output and the value of the inputs it has
purchased from others.
D) the portion of any increase in GDP that is caused by inflation as opposed to an increase in
real output.
Answer: C
28. Setup Corporation buys $100,000 of sand, rock, and cement to produce redi-mix
concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by
Setup Corporation is:
29. By summing the values added at each stage in the production of some good we obtain:
A) NI plus net foreign factor income earned in the U.S. plus indirect business taxes.
B) NI plus corporate income taxes.
C) GDP deflated for increases in the price level.
D) GDP minus indirect business taxes.
Answer: A
34. The total income earned in any year by national resource suppliers is measured by:
A) nominal GDP after it has been inflated or deflated for changes in the value of the dollar.
B) the after-tax income of resource suppliers.
C) the market value or cost of the resources used in the production of the national output.
D) the amount of wage, rent, interest, and profits income actually received by households.
Answer: C
A) when gross and net investment are equal. C) when gross investment exceeds net investment.
B) during a period of recession or depression. D) during a period of extended inflation.
Answer: B
37. If personal income exceeds national income in a particular year, we can conclude that:
39. Which of the following is the smallest dollar amount in the United States?
42. In a typical year which of the following measures of aggregate output and income is likely
to be the smallest?
43. Which of the following activities is excluded from GDP, causing GDP to understate a
nation's well-being?
44. Which of the following activities is excluded from GDP, causing GDP to understate a
nation's well-being?
A) overstate economic welfare because it does not include certain nonmarket activities such as
the productive work of housewives.
B) understate economic welfare because it includes expenditures undertaken to offset or
correct pollution.
C) understate economic welfare because it does not take into account increases in leisure.
D) overstate economic welfare because it does not reflect improvements in product quality.
Answer: C
47. GDP data are criticized as being inaccurate measures of economic welfare because:
48. Assume that the size of the underground economy increases both absolutely and
relatively over time. As a result:
1. .If the value of output by citizens outside the country is greater than the value of output by
foreigners inside the country, GNP will be less than GDP.
Then GNP< GDP if foreign product inside the country is greater than national output.
False , because GNP is the best measure of economic welfare, as it reflects what national
citizens can produce of all goods and services, and how much income is available to
citizens or residents of the country.
While , GDP is better than GNP as a measure of economic activity because it reflects the
level of employment and how much is being produced inside the country.
5. GDP calculated by the value added method may equal GDP calculated by the final
product method.
6. In calculating GDP from the expenditure side, economists add imports to other aggregate
expenditure components.
False , because GDP= C+I+G+(X-M), where imports are payments foe purchasing goods
and services from abroad.
7. If gross investment rose by $60 million there must be a replacement investment by the
same amount.
False , because if gross investment rose, there must be both replacement investment , for
the capital that already exist and net investment to increase the economy's capital stock.
a) Tata motors purchases tire from Good year to equip new Indica.
b) Tata motors purchases tires from Good year to replace worn tires on
executives’ company cars.
c) An individual purchases 50 shares of Microsoft.
d) You purchased a laptop from USA.
e) Indian Statistical Institute gives Scholarship to the students.
f) Employee contributes to retirement plan.
g) Maruti sells Zen from its inventory.
Solution:
• Consumption
Durable goods …………$ 820
Nondurable goods …….. 2,010
Services ……………….. 3,929
– Total C …………………………….$6,759
• Investment
Plant & Equipment …….$ 1,361
Residential Housing …… 416
Inventory change ………. 57
– Total I ……………………………….1,834
• Government Purchases
Solution
GDP = C + I + G + Xn
GDP =6,759+1,834+1,743+(-370)
GDP = 9,966