Multiple Choice Questions
1. If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to GDP as _________ hamburgers.
a. 5
b. 15
c. 30
d. 60
2. Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?
a. $40
b. $60
c. $80
d. $100
3. Which of the following does NOT add to U.S. GDP?
a. Air France buys a plane from Boeing, the U.S. aircraft manufacturer.
b. General Motors builds a new auto factory in North Carolina.
c. The city of New York pays a salary to a policeman.
d. The federal government sends a Social Security check to your grandmother.
4. An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction?
a. Net exports and GDP both rise.
b. Net exports and GDP both fall.
c. Net exports fall, while GDP is unchanged.
d. Net exports are unchanged, while GDP rises.
5. Which is the largest component of GDP?
a. Consumption
b. Investment
c. Government purchases
d. Net exports
6. If all quantities produced rise by 10 percent and all prices fall by 10 percent, which of the following occurs?
a. Real GDP rises by 10 percent, while nominal GDP falls by 10 percent.
b. Real GDP rises by 10 percent, while nominal GDP is unchanged.
c. Real GDP is unchanged, while nominal GDP rises by 10 percent.
d. Real GDP is unchanged, while nominal GDP falls by 10 percent.