Multiple Choice Questions:
1. The consumer price index?
a. Takes government purchases into account, unlike the GDP deflator.
b. Takes business investment purchases into account, unlike the GDP deflator.
c. Equals 100 in the base year, unlike the GDP deflator.
d. Is generally used to adjust nominal GDP to calculate real GDP.
e. None of the above is true.
2. Real GDP in base year dollars equals.
a. Nominal GDP divided by the price index, times 100.
b. Nominal GDP divided by the price index.
c. Nominal GDP times the price index.
d. Nominal GDP times the price index, divided by 100.
e. None of the above.
3. Suppose that nominal GDP in 2000 equals $8,000 trillion and that in 2001 nominal GDP equals $8,500 trillion. It can be concluded that?
a. Total production of output decreased from 2000 to 2001.
b. Total production of output increased from 2000 to 2001.
c. The economy experienced inflation from 2000 to 2001.
d. The economy experienced deflation from 2000 to 2001.
e. None of the above is true.
4. If real GDP increases and population increases, then real GDP per capita?
a. Will rise.
b. Will fall.
c. Will remain unchanged.
d. Could either rise, fall, or remain unchanged.
5. If nominal GDP rises from $5 billion to $6 billion, when the GDP deflator goes from 100 to 120, real GDP?
a. Rises.
b. Falls.
c. Stays the same.
d. Could either be rising or falling.
6. Important factors that are excluded from GDP measurements include?
a. Leisure.
b. The underground economy.
c. Nonmarket transactions.
d. The value of changes in the environment.
e. All of the above.
7. Which of the following is measured in per capita GDP?
a. Leisure.
b. Underground economic transactions.
c. The services of homemakers.
d. External benefits and costs.
e. None of the above.
8. If country A has a bigger underground economy than country B, and country A’s citizens work fewer hours per week than the citizens of country B, other things being equal, then?
a. GDP comparisons between the countries would overstate the economic welfare of country A compared to B.
b. GDP comparisons between the countries would understate the economic welfare of country A compared to B.
c. It is impossible to know which direction GDP comparisons between the countries would be biased as measures of the economic welfare of the two countries.
d. It would not introduce any bias in using GDP to compare economic welfare between the countries.
e. None of the above would be true.