1) If the CPI equals 110 in 2009 and 105 in 2010, then

a. the average quality of goods and services has increased.

b. the rate of inflation is exactly 5%.

c. the average quality of goods and services has decreased.

d. the average price of goods and services has decreased.

e. the average price of goods and services has increased.

2) Assume GDP is $19 billion. If consumer spending is $8 billion, financial investment is $2 billion, investment spending is $5 billion, business inventories are $3 billion, and government spending is $5 billion, then net exports must be equal to

a. $2 billion.

b. $1 billion.

c. -$4 billion.

d. $4 billion.

e. -$2 billion.

3) All of the following are examples of how GDP underestimates a nation's production of goods and services except

a. stock purchases.

b. student aid payments.

c. vacation travel.

d. pollution costs.

e. household production.

4) Which of the following would generate an increase in GDP of the USA?

a. The unreported cash sale of replica handbags on a street corner.

b. Medical services provided by a doctor in London.

c. Income earned by an American diplomat living in Germany.

d. A tractor purchased by a Canadian citizen living in the United States.

e. An increase in imported cars purchased by the local auto dealership.

5) Assume that consumer spending increased by $4 billion while business production aimed at consumers increased by $6 billion last year. As a result of these changes, GDP would

a. decrease by $2 billion.

b. increase by $2 billion.

c. increase by $10 billion.

d. increase by $4 billion.

e. increase by $6 billion.

6) Which of the following would be considered scarce?

1. Televisions
2. Automobiles
3. Computers

a. I and III only.

b. I, II, and III.

c. II and III only.

d. I and II only.

e. III only.

7) Which of the following would be considered employed?

a. An unpaid homemaker

b. A college student looking for his first job

c. A woman who has been temporarily laid off until business picks up

d. A teacher on summer vacation until school begins in the fall.

e. A student waiting to start his first job in two months

8) If an American student purchases a calculator made by a Mexican owned company located in Arizona, what would happen to consumption and GDP of the USA as a result?

Consumption / GDP

a. Decrease / Decrease

b. Decrease / Increase

c. No change / Increase

d. Increase / Decrease

e. Increase / Increase