True/False

1.Nominal GDP includes the current value of services produced in the economy.

2.GDP in 1999 would include the resale of a house built in 1978.

3.Cars produced by General Motors in Germany would be included in U.S. Gross Domestic Product.

4.GDP in 1999 would include the resale of a house built in 1978.

5.Cars produced by General Motors in Germany would be included in U.S. Gross Domestic Product.

6.Stagflation is the simultaneous occurrence of inflation and high unemployment.

Multiple-Choice

7.The vertical axis on the aggregate demand-aggregate supply model measures

a.the price of the specific product produced.

b. the level of total output.

c. the price level.

d. the level of employment.

8.The aggregate demand curve shows

a.the quantity of domestic product produced at each possible price.

b. the quantity of domestic product demanded and produced at each possible price.

c. the quantity of domestic product that is exported at each possible price.

d. the quantity of domestic product demanded at each possible price.

9.Real GDP

a.is nominal GDP adjusted for changes in the price level.

b. is also called nominal GDP.

c. measures GDP minus depreciation of capital.

d. will always change when prices change.

10.A good produced in 1998 and held in inventory until it is sold in 1999 would be included in which measure of GDP?

a.1999 GDP

b. both 1998 and 1999 GDP

c. 1998 GDP

d. half the value in 1998 and half the value in 1999

11.In 1999, you buy a beautiful vintage 1965 Thunderbird convertible. This purchase would

a.be included in the GDP for 1999.

b. not be included in the GDP for 1999.

c. be included in both the GDP for 1965 and 1999.

d. be in the GDP for 1999 at a depreciated value.

12.Deflation refers to a decline in the

a.price level.

b. rate of inflation.

c. total income.

d. real GDP.

13.Gross Domestic Product is a monetary measure of

a.total consumption in the economy.

b. the total value of all final goods and services.

c. total industrial output.

d. the total value of all foreign sales and purchases.

14.Nominal GDP is calculated by using

a.prices set in a base year.

b. average prices in all major cities.

c. current prices.

d. prices charged by initial producers.

15.In 1999 severe tornadoes hit the state of Oklahoma causing extensive damage. What is the most likely effect of this natural disaster on GDP and well-being?

a.Decreased GDP, decreased well-being.

b. Increased GDP, decreased well-being.

c. Decreased GDP, increased well-being.

d. Increased GDP, increased well-being.

e. Economists cannot predict these effects.

16.The term "stagflation" was invented in the 1970s to describe

a.an economy experiencing both deflation and economic stagnation.

b. an economy experiencing both inflation and economic stagnation.

c. an economy experiencing both high inflation and high employment.

d. an economy experiencing both high inflation and high levels of economic growth.