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University of the East College of Business Administration Manila Campus
Midterm Quiz 1-Measuring Nations Inome
Name! """"""""""""""""""""""""" """""""""""""""""""""""""""""""""""" """"""""""" Class #hedule! """""""""""""""" """""""""""""""" #ore! """"" $ating! """"" %rue&'alse Indicate whether the the statement is true true or false.
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1. GDP can measure either the total total income of everyone in the economy economy or the total expenditure expenditure on the economy’s output of goods and services, but GDP cannot measure both at the same time.
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2. f consumption is P!""", P!""", exports are P#"", government government purchases are P1""", imports imports are P!"", and investment is P$"", then GDP is P%&"".
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#. 'eal GDP evaluates current production production using prices prices that are fixed at past levels levels and therefore sho(s ho( ho( the economy’s overall production of goods and services changes over time.
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!. )conomists use the term term inflation to describe describe a situation in (hich the economy’s overall production production level is rising.
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%. *dditions to inventory inventory subtract from GDP, GDP, and (hen the goods in inventory inventory are later used or sold, sold, the reductions in inventory add to GDP.
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+. Periods during (hich real real GDP rises are called recessions. recessions.
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&. 'ecessions are associated (ith lo(er incomes, incomes, rising unemployment, unemployment, and falling profits.
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$. hanges in inventory are are included in the investment investment component of GDP. GDP.
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-. f consumption is P1$"", P1$"", GDP is P!#"", government government purchases are P1""", imports imports are P&"", and investment is P12"", then exports are P#"".
____ 1". he government computes computes measures of income other than than GDP because these other other measures usually tell different stories about overall economic conditions. ____ 11. he basic tools of supply supply and demand are as central to to macroeconomic analysis analysis as they are to microeconomic microeconomic analysis. ____ 12. /acroeconomic statistics statistics tell us about a particular particular household, firm, firm, or mar0et. ____ 1#. hanges in the GDP deflator deflator reflect only changes in the the prices of goods and services. services. ____ 1!. /acroeconomic statistics statistics include GDP, the inflation inflation rate, the unemployment unemployment rate, retail sales, and the trade deficit.
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____ 1%. 'eal GDP per person tells us the income and expenditure of the average person in the economy. ____ 1+. hile GDP includes tangible goods such as boo0s and bug spray, it excludes intangible services such as the services provided by teachers and exterminators. ____ 1&. f nominal GDP is P12,""" and the GDP deflator is $", then real GDP is P1%,""". ____ 1$. GDP adds together many different 0inds of products into a single measure of the value of economic activity by using mar0et prices. ____ 1-. 'eal GDP is a better gauge of economic (ellbeing than is nominal GDP. ____ 2". f total spending rises from one year to the next, then the economy must be producing a larger output of goods and services. ____ 21. f real GDP is higher in one country than in another, then (e can be sure that the standard of living is higher in the country (ith the higher real GDP. ____ 22. f the value of an economy’s imports exceeds the value of that economy’s exports, then net exports is a negative number. ____ 2#. *n economy’s income is the same as its expenditure because every transaction has a buyer and a seller. ____ 2!. f nominal GDP is P1",""" and real GDP is P$,""", then the GDP deflator is 12%. ____ 2%. GDP is the mar0et value of all final goods and services produced by a country’s citi3ens in a given period of time. ____ 2+. he investment component of GDP refers to financial investment in stoc0s and bonds. ____ 2&. f the GDP deflator in 2""! (as 1%" and the GDP deflator in 2""% (as 12", then the inflation rate in 2""% (as 2%4. ____ 2$. GDP does not ma0e ad5ustments for leisure time, environmental 6uality, or volunteer (or0. ____ 2-. /ost goods (hose purchases are included in the investment component of GDP are used to produce other goods. ____ #". 7e( home construction is included in the consumption component of GDP. ____ #1. he GDP deflator can be used to ta0e inflation out of nominal GDP. ____ #2. GDP is the most closely (atched economic statistic because it is thought to be the best single measure of a society’s economic (ellbeing. ____ ##. f exports are P%"", GDP is P$""", government purchases are P12"", imports are P&"", and investment is P$"", then consumption is P+2"". ____ #!. he term real GDP refers to a country’s actual GDP as opposed to its estimated GDP.
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____ #%. GDP does not directly measure those things that ma0e life (orth(hile, but it does measure our ability to obtain many of the inputs into a (orth(hile life. ____ #+. hanges in real GDP reflect only changes in the amounts being produced. ____ #&. )xpenditures by households on education are included in the consumption component of GDP. ____ #$. n years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and 5obs are easy to find. ____ #-. GDP includes only the value of final goods because the value of intermediate goods is already included in the prices of the final goods. ____ !". 8or an economy as a (hole, income must exceed expenditure. ____ !1. 7ominal GDP uses constant baseyear prices to place a value on the economy’s production of goods and services, (hile real GDP uses current prices to place a value on the economy’s production of goods and services. ____ !2. f the GDP deflator in 2""+ (as 1+" and the GDP deflator in 2""& (as 1$", then the inflation rate in 2""& (as 12.%4. ____ !#. he goal of macroeconomics is to explain the economic changes that affect many households, firms, and mar0ets simultaneously. Multiple Choie Identify the choice that best completes the statement or answers the question.
____ !!. hich of the follo(ing subcomponents of GDP can be either positive or negative9 a. inventory investment b. exports c. government purchases d. *ll of the above are correct. ____ !%. he information belo( (as reported by the orld :an0. ;n the basis of this information, (hich list belo( contains the correct ordering of GDP per person from highest to lo(est9 ountry imbab(e a. b. c. d.
7ominal GDP in 2""" =1",!"" million =-,""" million =&,2"" million
imbab(e an3ania, imbab(e >imbab(e, imbab(e, an3ania,
Population in 2""" #".1 million ##.& million 12.+ million
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____ !+. ?uppose an economy produces only cheese and fish. n 2""$, 2" units of cheese are sold at P% each and $ units of fish are sold at P%" each. n 2""&, the base year, the price of cheese (as P1" per unit and the price of fish (as P&% per unit. 8or 2""$, a. nominal GDP is P%"", real GDP is P$"", and the GDP deflator is +2.%. b. nominal GDP is P%"", real GDP is P$"", and the GDP deflator is 1+". c. nominal GDP is P$"", real GDP is P%"", and the GDP deflator is +2.%. d. nominal GDP is P$"", real GDP is P%"", and the GDP deflator is 1+". ____ !&. ransfer payments are a. included in GDP because they represent income to individuals. b. included in GDP because they eventually (ill be spent on consumption. c. not included in GDP because they are not payments for currently produced goods or services. d. not included in GDP because taxes (ill have to be raised to pay for them. ____ !$. hich of the follo(ing is not a 6uestion that macroeconomists address9 a. hy is average income high in some countries (hile it is lo( in others9 b. hy does the price of oil rise (hen (ar erupts in the /iddle )ast9 c. hy do production and employment expand in some years and contract in others9 d. hy do prices rise rapidly in some periods of time (hile they are more stable in other periods9 ____ !-. he GDP deflator is the ratio of a. real GDP to nominal GDP multiplied by 1"". b. real GDP to the inflation rate multiplied by 1"". c. nominal GDP to real GDP multiplied by 1"". d. nominal GDP to the inflation rate multiplied by 1"". Table 2
he table belo( contains data for the country of :atterland, (hich produces only (affles and panca0es. he base year is 2""+. @ear
2""% 2""+ 2""& 2""$
Price of affles =2 =2 =# =!
Auantity of affles 1"" 12" 1%" 1$"
Price of Panca0es =1 =2 =# =#
Auantity of Panca0es 1"" 1%" 2"" 22"
____ %". $efer to %a(le )* n 2""+, :atterland’s GDP deflator (as a. 1. b. 1"". c. 1#$.%. d. %!". ____ %1. $efer to %a(le )* n 2""$, :atterland’s GDP deflator (as a. %$.". b. 1"". c. 1!$.1.
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d. 1&2.%. ____ %2. $efer to %a(le )* 8rom 2""& to 2""$, :atterland’s output gre( a. 1!.#4. b. #1.!4. c. !$.14. d. 1%%.+4. ____ %#. $efer to %a(le )* n 2""&, :atterland’s GDP deflator (as a. ++.&. b. 1"". c. 12-.+. d. 1%". ____ %!. ransfer payments a. are payments that flo( from government to households. b. are not made in exchange for currently produced goods or services. c. alter household income, but they do not reflect the economy’s production. d. *ll of the above are correct. ____ %%. hich of the follo(ing is not included in GDP9 a. a can of bug spray b. the services of an exterminator c. the honey produced and sold by a bee0eeper d. *ll of the above are included in GDP. ____ %+. GDP adds together many different 0inds of products into a single measure of the value of economic activity by using prices determined by a. ban0s. b. economists. c. the government. d. mar0ets. ____ %&. f an economy’s GDP falls, then it must be the case that the economy’s a. income falls and saving rises. b. income and saving both fall. c. income falls and expenditure rises. d. income and expenditure both fall. ____ %$. he inflation rate in year 2 e6uals a. b. c. d.
____ %-. hanges in nominal GDP reflect a. only changes in prices.
. . . .
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b. only changes in the amounts being produced. c. both changes in prices and changes in the amounts being produced. d. neither changes in prices nor changes in the amounts being produced. ____ +". ransactions involving items produced in the past, such as the sale of a %yearold automobile by a used car dealership or the purchase of an anti6ue roc0ing chair b y a person at a yard sale, are a. included in current GDP because GDP measures the value of all goods and services sold in the current year. b. included in current GDP but valued at their original prices. c. not included in current GDP because GDP only measures the value of goods and services produced in the current year. d. not included in current GDP because these items have no current value. ____ +1. hen economists refer to intangible items, they are referring to such things as a. illegal goods, and the value of such items is included in GDP. b. illegal goods, and the value of such items is excluded from GDP. c. consulting services and dental care, and the value of such items is included in GDP. d. consulting services and dental care, and the value of such items is excluded from GDP. ____ +2. Bousehold spending on education is counted in (hich component or subcomponent of GDP9 a. consumption of durable goods b. consumption of nondurable goods c. consumption of services d. investment ____ +#. f real GDP doubles and the GDP deflator doubles, then nominal GDP a. remains constant. b. doubles. c. triples. d. 6uadruples. ____ +!. GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because a. the 6uality of these items is not high enough to contribute value to GDP. b. measuring them is so difficult. c. the government (ants to discourage the production and consumption of these items. d. these items are not reported on income tax forms. Table 3
he table belo( contains data for the country of /y0land. he base year is 1-&!. @ear 1-&! 1-&% 1-&+ 1-&&
7ominal GDP =2""" =#""" =#&%" =+"""
GDP Deflator 1"" 12" 1%" 2""
____ +%. $efer to %a(le +* 8rom 1-&+ to 1-&&, a. inflation (as ##.#4 and output gre( at a rate of 2"4. b. inflation (as ##.#4 and output gre( at a rate of +"4.
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c. inflation (as %"4 and output gre( at a rate of 2"4. d. inflation (as %"4 and output gre( at a rate of +"4. ____ ++. hich of the follo(ing statistic is usually regarded as the best single measure of a society’s economic (ell being9 a. the unemployment rate b. the inflation rate c. gross domestic product d. the trade deficit ____ +&. he inflation rate is the a. absolute change in real GDP from one period to another. b. percentage change in real GDP from one period to another. c. absolute change in the price level from one period to another. d. percentage change in the price level from one period to another. ____ +$. Cnemployment compensation is a. part of GDP because it represents income. b. part of GDP because the recipients must have (or0ed in the past to 6ualify. c. not part of GDP because it is a transfer payment. d. not part of GDP because the payments reduce business profits. ____ +-. n a simple circularflo( diagram, total income and total expenditure are a. never e6ual because total income al(ays exceeds total expenditure. b. seldom e6ual because of the ongoing changes in an economy’s unemployment rate. c. e6ual only (hen one dollar is spent on goods for every dollar that is spent on services. d. al(ays e6ual because every transaction has a buyer and a seller. ____ &". )stimates of the values of (hich of the follo(ing nonmar0et goods or services are included in GDP9 a. the value of unpaid house(or0 b. the value of vegetables and other foods that people gro( in their gardens c. the estimated rental value of o(neroccupied homes d. *ll of the above are included in GDP. Table 1
*ssuming that the table belo( contains data for the Philippines, (hich produces only banana chips and dried mango. he base year is 2""%. @ear
2""% 2""+ 2""& 2""$
Price of banana chips P!."" P!."" P%."" P+.""
Auantity of banana chips -" 1"" 12" 1%"
Price of dried mango P1.%" P2."" P2.%" P#.%"
Auantity of dried mango 1%" 1$" 2"" 2""
____ &1. $efer to %a(le 1* n 2""$, Dachsland’s a. nominal GDP (as P%$%, real GDP (as P-"", and the GDP deflator (as +%. b. nominal GDP (as P%$%, real GDP (as P1"+%, and the GDP deflator (as %!.-. c. nominal GDP (as P1+"", real GDP (as P-"", and the GDP deflator (as 1&&.$.
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d. nominal GDP (as P1+"", real GDP (as P1"+%, and the GDP deflator (as 1%".2. ____ &2. ?uppose an economy’s production consists only of corn and soybeans. n 2""%, 2" bushels of corn are sold at P! per bushel and 1" bushels of soybeans are sold at P2 per bushel. n 2""!, the price of corn (as P2 per bushel and the price of soybeans (as P1 per bushel. Csing 2""! as the base year, it follo(s that, for 2""%, a. nominal GDP is P%", real GDP is P1"", and the GDP deflator is %". b. nominal GDP is P%", real GDP is P1"", and the GDP deflator is 2"". c. nominal GDP is P1"", real GDP is P%", and the GDP deflator is %". d. nominal GDP is P1"", real GDP is P%", and the GDP deflator is 2"". ____ &#. n a simple circularflo( diagram, firms use the money they get from a sale to a. pay (ages to (or0ers. b. pay rent to landlords. c. pay profit to the firms’ o(ners. d. *ll of the above are correct. ____ &!. he term economists use to describe a situation in (hich the economy’s overall price level is rising is a. gro(th. b. inflation. c. recession. d. expansion. ____ &%. he information belo( (as reported by the orld :an0. ;n the basis of this information, (hich list belo( contains the correct ordering of GDP per person from highest to lo(est9 ountry apan ?(it3erland Cnited ?tates a. b. c. d.
7ominal GDP in 2""" =!,$"",""" million =2!",""" million =-,$"",""" million
apan, ?(it3erland, Cnited ?tates apan, Cnited ?tates, ?(it3erland ?(it3erland, Cnited ?tates, apan Cnited ?tates, apan, ?(it3erland
Population in 2""" 12& million &.2 million 2$" million
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