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Which describes the product quality improvement bias in the consumer price index?


A) The quality often remains constant while the price continues to increase.
B) New versions of a product may have more features than older versions, and yet the price may not be higher.
C) New products become available and reduce the demand for old products.
D) Product quality tends to fall rather than rise with time even though price remains constant.

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Why is the gross domestic product (GDP) deflator used in the computation of real GDP rather than the consumer price index (CPI), which is a better-known price index?

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The gross domestic product (GDP) deflato...

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Which price index considers the prices of the largest number of goods and services?


A) consumer price index
B) personal consumption expenditure
C) chain-weighted consumption index
D) GDP deflator

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(Table 4: Market Basket Prices in Macroland) Table 4 shows the cost of a given market basket of goods and services in Macroland over a four-year period. Use this market basket to compute the price index for year 4 if the base year is year 1. The year 4 price index is:  Table 4: Market Basket Prices in Macroland  Year 1  Year 2  Year 3  Year 4  Cost of the market basket $600$640$630$660\begin{array}{l}\text { Table 4: Market Basket Prices in Macroland }\\\begin{array}{|l|l|l|l|l|}\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Cost of the market basket } & \$ 600 & \$ 640 & \$ 630 & \$ 660 \\\hline\end{array}\end{array}


A) 107.
B) 110.
C) 4.7%.
D) 10.0%.

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GDP is defined as the:


A) total income earned in a country in a time period by all owners of resources.
B) market value of all final goods and services produced in a country in a time period.
C) market value of all goods and services purchased in a country in a time period.
D) total expenditures by citizens of a country in a time period.

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The price index that focuses on the prices of inputs and raw materials is known as the:


A) input price index.
B) manufacturer's price index.
C) input cost index.
D) producer price index.

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D

In the calculation of GDP, what is considered the country's output?


A) Output that is produced by resources owned by citizens of the country
B) Output that is produced by companies that are headquartered within the country regardless of where the output is produced
C) Output that is purchased by the citizens of the country regardless of where it is produced
D) Goods and services that are produced within the geographic boundaries of the country

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D

Which measure provides businesses with the best estimate of the economic health of the typical consumer in an economy?


A) GDP
B) Real GDP
C) GDP per capita
D) Real GDP per capita

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How does the average amount of nonmarket production affect living standards?


A) It results in goods and services for consumption that are not included in GDP. Living standards are higher than what is represented by GDP per capita.
B) It results in goods and services for consumption that increase GDP. GDP is higher than it would be without the nonmarket production.
C) It raises the prices of goods and services due to increased demand for them. This means that GDP and living standards appear higher even though the quantity of production is unchanged.
D) It has no impact on living standards because it is outside of the markets that determine how much people have to consume.

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Which of the following is NOT one of the problems with using GDP per capita to measure standard of living?


A) GDP does not include nonmarket production.
B) GDP does not account for the environmental and health impacts of production.
C) GDP does not account for the average amount of leisure time.
D) GDP does not include services.

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A company is considering whether to expand its sales into an additional country. It wishes to compare the growth of prosperity or buying power in several countries as part of its analysis. What adjustments to the GDP measure will provide the company with insights into this across countries?

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The company should compare real GDP per ...

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Disposable personal income is:


A) earned income plus unearned income minus taxes.
B) total income minus both necessary expenses and taxes.
C) total income earned by all resource owners in a country.
D) total income earned in a country minus personal income taxes.

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What is domestic content in relation to the U.S. GDP?


A) A product that was produced in the United States
B) A product that is used in a home and not by a business
C) The proportion of consumption in the United States that is produced within the U.S. and not abroad
D) The share of the total cost of a product produced within the U.S.

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Earned income plus unearned income minus taxes is a measure called:


A) personal income.
B) national income.
C) disposable personal income.
D) take-home income.

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(Table 6: Real GDP and Population Data) Table 6 provides data on real GDP, population, and the GDP deflator measures for four countries for 2018. What was GDP per capita in country A in 2018?  Table 6: Real GDP and Population Data, 2018 Country A  Country B  Country C  Country D  Real GDP (millions  of dollars)  $4,000$10,000$8,000$16,000 Population (millions)  4524 GDP deflator 1.101.021.051.00\begin{array}{l}\text { Table 6: Real GDP and Population Data, } 2018\\\begin{array}{|c|c|c|c|c|}\hline & \text { Country A } & \text { Country B } & \text { Country C } & \text { Country D } \\\hline \begin{array}{c}\text { Real GDP (millions } \\\text { of dollars) }\end{array} & \$ 4,000 & \$ 10,000 & \$ 8,000 & \$ 16,000 \\\hline \text { Population (millions) } & 4 & 5 & 2 & 4 \\\hline \text { GDP deflator } & 1.10 & 1.02 & 1.05 & 1.00 \\\hline\end{array}\end{array}


A) $1,100
B) $909
C) $2,000
D) $1,000

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D

What does CPI stand for?


A) current personal investment
B) calculated productivity investment
C) consumer price index
D) current price indicator

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What is the difference between nominal GDP and real GDP?


A) There is no difference. They are two terms for the same thing.
B) Nominal GDP is always smaller than real GDP because it does not include price changes.
C) Nominal GDP changes when output changes. Real GDP changes when output or prices change.
D) Nominal GDP changes when prices or output change. Real GDP changes when output changes.

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What is net exports, and why is the category of net exports included in GDP?

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GDP is a measure of the value of all fin...

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How can the circular flow model be used to explain conceptually why GDP computed by the expenditure approach would be equal to GDP computed by the income approach?

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The circular flow model shows relationsh...

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Trends over the last 70 years for the consumer price index (CPI) , producer price index (PPI) , and gross domestic product (GDP) deflator show that:


A) They exhibit identical patterns.
B) They have changed in similar but not identical patterns.
C) The GDP deflator has shown considerably higher inflation than the other two measures.
D) The producer price index has shown considerably higher inflation than the other two measures.

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