BUS 218 Macroeconomics Study Guide With Complete Solution

To judge whether or not an economy is doing well, it is useful to look at a. GDP b. the inflation rate c. the unemployment rate d. the trade deficit - Answer a. GDP The US Gross domestic product (GDP) is the market value of all final goods and services produced ........ in a given period of time. a. By all permanent residents and foreigners with in the border of the US b. by all American companies no matter where c. By all of the US citizens all around the world. d. Inside and outside of the US by Americans - Answer a. By all permanent residents and foreigners within the border of the US Which of the following is the correct definition of GDP? a. the market value of all final goods and services produced within a country in a given period of time. b. the market value of all final goods and services produced by the citizens of a country c. the market value of all final goods and services produced with in a country in a given period of time. d. none of the above is correct. - Answer a. The market value of all final goods and services produced within a country in a given period of time. Over time people have to to rely more on the market-produced goods and less on goods that they produce for themselves. For example people eat at a restaurants relatively more and prepare their own meals at home relatively less. By itself this change would... a. make GDP fall over time b. not make any change in GDP over time c. Make GDP rise over time. d. change GDP, but in an uncertain direction - Answer c. Make GDP raise over time Consumption spending refers to the spending by households, with the exception of purchases of a. intangible products b. all services provided within the border of the country c. Investment in new homes by the home owners d. tangible products - Answer c. Investment in new home by the home owners Grapes are a. final goods if used by consumer as a fruit but if they are used to produce win it is an intermediate good b. counted as an intermediate good whether they are used to produce another good or consumed c. always counted as an intermediate good d. always final good - Answer a. Final goods if used by consumer as a fruit but if they are used to produce wine it is an intermediate good. The local Chevrolet dealership has an increase in inventory of 25 cars in 2014. In 2015 it sells all 25 cars. a. The value of increased inventory will be counted as part of GDP in 2014, but the value of the cars sold in 2015will not cause GDP to increase b. the value of the increased inventory will not affect 2014 GDP, but will be included in 2015 GDP c. The value of the increased inventory will be counted as 2014 GDP and the value of the cars sold in 2014 will increase 2015 GDP d. None of the above are correct - Answer a. The value of increased inventory will be counted as part of GDP in 2014, but the value of the cars sold in 2015 will not cause GDP to increase An Italian company opens a pasta company in the US. The profits from this pasta company are included in a. both US and Italian GDP b. both us and Italian GNP c. US GNP and Italian GDP d. Italian GNP and US GDP - Answer d. Italian GNP and US GDP After the terrorist attack on September 11, governments raised expenditures to increase security at airports. These purchases of goods and services are a. not included in GDP since they are not productive b. Not included in GDP since the government will have to raise taxes to pay for them c. Included in GDP d. Included in GDP because it is related to the state government - Answer c. Included in GDP Government purchases is a part of GDP, it refers to spending on goods and services by a. state and local government b. the federal government c. the federal and local government d. all the government, Federal, State, and Local - Answer d. All the government, federal, state, and local From this information we can conclude that real GDP was higher in a. 2016 than 2015, and real GDP in 2015 was higher than in 2014 b. 2015 than in 2014, and real GDP in 2015 was higher than in 2016 c. 2014 than in 2015, and real GDP was in 2015 was higher than in 2016 d. 2014 than in 2016 and real GDP in 2015 was higher than in 2014 - Answer c. 2014 than in 2015, and real GDP in 2015 was higher than in 2016 Suppose GDP consists of wheat and rice. in 2017, 20 bushels of wheat are sold at $4 per bushel and 10 bushels of rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in 2016, the base year, nominal 2017 GDP is a. $100, real 2017 GDP is $50, and the GDP deflator is 50 b. $50, real 2017 GDP is $100, and the GDP deflator is 200 c. $100, real 2017 GDP is $50, and the GDP deflator is 200 d. $40, real 2017 GDP is $100, and the GDP deflator is 50 - Answer c. $100, real 2017 GDP is $50, and the GDP deflator is 200 Suppose that Wisconsin produced cheese and fish. In 2017, 20 units of cheese are sold at $5 each, and 8 units of fish are sold at $50 each. In 2016, the base year, the price of cheese was $10 per unit, and the price of fish was $75 per unit. a. Nominal 2017 GDP is $800, real 2017 GDP is $500, and the GDP deflator is 160 b. Nominal 2017 GDP is $500, real 2017 GDP is $800, and the GDP deflator is 160 c. Nominal 2017 GDP is $500, real 2017 GDP is $800, and the GDP deflator is 62.5 d. Nominal 2017 GDP is $100, and the GDP deflator is 50 - Answer c. Nominal 2017 GDP is $500, real 2017 GDP is $800, and the GDP deflator is 62.5