Chapter 2: A Tour of the Book

2.1 Multiple Choice Questions

1)
Fill in the blank for the following: GDP is the value of all ________ produced
in a given period.
A)
final and intermediate goods and services produced by the private sector only
B)
final goods and services
C)
final and intermediate goods and services, plus raw materials
D)
all of the above
E)
none of the above

2)
When using the income approach to measure GDP, the largest share of GDP
generally consists of
A)
interest income.
B)
labor income.
C)
indirect taxes.
D)
profits.
E)
capital income.

3)
For this question, assume that 1980 is the base year. Given macroeconomic
conditions in the United States over the past three decades, we know that
A)
nominal GDP is always smaller than real GDP since 1980.
B)
real GDP and nominal GDP would be equal for the entire period.
C)
real GDP is larger than nominal GDP from 2002 to 2008.
D)
real GDP and nominal GDP were equal in 1980.
E)
none of the above

4)
Suppose nominal GDP increased in a given year. Based on this information, we
know with certainty that
A)
real output has increased.
B)
the price level (GDP deflator) has increased.
C)
real output and the price level (GDP deflator) have both increased.
D)
either real output or the price level (GDP deflator) have increased.
E)
real output has increased and the price level has decreased.

5)
Use the following information to answer this question. If nominal GDP rises
from $100 trillion to $120 trillion, while the GDP deflator rises from 2.0 to
2.2, the percentage change in real GDP is approximately equal to
A)
-10%.
B)
10%.
C)
20%.
D)
9.1%.
E)
0%.

6)
Hedonic pricing is
A)
the way that luxury goods are priced in a market economy.
B)
the tendency for the inflation rate to rise by greater and greater amounts.
C)
the tendency for nominal GDP to rise when the price level rises.
D)
the process of translating nominal GDP into real GDP.
E)
the process of pricing individual characteristics of a good or service.

7) In a given year, suppose a company spends
$100 million on intermediate goods and $200 million on wages, with no other
expenses. Also assume that its total sales are $800 million. The value added by
this company equals
A)
$200 million.
B)
$300 million.
C)
$500 million.
D)
$700 million.
E)
$800 million.

8) A firm’s value added equals
A)
its revenue minus all of its costs.
B)
its revenue minus its wages.
C)
its revenue minus its wages and profit.
D)
its revenue minus its cost of intermediate goods.
E)
none of the above

9)
Suppose you are provided with the following data for your country for a
particular month: 200 million people are working, 20 million are not working
but are looking for work, and 40 million are not working and have given up
looking for work. The official unemployment rate for that month is
A)
7.7%.
B)
9.1%.
C)
10%.
D)
23%.
E)
30%.
10)
In the United States, someone is classified as unemployed if he or she
A)
does not have a job.
B)
does not have a job, or else has a job but is looking for a different one while
continuing to work.
C)
does not have a job, has recently looked for work, and is collecting
unemployment insurance.
D)
does not have a job, and is collecting unemployment insurance.
E)
none of the above