Unit 2 Test Review
For the following, determine whether or not it counts in the U.S. GDP for 2014. If so, determine which
category it belongs in. If not, write why it doesn’t count in GDP.
1. Social Security payments to a retired factory worker.
2. A new car purchased by Alamo Rent-A-Car to be rented to customers.
3. A driver rents a car from Kramerica Rent-A-Car.
4. The purchase of $5000 worth of stock in Kramerica Industries.
5. Ford Motor Co. purchases a new stereo from Sony that they put into new Ford cars and trucks.
6. David Puddy buys a new car stereo in January, 2015 that he installs into his BMW. The stereo was
produced in December, 2014.
7. A new Dell Computer produced in the U.S. and sold to a customer in Belgium.
8. Frozen waffles that are made in Belgium and are purchased by customers in Sugar Land.
9. Art Vandelay buys ccar insurance policy for his new car.
10. Mr. Pitt buys a new house that was just built in Sugar Land.
11. Why aren’t intermediate goods counted in GDP?
Determine the correct type of unemployment, or if they’re not unemployed, for each of the following.
12. Reduced consumer spending across the economy causes people in many industries to lose their
jobs.
13. Grocery clerks lose their jobs and are replaced by self-serve checkout stations.
14. Linda is a recent college graduate looking for her first job.
15. Jerry lost his job and was replaced by a machine but has returned to school full-time to get his
bachelor’s degree.
16. In an economy, 8 people are working. Four people are not working but only 2 of those 4 are looking
for jobs. What is the unemployment rate?
Inflation
17. Which groups of people are helped by inflation?
18. Which groups of people are hurt by inflation?
19. What are the causes of the 2 types of inflation?
20. Define real income.
21. A bank loans George $10,000 at an 8% nominal interest rate that he will pay back in a year. The
bank anticipates 3% inflation over the next year. What is the real interest rate?
Answer the following questions about the tables provided below.
Year 1
Good
Q (yr. 1; in 1000s)
P (yr. 1)
Q (yr 2)
Pineapples
6
$1
4
Bananas
40
$.20
60
Mangos
20
$.30
20
P (year 2)
$1.50
$.15
$.50
22. Calculate the nominal GDP in year 1.
23. Calculate the nominal GDP in year 2.
24. Calculate the real GDP in year 2.
Good
Q (yr 1)
P (yr 1)
Q (yr 2)
P(yr 2)
Computer chips
2
$20
4
$25
Chocolate chips
30
$1
40
$1.25
Potato chips
20
$1.50
20
$1.25
25. What is the nominal GDP in year 1?
26. What is the nominal GDP in year 2?
27. What is the real GDP in year 2?
28. Use the GDP deflator to calculate the inflation rate in year 2.
29. Calculate the inflation rate in year 2 for the following examples using year 1 as the base year.
Price index, yr 2: 115
Price index, yr 2: 220
Price index, yr 2: 50
Price index, yr 1: 100
Price index, yr 1: 200
Price index, yr 1: 40
30. Calculate the GDP deflator and the inflation rate for 2019 for the country of Niaps if their nominal
GDP in 2019 was $50 billion and their real GDP was $40 billion.
31. The following data is for the beautiful nation of Adanac for 2019. Dollars are in millions.
Consumer
$35
GDP deflator
110
Employed (thousands)
spending
Taxes
$10
Unemployed
Government
$15
Population
10
Retirees
spending
(millions)
Employee
$40
Full-time adult students
compensation
Exports
$5
Nominal
15%
Discouraged workers
interest rate
Imports
$10
Others not in labor force
Capital
$10
investment
Business profits
$20
Calculate each of the following.
Nominal GDP:
Real GDP:
Real GDP per capita:
The inflation rate:
The Real interest rate:
The Unemployment rate:
Labor Force Participation rate:
3200
800
1500
1500
500
500