University of Waterloo
Econ 102, Section 001 - J-P Lam1
Practice Questions - Lecture 2a
1
These questions are intended for students who are registered in Econ 102. Please do not share these
questions with any other sections or groups of students. Do not post these practice questions online.
1. Gross domestic product (GDP) equals the
produced within a country during a given period of time.
of final
A. market value; goods
B. market value; services
C. market value; goods and services
D. quantity; goods
E. quantity; goods and services
2. The market value of final goods and services produced within a country during a period
of time is called
A. guaranteed direct prices.
B. general domestic productivity.
C. government documented production.
D. gross domestic product.
E. growth determined profit.
3. When economists use market values to aggregate output, they sum the
A. number of items produced.
B. quantity of items produced.
C. price multiplied by the quantity of items produced.
D. social value of items produced.
E. amount of each item produced.
4. Suppose that the total production an economy consists of 4 billion oranges and 10 billion
candy bars, each orange sells for $0.25, and each candy bar sells for $0.50. What is the
market value of production in this economy?
A. $0.75 billion.
B. $1 billion.
C. $4.5 billion.
D. $5 billion.
E. $6 billion.
5. A drawback of using market values to aggregate the quantities of goods and services
produced in an economy is that
A. higher-priced items count more.
B. GDP increases when not all goods are produced in greater quantities.
C. market prices generally reflect the economic benefit consumers expect to receive from an item.
D. not all economically valuable goods and services are bought and sold in markets.
E. lower-priced items count more.
6. The value of unpaid work by a stay-at-home-parent
and value of housekeeping services sold in the market
included in GDP
included in GDP.
A. is; is not
B. is; is
C. is not; is not
D. is not; is
E. is sometimes; is
production and
7. Final goods and services are
in GDP.
counted
A. the end product of; are
B. the end product of; are not
C. used up in the process of ; are
D. used up in the process of; are not
E. transformed in; are not
8. If an automobile manufacturer pays $200 for a car windshield, $400 for four car tires,
$100 for a car CD player, and sells cars made with these parts for $20,000, then each
car the automobile manufacturer sells contributes how much to GDP?
A. $19,300.
B. $20,000.
C. $20,200.
D. $20,400.
E. $20,700.
9. If Bountiful Orchard grows $100,000 worth of peaches, sells $50,000 worth of peaches
to consumers, and uses the rest to make jam that is sold to consumers for $100,000,
Bountiful Orchard’s contribution to GDP is
A. $50,000.
B. $100,000.
C. $150,000.
D. $200,000.
E. $250,000.
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10. If the Citrus Growers Association grows $1 million worth of oranges, sells $500,000 worth
of oranges to consumers, and uses the rest to make orange juice that is sold to consumers
for $3 million, the Citrus Growers’ contribution to GDP is
A. $500,000.
B. $1,000,000.
C. $3,500,000.
D. $4,000,000.
E. $4,500,000.
11. Northern Wheat produces wheat and sells $800,000 worth of wheat to Western Pasta
for pasta production and $500,000 worth of wheat to Eastern Flour for flour production.
Northern Wheat uses $1,000,000 worth of fertilizers, seeds, water and equipment to
grow the wheat. Western Pasta also import $100,000 worth of wheat to make pasta.
They sell their pasta to consumers for $1,200,000. Eastern Flour sell their flour to
Southern Bakeries for $800,000. In turn, Southern Bakeries sell their bread and pastries
to consumers for $1,000,000 for brewing. What is the value of GDP in this economy?
A. $1,200,000.
B. $1,000,000.
C. $1,100,000.
D. $1,300,000.
E. $900,000.
12. A local Dairy Cooperative produces $1.5 million worth of milk. It sells $600,000 worth of
milk directly to consumers and $400,000 worth to a cheese factory. The remaining milk
is processed into cream and yogurt, which are sold together for $2 million. Additionally,
the Cooperative spends $300,000 on sugar and fruit for yogurt production. The Dairy
Cooperative’s total contribution to GDP is
A. $2,600,000.
B. $2,700,000.
C. $3,200,000.
D. $3,500,000.
E. $3,700,000.
13. The value added by any firm equals the firm’s
minus
.
from selling the product
A. revenue; expenses
B. revenue; the cost of inputs purchased from other firms
C. profits; expenses
D. profits; the cost of inputs purchased from other firms
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E. revenue; taxes
14. A firm’s revenue from selling its product minus the cost of inputs purchased from other
firms is called
A. profit.
B. investment.
C. value added.
D. production costs.
E. intermediate costs.
Use the following information to answer questions 15-17
A jar of orange marmalade, ultimately sold to a customer at The Corner Store, is
produced by the following production process:
Name of company
Citrus Growers Inc
Florida Jam Company
The Corner Store
Revenue
$0.75
$2.00
$2.50
Cost of purchased inputs
0
$0.75
$2.00
15. What is the value added of Citrus Growers Inc.?
A. $0.00.
B. $0.50.
C. $0.75.
D. $1.25.
E. $2.00.
16. What is the value added of Florida Jam Company?
A. $0.00.
B. $0.50.
C. $0.75.
D. $1.25.
E. $2.00.
17. What is the value added of The Corner Store?
A. $0.00.
B. $0.50.
C. $0.75.
D. $1.25.
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E. $2.00.
18. What is the sum of the value added of all the firms?
A. $2.00.
B. $2.50.
C. $2.75.
D. $4.50.
E. $5.25.
19. Which of the following transactions would be included in the GDP of Canada?
A. Honda produces cars in Ontario.
B. Bank of Nova Scotia operates a branch in the Bahamas.
C. A Canadian company produces telecommunications equipment in the United
States.
D. Microsoft Corporation produces Windows 11 in Redmond, Washington.
E. Coca-Cola produces soft drinks in England.
20. In the year 2021, Janet sells a five-year-old car to Used Car Inc. for $3000. In the same
year, Used Car Inc. resells the car to Bob for $3500. What is the contribution of this
transaction to GDP in the year 2021?
A. $0.
B. $500.
C. $3000.
D. $3500.
E. $6500
21. Goods and services that are consumed by the ultimate user are called
goods and services.
A. intermediate
B. final
C. value added
D. nominal
E. real
22. Goods and services that are used up in the production of other goods and services are
called
goods and services.
A. intermediate
B. final
C. value added
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D. nominal
E. real
23. Which of the following would be included in Canada’s GDP?
A. Bombardier builds a plane in Montreal that is sold to American Airlines.
B. Daimler-Chrysler produces a car in Germany that is sold in Toronto.
C. Nestlé produces a candy bar in Switzerland that is sold in Calgary.
D. Royal Bank of Canada operates a branch in Nassau, Bahamas.
E. Canada’s Wonderland provides entertainment services in an amusement park
in Japan.
24. Three equivalent ways to measure GDP are total
, and total
.
, total
A. profits; production; saving
B. expenditure; income; profits
C. investment; consumption; saving
D. output; income; expenditure
E. revenue; profits; production
25. GDP can be measured as each of the following EXCEPT
A. the market value of production.
B. total expenditure on final goods and services.
C. incomes of capital and labour.
D. total business revenues.
E. the sum of value added.
26. Which of the following would be included in the calculation of GDP for 2022?
A. The price of a home built in 1991 and sold in 2022.
B. The price of 100 shares of Apple stock purchased in 2022.
C. The price of a classic 1948 Porsche 356 purchased in 2022.
D. The price of a new laptop built and purchased in 2022 to replace a broken
laptop.
E. The price of a new bicycle purchased at a garage sale in 2018.
27. The market value of all domestically-produced final goods and services is also equal
to the total amount spent by
, less spending on imported goods and
services.
A. households and firms
B. firms and governments
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C. households, firms, and governments
D. households, firms, and the foreign sector
E. households, firms, governments, and the foreign sector
28. Consumption expenditures include spending by households on
A. exports.
B. inventories.
C. residential housing.
D. services.
E. taxes.
29. Government purchases include all of the following EXCEPT
A. pension benefits paid by the federal government.
B. the construction of a new courthouse built by a local government.
C. the salary paid to an elementary school teacher employed by a local public
school board.
D. the purchase of new military hardware by the Canadian Forces.
E. the construction of new highways by provincial governments
30. Net exports equal
A. the value added of exports.
B. exports minus imports.
C. the market value of exports.
D. exports plus imports.
E. exports minus depreciation
31. Which of the following would increase the consumption component of Canada’s GDP?
A. You purchase a bottle of British Columbia wine.
B. A person in Paris purchases a bottle of British Columbia wine.
C. A restaurant in Montreal purchases a bottle of British Columbia wine to include on its wine list.
D. A restaurant in Edmonton purchases a bottle of French wine to include on its
wine list.
E. The Canadian government buys a bottle of British Columbia wine to serve at
a State dinner.
32. Which of the following would increase the private-sector investment component of Canada’s
GDP?
A. You purchase a new washing machine produced in Canada.
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B. You purchase a new washing machine produced in France.
C. A laundry in Calgary purchases a new washing machine produced in Canada.
D. A laundry in Mexico purchases a new washing machine produced in Canada.
E. The Canadian government purchases a new washing machine produced in
Canada for rangers to use in a Canadian national park.
33. Which of the following would increase the net export component of Canada’s GDP?
A. A car produced in Japan is purchased in British Columbia.
B. A bottle of British Columbia wine is purchased in California.
C. A bottle of French wine is purchased in Quebec.
D. A car produced in Cambridge, Ontario, is purchased in Winnipeg, Manitoba.
E. A bottle of French wine is purchased in London, England.
34. Given the following data for an economy, compute the value of GDP.
Consumption expenditures
$1000
Imports
$600
Government purchases of goods and services $700
Sales of existing homes and apartments
$600
Government payment to retirees
$200
Household purchases of durable goods
$300
Beginning-of-year inventory of stocks
$500
End-of-year inventory of stocks
$1600
Business fixed investment
$300
A. 2400.
B. 2500.
C. 2600.
D. 2700.
E. 5600.
35. Compute the private-sector investment component of GDP.
A. 300.
B. 400.
C. 800.
D. 1400.
E. 1500.
36. Given the following data for an economy, compute the value of GDP.
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Consumption expenditures
Imports
Government purchases of goods and services
Construction of new homes and apartments
Sales of existing homes and apartments
Exports
Government payment to retirees
Household purchases of durable goods
Beginning-of-year inventory of stocks
End-of-year inventory of stocks
Business fixed investment
$50
$40
$20
$30
$40
$50
$10
$20
$10
$20
$30
A. 130.
B. 140.
C. 150.
D. 160.
E. 320.
37. Compute the private-sector investment component of GDP.
A. 30.
B. 40.
C. 60.
D. 70.
E. 110.
38. An economy produces 5000 computers valued at $1,000 each. Of these, 1,000 are sold to
consumers, 1,500 are sold to businesses, 1,500 are sold to the government, and 500 are
sold abroad. No computers are imported. The unsold computers at the end of the year
are held in inventory by the computer manufacturers. What is the value of inventories
and GDP?
A. $0; $5,000,000
B. $500,000; $5,000,000
C. $1,000,000; $5,000,000
D. $500,000; $10,000,000
E. $500,000; $7,500,000
39. An economy produces 2,000 tables valued at $200 each. Of these, 400 are sold to
consumers, 800 are sold to businesses, 400 are sold to the government, and 200 are sold
abroad. No tables are imported. The unsold tables at the end of the year are held in
inventory by the table manufacturers. What is the value of the private-sector investment
component of GDP?
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A. $160,000.
B. $180,000.
C. $200,000.
D. $240,000.
E. $500,000.
40. A small country specializes in the production of bicycles, manufacturing 20,000 units
annually, each priced at $150. Out of these, 6,000 are purchased by local consumers,
8,000 are acquired by businesses, 4,000 are bought by the government, and 1,000 are
exported. The country imports no bicycles. Any unsold bicycles are stored in warehouses
by the manufacturers. What is the value of the government expenditure component in
the country’s GDP?
A. $200,000.
B. $300,000.
C. $600,000.
D. $800,000.
E. $1,000,000.
41. An economy is engaged solely in producing and selling smartphones. In one year, it
produces 40,000 smartphones, each with a sale price of $200. Domestic consumers buy
10,000 of these phones, businesses purchase 16,000, the government buys 8,000, and
6,000 are exported. It imports 5,000 at the price of $200. Calculate the value of the net
export component of GDP for this economy.
A. $200,000.
B. $400,000.
C. $600,000.
D. $800,000.
E. $1,200,000.
42. The four components of aggregate expenditures are
A. consumption, imports, government purchases, and net exports.
B. consumption, interest payments, government purchases, and net exports.
C. consumer durables, private-sector investment, government purchases, and net
exports.
D. consumption, imports, government purchases, and exports.
E. consumption, private-sector investment, government purchases, and net exports.
43. Consumption spending includes spending on
A. durables, nondurables, and services.
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B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. goods and services by federal, provincial, and local governments.
E. goods and services sold abroad minus goods and services produced abroad.
44. Private-sector investment includes spending on
A. durables, nondurables, and services.
B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. goods and services by federal, provincial, and local governments.
E. goods and services sold abroad minus goods and services produced abroad.
45. Government purchases include spending by all levels of government on
A. consumer durables, nondurables, and services.
B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. final goods and services.
E. goods and services sold abroad minus goods and services produced abroad.
46. Net export spending is expenditures on
A. consumer durables, nondurables, and services.
B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. goods and services by federal, provincial, and local governments.
E. goods and services sold abroad minus goods and services produced abroad.
47. Real GDP measures the
of current production.
A. change in the volume
B. physical volume
C. current dollar value
D. base-year value
E. change in the market value
48. The largest expenditure component of Canada’s GDP is
A. consumption.
B. private-sector investment.
C. government purchases.
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D. exports.
E. imports.
49. Consumption expenditure is subdivided into four categories, including
A. durables, nondurables, services and new homes.
B. durables, nondurables, semi-durables, and new homes.
C. durables, nondurables, semi-durables, and services.
D. durables, nondurables, exports and imports.
E. durables, nondurables, net exports and services.
GDP
Government purchases
Transfer payment
Exports
Imports
Net foreign factor income
Millions of dollars
6.0
1.2
0.2
0.4
0.5
0.4
50. Refer to the table above. What is consumption in this economy?
A. $4.0 million.
B. $4.8 million.
C. $4.9 million.
D. There is not sufficient information to calculate consumption.
E. $5.2 million.
51. Refer to the table above. The sum of private-sector investment and consumption in this
economy is
A. $4.0 million.
B. $4.8 million.
C. $4.9 million.
D. indeterminate given the above information.
E. $5.2 million.
52. If prices in the current year are higher on average than in the base year, then real GDP
in the current year
nominal GDP in the current year.
A. is greater than
B. is less than
C. is equal to
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D. could be greater or less than
E. is one-third of
53. A measure of GDP in which quantities produced are valued at the prices of a fixed base
year is called
A. real GDP.
B. nominal GDP.
C. base GDP.
D. current GDP.
E. production GDP.
54. Real GDP is measured in
prices.
prices and nominal GDP is measured in
A. current; base-year
B. base-year; current
C. current; current
D. base-year; base-year
E. current; market
55. Real GDP measures the
of production.
of production and nominal GDP measures the
A. current-dollar value; physical volume
B. current-dollar value; current-dollar value
C. current-dollar value; market value
D. constant-dollar value; current-dollar value
E. physical volume; physical volume
56. Bob’s Barber Shop gave 3000 haircuts in the year 2021 and 3100 in the year 2022. The
price of a haircut was $7 in 2021 and $8 in 2022. If the year 2021 is the base year, what
was Bob’s contribution to real GDP in 2022?
A. $21,000.
B. $21,700.
C. $24,000.
D. $24,800.
E. $25,000.
57. Peg’s Manicure Manor did 4000 sets of nails in the year 2021 and 4500 sets of nails in
the year 2022. The price of a set of nails was $20 in 2021 and $22 in 2022. If the year
2021 is the base year, Peg’s contribution to nominal GDP in 2021 was
and in 2022 was
.
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A. $80,000; $88,000
B. $80,000; $90,000
C. $80,000; $99,000
D. $88,000; $90,000
E. $90,000; $99,000
58. A measure of the price level of the goods and services included in GDP is
A. the GDP deflator.
B. the CPI.
C. nominal GDP.
D. the GDP multiplier.
E. real GDP.
59. Real GDP may be calculated by dividing
by
.
A. nominal GDP; the GDP deflator
B. the GDP deflator; nominal GDP
C. nominal GDP; real GDP
D. the price index; nominal GDP
E. real GDP; nominal GDP
The following table shows the production and prices of an economy’s only two goods,
TVs and computers, in 2012 and 2022. Assume that 2012 is the base year.
2012
2022
Qty of TVs
100
200
Price of TVs
$100
$150
Qty of computers
10
15
60. What is nominal GDP in 2012?
A. $15,000.
B. $15,460.
C. $27,500.
D. $36,750.
E. $50,110.
61. What is real GDP in 2012?
A. $15,000.
B. $15,460.
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Price of computers
$500
$450
C. $27,500.
D. $36,750.
E. $50,110.
62. What is nominal GDP in 2022?
A. $15,000.
B. $15,460.
C. $27,500.
D. $36,750.
E. $50,110.
63. What is real GDP in 2022?
A. $15,000.
B. $15,460.
C. $27,500.
D. $36,750.
E. $50,110.
64. What is the growth in real GDP over the period from 2012 to 2022?
A. 34%.
B. 78%.
C. 83%.
D. 138%.
E. 145%.
65. The GDP deflator for 2012 is
A. 100.
B. 103.
C. 134.
D. 178.
E. 183.
66. The GDP deflator for 2022 is
A. 100.
B. 103.
C. 134.
D. 178.
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E. 183.
67. One shortcoming of using GDP as a central variable for policy objectives is that it fails
to measure
A. growth in productivity.
B. increases in the quantity of goods.
C. non-market production.
D. changes in the price level.
E. increases in the number of imported goods.
68. If substantially more foreign investment income comes into Brazil than leaves Brazil,
then it is most likely that
A. Brazilian net foreign investment income is negative.
B. Brazilian net foreign investment income is zero.
C. Brazilian GDP exceeds Brazilian GNP.
D. Brazilian GNP exceeds Brazilian GDP.
E. Brazilian GNP equals Brazilian GDP.
69. If Turkey has substantially less foreign investment income entering the country than
leaving, then we might expect
A. Turkish net foreign factor income to be positive.
B. Turkish net foreign factor income to be zero.
C. Turkish GDP to exceed Turkish GNP.
D. Turkish GNP to exceed Turkish GDP.
E. Turkish GNP to equal Turkish GDP.
70. Which of the following is NOT a shortcoming of using real GDP as an indicator of
well-being?
A. The benefits people derive from economic output depend on what is available
to them as individuals or households.
B. The benefits people derive from economic output depend upon the distribution
of income among individuals or households.
C. GDP is a measure of goods and services produced by the residents of a country,
not a measure of the goods and services produced by factors of production
owned by the residents of a country.
D. GDP includes the value of investment devoted to replacing capital goods that
have worn out or become obsolete.
E. GDP includes the effects of inflation.
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71. Which of the following would be included in Canadian gross domestic product, but NOT
in Canadian gross national product or income?
A. The wages paid to Canadian actors working in the film industry in California.
B. The wages paid to Canadian welders working at a Japanese-owned automobile
factory in Quebec.
C. The profits from a Canadian-owned tourism company located in Nova Scotia.
D. The profits from a U.S.-owned automobile factory in Ontario.
E. The profits from a Canadian-owned food-processing factory in Michigan.
72. What does GDP per capita measure?
A. The total economic output of a country.
B. The average economic output per person in a country.
C. The total economic output of a country’s manufacturing sector.
D. The economic output per square mile of a country.
E. The total economic output divided by the number of businesses in a country.
73. Country X has a GDP of $600 billion and a population of 150 million people. What is
the GDP per capita of Country X?
A. $2,000
B. $4,000
C. $10,000
D. $40,000
E. $400,000
74. Which of the following best describes the difference between GDP and GNP?
A. GDP measures the total economic output within a country’s borders, while
GNP measures the total economic output of a country’s citizens and businesses,
regardless of where they are located.
B. GDP and GNP are essentially the same and can be used interchangeably.
C. GDP measures the total economic output of a country’s citizens and businesses,
regardless of where they are located, while GNP measures the total economic
output within a country’s borders.
D. GDP includes only goods production, while GNP includes both goods and
services.
E. GDP measures the economic output in urban areas, while GNP measures the
output in rural areas.
75. If a German car company operates a factory in the United States, where is the value of
the cars produced counted?
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A. Only in Germany’s GDP.
B. Only in the United States’ GDP.
C. In the United States’ GDP and Germany’s GNP.
D. In both the United States’ GDP and GDP.
E. In neither the United States’ GDP nor Germany’s GNP.
76. Which of the following income would be included in the United States’ GNP but not its
GDP?
A. Income earned by a Canadian company from its operations in the United
States.
B. Income earned by all companies operating within the United States.
C. Salaries of U.S. government employees working in the United States.
D. Salaries of foreign diplomats working in the United States.
E. Income earned by a U.S. company from its operations in Canada.
77. Using the expenditure method, calculate the GDP given the following detailed economic
data:
Household Purchases of Durable Goods
$500
Household Purchases of Non-Durable Goods
$600
Household Purchases of Semi-Durable Goods
$300
Business Fixed Investment
$700
Beginning-of-year inventory of stocks
$500
End-of-year inventory of stocks
$1600
Government Purchases of Goods and Services $900
Exports
$400
Imports
$450
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78. Consider an economy with three goods where the quantity produced and prices for each
good are shown for three years. The base price is set in 2021.
Year
Price
of TVs
2021
500
2022
550
2023
600
Quantity
of TVs
200
180
170
Price
of Bananas
1
1.1
1.2
Quantity
of Bananas
1000
1100
1200
Price
Quantity
of Jackets of Jackets
50
400
55
420
60
440
(i) Calculate nominal GDP in 2021, 2022, and 2023.
(ii) Calculate real GDP in 2021
(iii) Using the chain-weighted method and 2021 as the base year, calculate real GDP in
2022, 2023.
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