National Accounts Chapter 1 Study Questions
1)
2)
3)
4)
5)
Suppose an individual wishes to provide a
definition of GDP for a given period. Which of
the following phrases would be used when
defining GDP?
(a) final and intermediate goods and services,
plus raw materials
(b) final and intermediate goods and services
(c) final and intermediate goods and services
produced by the private sector only
(d) all of the above
(e) none of the above
When nominal GDP falls for a given period,
we know with certainty that:
(a) the price level (GDP deflator) has
decreased.
(b) real output and the price level (GDP
deflator) have both decreased.
(c) either real output or the price level
(GDP deflator) have decreased.
(d) real output has increased and the price
level has decreased.
(e) real output has decreased.
Use the following information to answer this
question. If nominal GDP rises from $40
trillion to $48 trillion, while the GDP deflator
rises from 2.0 to 2.4, the percentage change in
real GDP is:
(a) -10%.
(b) 0%.
(c) 9.1%.
(d) 10%.
(e) 20%.
Use the following information to answer this
question: 100 million people are working, 10
million are not working but are looking for
work, and 20 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%.
An individual is said to be a discouraged
worker if he or she:
(a) wants to work, and is actively searching
for a job.
(b) is working, but prefers not to work.
(c) wants to work, but has given up
searching for a job
(d) is working part time, but would prefer a
full-time job.
(e) is working in jobs she/he is not suited for.
Use the data below to answer the following questions.
Suppose a country using the United States system of
unemployment statistics has 200 million people, of
whom 100 million are working age. Of these 100
million, 40 million have jobs. Of the remainder: 20
million are actively searching for jobs; 20 million
would like jobs but are not searching; and 20 million
do not want jobs at all.
6)
The labor force is:
(a) 20 million.
(b) 40 million.
(c) 60 million.
(d) 80 million.
(e) 100 million.
7)
The labor force participation rate is:
(a) .2.
(b) .3.
(c) .4.
(d) .6.
(e) .8.
8)
The official unemployment rate is:
(a) .1.
(b) .2.
(c) .33.
(d) 0.4
(e) 0.66
9)
The prices for which of the following goods
are included in both the GDP deflator and the
consumer price index?
(a) good bought by governments
(b) goods bought by firms
(c) goods bought by foreign households (i.e.,
exports)
(d) goods bought by households
(e) all of the above
10)
Suppose government officials decide to change
the base year to a more recent year (e.g. from
1992 to, say, 2002). A change in the base year
such as this will cause:
(a) nominal GDP in every year to decrease.
(b) nominal GDP in every year to increase.
(c) both nominal and real GDP in every year
to decrease.
(d) real GDP in every year to decrease.
(e) none of the above
National Accounts Chapter 1 Study Questions
11)
12)
Deflation generally occurs when which of the
following occurs?
(a) the consumer price index is greater than
the GDP deflator
(b) the rate of inflation falls, for example,
from 4% to 2%
(c) the consumer price index decreases
(d) nominal GDP does not change
During 2004 and 2005, we observed a
significant increase in oil prices. In Turkey, we
would expect that this increase in oil prices
would cause:
(a) an equal increase in the CPI and GDP
deflator.
(b) no change in the CPI and an increase in
the GDP deflator.
(c) a larger increase in the GDP deflator
compared to the CPI.
(d) a larger increase in the CPI compared
to the GDP deflator.
13)
During the late 1990s, Japan experienced
reductions in the GDP deflator. Given this
information, we know with certainty that:
(a) real GDP did not change during these
periods.
(b) real GDP fell during these periods.
(c) both real GDP and the overall price level
decreased during these periods.
(d) the overall price level in Japan
decreased during these periods.
14)
If GDP exceeds GNP, we know with certainty
that:
(a) a budget deficit exists.
(b) a trade deficit exists.
(c) a trade surplus exists.
(d) receipts of factor income from the rest
of the world exceed payments of factor
income to the rest of the world.
15)
A high current rate of inflation ________ those
who have saved and _________ those who
have borrowed.
(a) harms, helps
(b) harms, has no effect on
(c) helps, helps
(d) helps, has no effect on
(e) helps, harms
16)
The real income per capita is a measure of the
(a) well-being of every individual in the
nation.
(b) well-being of the average individual in
the nation.
17)
(c) well-being of the average employed
person in the nation.
(d) total well-being of the nation.
Suppose that nominal GDP were $1200 billion
in 1990 and $2000 billion in 1995. The
implicit GDP deflator was 1.00 in 1990 and
1.50 in 1995. From this we can infer that,
between 1990 and 1995
(a) nominal GDP rose by 33%.
(b) real GDP rose by 33%.
(c) real GDP remained constant.
(d) real GDP rose by about 11%.
18)
If real GDP for a given year is $2400 billion
and nominal GDP is $2400
(a) this year is the base year for the GDP
deflator.
(b) the GDP deflator for this year is 1.25.
(c) the GDP deflator for this year is 0.8.
(d) the GDP deflator for this year is 1.10.
19)
A farmer sells raw milk for 50 cents to a dairy,
who sells cheese made from it for $1.50 to a
grocery wholesaler, who sells it for $1.90 to a
supermarket, who sells it to the final consumer
for $2.19. These transactions increase the GDP
by
(a) $0.50  $1.00  $0.40  $0.29  $2.19.
(b) $0.50  $1.00  $1.90  $2.19  $5.59.
(c) $0.50  $1.00  $1.50.
(d) $2.19 – $1.50  $0.69.
(e) $2.19 – $0.50  $1.69.
Questions 20-21 are based on the following
information: Robinson Crusoe (RC) and Friday
(Friday) are living in an island.
20)
They engage following economic activities. In
2003 Friday catches 50 fish and sells them to
RC for 5 YTL each. RC uses all of the fish to
make 25 liters of fish oil, all of which he sells
to Friday for 20 YTL per gallon. If these are
the only transactions that take place in 2003,
what is the GDP on this island in 2003?
(a) 250 YTL
(b) 500 YTL
(c) 750 YTL
(d) 1250 YTL
(e) none of the above
National Accounts Chapter 1 Study Questions
21)
In 2004 Friday catches 50 fish and sells them
to RC for 5 YTL each. In 2005 RC uses all of
the fish to make 25 liters of fish oil, all of
which he sells to Friday for 20 YTL per gallon.
If these are the only transactions that take
place in these two years, what is GDP in 2004
and 2005, respectively?
(a) 0 and 550
(b) 250 and 500
(c) 250 and 750
(d) 0 and 750
(e) none of the above
First, define nominal GDP and real GDP. Second, is
it possible for nominal GDP in a year to be less than
real GDP in the same year? Explain.
Explain what factors cause changes in output in: (1)
the short run; (2) medium run; and (3) long run.