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Quiz #2/3 [MCQ | Chapters 23-24]

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Hell on Earth Economics [Teacher: Abdinova Makpal ; Final Exam + Quizzes] ▼ (Quizzes #2 & #3 [Chapters 1-3, 4-6, 13-17-18, 23-24]) Quiz on Quiz #2/3 [MCQ | Chapters 23-24], created by Good Guy Beket on 02/12/2018.
Good Guy Beket
Quiz by Good Guy Beket, updated more than 1 year ago
Good Guy Beket
Created by Good Guy Beket almost 6 years ago
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Resource summary

Question 1

Question
An example of a transfer payment is
Answer
  • profit.
  • rent.
  • unemployment benefits.
  • government purchases.
  • wages.

Question 2

Question
The value of plant and equipment worn out in the process of manufacturing goods and services is measured by
Answer
  • intermediate production.
  • Net National Product.
  • investment.
  • depreciation.
  • consumption.

Question 3

Question
Which of the following would be excluded from UK GDP for 2005? The sale of?
Answer
  • a haircut.
  • the value of a lawyer’s services.
  • a 2005 Honda made in Swindon.
  • All of things mentioned in these answers should be counted in 2005 GDP.
  • a home built in 2004 and first sold in 2005.

Question 4

Question
Gross Domestic Product can be measured as the sum of
Answer
  • final goods and services, intermediate goods, transfer payments, and rent.
  • consumption, investment, government purchases, and net exports.
  • consumption, transfer payments, wages, and profits.
  • Net National Product, Gross National Product, and Disposable personal income.
  • investment, wages, profits, and intermediate production.

Question 5

Question
UK Gross Domestic Product (in contrast to Gross National Product) measures the production and income of
Answer
  • British-owned firms no matter where they are located in the world.
  • none of these answers.
  • the domestic service sector only.
  • people and factories located within the borders of the UK.
  • the domestic manufacturing sector only.

Question 6

Question
Gross Domestic Product is the sum of the market value of the
Answer
  • intermediate goods.
  • final goods and services.
  • manufactured goods.
  • inferior goods and services.
  • normal goods and services.

Question 7

Question
If nominal GDP in 2005 exceeds nominal GDP in 2004, then the production of output
Answer
  • must have fallen.
  • must have risen.
  • must have stayed the same.
  • may have risen, fallen, or stayed the same because there is not enough information to determine what happened to real output.

Question 8

Question
If a cobbler buys leather for €100 and thread for €50 and uses them to produce and sell €500 worth of shoes to consumers, the contribution to GDP is
Answer
  • €50.
  • €100.
  • €650.
  • €500
  • €600.

Question 9

Question
GDP would include which of the following?
Answer
  • the value of taking a day off from work
  • consulting services
  • intermediate sales
  • illegal drug sales
  • housework

Question 10

Question
Real GDP is measured in ________ prices while nominal GDP is measured in ________ prices.
Answer
  • foreign; domestic
  • current year; base year
  • domestic; foreign
  • base year; current year
  • intermediate; final

Question 11

Question
What is the value of real GDP for 2004?
Image:
Screenshot 9 (binary/octet-stream)
Answer
  • €800
  • €1,060
  • €1,460
  • €1,200
  • none of these answers

Question 12

Question
What is the value of the GDP deflator in 2004?
Image:
Screenshot 9 (binary/octet-stream)
Answer
  • 119
  • 138
  • 116
  • 113
  • 100

Question 13

Question
What is the percentage increase in prices from 2003 to 2004?
Image:
Screenshot 9 (binary/octet-stream)
Answer
  • 16 percent
  • 22 percent
  • 13 percent
  • 0 percent
  • 38 percent

Question 14

Question
What is the approximate percentage increase in prices from 2004 to 2005?
Answer
  • 13 percent
  • 0 percent
  • 16 percent
  • 38 percent
  • 22 percent

Question 15

Question
What is the percentage increase in real GDP from 2004 to 2005?
Image:
Screenshot 9 (binary/octet-stream)
Answer
  • 27 percent
  • 7 percent
  • 32 percent
  • 0 percent
  • 22 percent

Question 16

Question
If UK GDP exceeds UK GNP, then
Answer
  • intermediate production exceeds final production.
  • foreigners are producing more in the UK than Britons are producing in foreign countries.
  • real GNP exceeds nominal GNP.
  • real GDP exceeds nominal GDP.
  • Britons are producing more in foreign countries than foreigners are producing in the UK.

Question 17

Question
UK GDP would exclude which of the following?
Answer
  • Lawyer services purchased by a home buyer.
  • The purchase of a new Nissan produced in Sunderland.
  • Copper purchased by tap manufacturer Bristan.
  • A new art gallery purchased by the city of Newcastle.
  • Lawn care services purchased by a home owner.

Question 18

Question
How is your purchase of a €40,000 BMW automobile that was produced entirely in Germany recorded in the UK GDP accounts?
Answer
  • Consumption increases by €40,000 and net exports decreases by €40,000.
  • Net exports increases by €40,000.
  • There is no impact because this transaction does not involve domestic production.
  • Investment increases by €40,000 and net exports increases by €40,000.
  • Net exports decreases by €40,000.

Question 19

Question
If your grandparents buy a newly built retirement home, this transaction would affect
Answer
  • investment.
  • net exports.
  • government purchases.
  • consumption.
  • none of these answers.

Question 20

Question
Inflation can be measured by all of the following except the
Answer
  • All of these answers are used to measure inflation.
  • consumer price index.
  • producer price index.
  • GDP deflator.
  • finished goods price index.

Question 21

Question
The CPI will be most influenced by a 10 percent increase in the price of which of the following consumption categories?
Answer
  • Clothing and footwear.
  • Furniture, household equipment and maintenance. See Figure 24.1 in the textbook.
  • Transport
  • Food and non-alcoholic beverages
  • All of these answers would produce the same impact

Question 22

Question
In 1989, the CPI was 124.0. In 1990, it was 130.7. What was the rate of inflation over this period?
Answer
  • 5.4 percent
  • 30.7 percent
  • You can't tell without knowing the base year.
  • 5.1 percent
  • 6.7 percent

Question 23

Question
Which of the following would probably cause the CPI to rise more than the GDP deflator in the UK?
Answer
  • An increase in the price of BMWs produced in Germany and sold in the UK.
  • An increase in the price of Peugeots produced in the UK.
  • An increase in the price of helicopters purchased by the Royal Navy.
  • An increase in the price of domestically produced armoured vehicles sold exclusively to India.

Question 24

Question
The "basket" on which the CPI is based is composed of
Answer
  • consumer production.
  • products purchased by the typical consumer.
  • raw materials purchased by firms.
  • total current production.
  • none of these answers.

Question 25

Question
If there is an increase in the price of apples which causes consumers to purchase fewer kilograms of apples and more kilograms of oranges, the CPI will suffer from
Answer
  • none of these answers.
  • substitution bias.
  • base year bias.
  • bias due to unmeasured quality change.
  • bias due to the introduction of new goods.

Question 26

Question
What is the value of the basket in the base year?
Image:
Screenshot 10 (binary/octet-stream)
Answer
  • €459.25
  • €418.75
  • €300
  • none of these answers
  • €333

Question 27

Question
What are the values of the CPI in 2000, 2001, and 2002, respectively?
Image:
Screenshot 10 (binary/octet-stream)
Answer
  • 83.5, 94.2, 100
  • 100, 113.3, 125
  • none of these answers
  • 100, 111, 139.6
  • 100, 109.2, 116

Question 28

Question
What is the inflation rate for 2001?
Answer
  • 0 percent
  • 13.3 percent
  • 11 percent
  • 9.2 percent
  • none of these answers

Question 29

Question
What is the inflation rate for 2002?
Answer
  • 10.3 percent
  • none of these answers
  • 11 percent
  • 13.3 percent
  • 0 percent

Question 30

Question
The table shows that the 2001 inflation rate is biased upward because of
Image:
Screenshot 10 (binary/octet-stream)
Answer
  • base year bias.
  • bias due to the introduction of new goods.
  • none of these answers.
  • bias due to unmeasured quality change.
  • substitution bias.

Question 31

Question
Suppose the base year is changed in the table from 2000 to 2002 (now use the 2002 consumption basket). What is the new value of the CPI in 2001?
Image:
Screenshot 10 (binary/octet-stream)
Answer
  • 90.6
  • 100.0
  • none of these answers
  • 114.7
  • 134.3

Question 32

Question
Suppose your income rises from €19,000 to €31,000 while the CPI rises from 122 to 169. Your standard of living has likely
Answer
  • fallen.
  • You can't tell without knowing the base year.
  • risen.
  • stayed the same.

Question 33

Question
If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is
Answer
  • 4 percent.
  • 10 percent.
  • -4 percent.
  • 3 percent.
  • 21 percent.

Question 34

Question
Which of the following statements is correct?
Answer
  • none of these answers
  • The nominal interest rate is the inflation rate minus the real interest rate.
  • The real interest rate is the nominal interest rate minus the inflation rate.
  • The nominal interest rate is the real interest rate minus the inflation rate.
  • The real interest rate is the sum of the nominal interest rate and the inflation rate.

Question 35

Question
If inflation is 8 percent and the real interest rate is 3 percent, then the nominal interest rate must be
Answer
  • 3/8 percent.
  • 5 percent.
  • 11 percent.
  • 24 percent.
  • -5 percent.

Question 36

Question
Under which of the following conditions would you prefer to be the lender?
Answer
  • The nominal rate of interest is 15 percent and the inflation rate is 14 percent.
  • The nominal rate of interest is 20 percent and the inflation rate is 25 percent.
  • The nominal rate of interest is 12 percent and the inflation rate is 9 percent.
  • The nominal rate of interest is 5 percent and the inflation rate is 1 percent.

Question 37

Question
Under which of the following conditions would you prefer to be the borrower?
Answer
  • The nominal rate of interest is 12 percent and the inflation rate is 9 percent.
  • The nominal rate of interest is 20 percent and the inflation rate is 25 percent.
  • The nominal rate of interest is 5 percent and the inflation rate is 1 percent.
  • The nominal rate of interest is 15 percent and the inflation rate is 14 percent.

Question 38

Question
If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected,
Answer
  • neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract.
  • none of these answers
  • borrowers will gain at the expense of lenders.
  • lenders will gain at the expense of borrowers.

Question 39

Question
If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected,
Answer
  • none of these answers
  • workers will gain at the expense of firms.
  • neither workers nor firms will gain because the increase in wages is fixed in the labour agreement.
  • firms will gain at the expense of workers.
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