AP Macro MACRO: Measurement of Economic Performance 2

Question 1

Which of the following transactions would be EXCLUDED from GDP calculations?

Accepted Answer

A homeowner sells a house built in 1985

Answer

A firm buys new machinery for its factory

Answer

A government pays soldiers' salaries

Answer

A restaurant sells meals to customers

Question 2

If nominal GDP grows by 8% and the GDP deflator rises by 5%, what is the approximate growth rate of real GDP?

Accepted Answer

3%

Answer

13%

Answer

8%

Answer

5%

Question 3

Which component of GDP is most volatile over the business cycle?

Accepted Answer

Investment

Answer

Government spending

Answer

Net exports

Answer

Consumption

Question 4

A country's CPI basket was determined in 2015. A weakness of using this fixed basket through 2025 is that it:

Accepted Answer

Ignores new goods and substitution behavior

Answer

Understates inflation by using current prices

Answer

Overstates real wages by using base-year quantities

Answer

Counts only durable goods in the price index

Question 5

In the circular flow model, which of the following represents a leakage from the spending stream?

Accepted Answer

Household saving

Answer

Investment spending by firms

Answer

Government transfer payments

Answer

Export revenue received by firms

Question 6

The underground economy is NOT counted in official GDP figures. What is the most direct consequence?

Accepted Answer

Official GDP understates the true level of economic activity

Answer

Real GDP is overstated relative to potential GDP

Answer

The price level is underestimated

Answer

Unemployment is overstated

Question 7

A U.S. auto company produces cars at its factory in Mexico. This output is included in:

Accepted Answer

Mexico's GDP and U.S. GNP

Answer

U.S. GDP and U.S. GNP

Answer

Mexico's GDP and Mexico's GNP

Answer

U.S. GDP and Mexico's GNP