Question

34. All of the following will increase potential real GDP except

a. an increase in the amount of natural resources available.

b. an increase in the percentage of the population that attends college.

c. an increase in the cost of living (money prices).

d. an improvement in technology.

35. Which of the following is not a problem associated with Real GDP as a measure of social welfare?

a. It excludes intermediate goods as a separate entry.

b. It does not include many nonmarket activities, such as home gardening done by the homeowner.

c. It excludes the value of leisure time.

d. It does not account for pollution damage.

36.

The table below gives information on the output of peanut butter and jelly and the prices of peanut butter and jelly in 2010 and 2011.The table has six columns with column headers: Product, 2010 Output, 2010 Price (base year), Product, 2011 Output, and 2011 Prices. The data presented on the table, from top to bottom is as follows. Row - 1 Peanut butter, 200 units, 1 dollar per unit, Peanut butter, 250, 1.10 dollar per unit. Row -2 Jelly, 100 units, 2 dollars per unit, Jelly, 100, 2.50 dollars per unit.

According to the table, nominal GDP was _______in 2011, and real GDP was _______in 2011 if the base year is 2010.

a. $450; $575

b. $450; $400

c. $525; $400

d. $525; $450

37. Which definition best describes a country's annual nominal GDP?

a. The total constant-dollar value of all final goods and services produced within the country's borders during a given year

b. The total current-dollar value of all goods and services produced within the country's borders during a given year.

c. The total current-dollar value of all goods sold with the country's borders during a given year.

d. The total current-dollar value of all final goods and services produced within the country's borders during a given year.

38. Monetary policy attempts to affect the overall level of spending through

a. changes in the quantity of money and the interest rate.

b. changes in the inflation rate.

c. changes in government regulations.

d. changes in tax policy or government spending.

Answer 1

34) Potential GDP depends on amount of resources, their productivity and status of technology. Cost of living affects short run demand but it cannot influence the long run full employment potential. Select C

35) Exclusion of intermediate goods is necessary because otherwise this results in double counting and unnecessary inflated nominal GDP. Select A

36) Nominal GDP 2011 = 250*1.1 + 100*2.50 = 525. Real GDP 2011 = 200*1.1 + 100*2.50 = 470. Select D

37) Select D

38) Select A