Question

QUESTION 1

AlpenPleasure Co. produces 1000 boxes of chocolate. Each box sells for $30. AlpenPleasure pays wages of $10,000 and buys $15,000 worth of cocoa beans and other ingredients needed to produce the chocolate. What is AlpenPleasure's contribution (value-added) to GDP?

$5,000

$45,000

$15,000

$20,000

QUESTION 2

There is currently a lot of debate in the U.S. about raising the minimum wage. As a contribution to this debate, the Wall Street Journal recently reported the following numbers:

In 1980, the federally mandated minimum wage was $3.10/hour and the price of a White Castle Slider (a mini-burger from a particularly fine U.S. fast-food establishment) was $0.26.

In 2013, the federally mandated minimum wage was $7.25/hour and the price of a White Castle slider was $0.69.

Based on these numbers, we can conclude: (Choose one)

(a) The minimum wage in 2013 bought more White Castle sliders than it did in 1980.

(b) The minimum wage in 1980 bought more White Castle sliders than it did in 2013.

(c) The real minimum wage (measured in terms of White Castle sliders) has decreased by 11.8% between 1980 and 2013.

(d) The real minimum wage (measured in terms of White Castle sliders) has increased by 2.3% between 1980 and 2013.

(a) and (c)

(a) and (d)

(b) and (c)

(b) and (d)

QUESTION 3

By how much does the current GDP rise in the following scenario? A real estate agent sells a house for $250,000 that the previous owners had purchased 10 years earlier for $90,000. The real estate agent earns a commission of $10,000.

a.$10,000

b.$250,000

c.$160,000

d.$90,000

e.$260,000

QUESTION 4

Refer to the following table when answering the next four questions.
Table 2.1: U.S. 2011 -2012 Expenditures ($ billions)

2011

2012

Personal consumption expenditures

10,729

11,120

Goods

3,625

3,783

Services

7,104

7,337

Gross private domestic investment

1,855

2,062

Fixed investment

1,818

2,004

Change in private inventories

37

58

Net exports of goods and services

–568

–560

Exports

2,094

2,184

Imports

2,662

2,744

Government expenditures

3,060

3,063

Federal

1,222

1,214

State and local

1,838

1,849

Consider Table 2.1, which tabulates GDP for 2011–2012. Total GDP in 2012 is:

a. $36,858 billion

b. $13,991 billion

c.$16,245 billion

d.$15,685 billion

e.$6,554 billion

QUESTION 5

If the real interest rate is ________ than ________, ________.

a. smaller; the nominal interest rate; the inflation rate is negative (deflation)

b. greater; the nominal interest rate; the inflation rate is negative (deflation)

c. greater; the inflation rate; the nominal interest rate is negative

d. smaller; the inflation rate; the nominal interest rate is negative

QUESTION 6

Consider an economy that only produces apples and bananas. The following data describes the
production and prices of these goods in years 1 and 2. Which of the below statements is correct?

Year 1

Year 2

Quantity / Unit price   

Quantity / Unit price

Apples

2000 / $1.50

3000 / $3.00

Bananas

1000 / $2.00

3000 / $1.00

a. Using year 1 prices as the base, real GDP growth is 140%.

b. Using year 2 prices as the base, real GDP increases by less than 40%.

c. Real GDP growth is higher if calculated based on year 1 prices than if calculated based on year 2 prices.

d. Nominal GDP in year 1 is $12,000.

QUESTION 7

After graduating college, you start a job making $40,000. Your earnings grow at a constant growth rate of 3 percent per year. When you retire 40 years later, you are earning approximately:

a. 41,000.

b. 70,000.

c. 100,000.

d.130,000.

QUESTION 8

In 2004, the movie Spiderman 2 generated about $40 million on its opening day. In 1992, Batman Returns generated $35 million on its opening day. Suppose the CPI was 100 in 2006; 93.7 in 2004; and 69.5 in 1992. Then after adjusting for inflation, _______ generated larger single-day gross revenues, with _______ in revenues in 2006 dollars.

a. Batman Returns / $50.4 million

b. Spiderman 2 / $40.0 million

c. Batman Returns / $47.2 million

d. Spiderman 2 / $42.7 million

QUESTION 9

With an average annual growth rate of 5 percent per year, per capita income will increase by what factor over a century?

a.16

b. 32

c. 64

d. 126

QUESTION 10

There are many issues that arise in measuring economic well-being of a nation with GDP. Which is NOT one of them?

a. Capital goods are those that are used to produce other goods but not used up in the same period. Hence, they are intermediate goods that are incorrectly classifed as final goods.

b. Some final goods and services are not sold in formal markets (e.g. home-cooked meals) and so, their value-added is excluded from GDP, creating a downward bias.

c. GDP leaves out the economic costs of environmental degradation in the calculation of firms' contribution to output, creating an upward bias.

d. GDP does not measure the wealth of a nation, which presumably is a better measure of a country's potential.

e. GDP does not any information about income inequality.

Answer 1

Q.1.

Value added to GDP by Alpen Pleasure Co. = Sales - wages paid to workers - cost incurred in machinery

= 30*10000 - 10000 - 15000 = $5000

Correct Ans - A