1. U.S. GDP and U.S.

GNP are related as follows:

Select one:
a. a.GNP = GDP - Income earned by foreigners in the U.S. + Income
earned by U.S. citizens abroad.
b. b.GNP = GDP + Income earned by foreigners in the U.S. - Income
earned by U.S. citizens abroad.
c. c.GNP = GDP + Value of exported goods - Value of imported goods.
d. d.GNP = GDP - Value of exported goods + Value of imported goods.
2. If you buy a burger and fries at your favorite fast food restaurant,
Select one:
a. a.neither GDP nor consumption will be affected because you would have
eaten at home had you not bought the meal at the restaurant.
b. b.GDP will be higher, but consumption spending will be unchanged.
c. c.GDP will be unchanged, but consumption spending will be higher.
d. d.both GDP and consumption spending will be higher.
3.  The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S.
base in Turkey. As a result,
Select one:
a. a.U.S. government purchases increase by $30,000; U.S. net exports
decrease by $30,000; and U.S. GDP and GNP are unaffected.
b. b.U.S. government purchases increase by $30,000; U.S. GNP increases
by $30,000; and U.S. GDP and U.S. net exports are unaffected.
c. c.U.S. government purchases; and U.S. net exports, GDP, and GNP are
unaffected.
d. d.U.S. government purchases increase by $30,000; U.S. net exports
decrease by $30,000; U.S. GNP increases by $30,000; and U.S. GDP is
unaffected.
4. Suppose the price index in 2004 was 100; the price index in 2005 was
118; and the inflation rate between 2005 and 2006 was lower than it was
between 2004 and 2005. This means that
Select one:
a. a.the price index in 2006 was lower than 118.00.
b. b.the price index in 2006 was lower than 136.00.
c. c.the price index in 2006 was lower than 139.24.
d. d.the inflation rate between 2005 and 2006 was lower than 1.18 percent.
5. When the quality of a good improves, the purchasing power of the dollar
Select one:
a. a.increases, so the CPI overstates the change in the cost of living if the
quality change is not accounted for.
b. b.increases, so the CPI understates the change in the cost of living if the
quality change is not accounted for.
c. c.decreases, so the CPI overstates the change in the cost of living if the
quality change is not accounted for.
d. d.decreases, so the CPI understates the change in the cost of living if
the quality change is not accounted for.
6. If the real interest rate relevant to a bank account is 5 percent and the
expected inflation rate is 4 percent, then after a year a person expects to
have, relative to today,
Select one:
a. a.9 percent more dollars in the bank account, which will purchase 5
percent more goods.
b. b.5 percent more dollars in the bank account, which will purchase 4
percent more goods.
c. c.5 percent more dollars in the bank account, which will purchase 4
percent more goods.
d. d.4 percent more dollars in the bank account, which will purchase 1
percent more goods.
7. Ralph puts money in the bank and earns a 5 percent nominal interest
rate. Then, if the inflation rate is 3 percent,
Select one:
a. a.Ralph will have 3 percent more money, which will purchase 2 percent
more goods.
b. b.Ralph will have 3 percent more money, which will purchase 8 percent
more goods.
c. c.Ralph will have 5 percent more money, which will purchase 2 percent
more goods.
d. d.Ralph will have 5 percent more money, which will purchase 8 percent
more goods.