A growing economy is important in order to which of the


1. A growing economy is important in order to:

a. compute real GDP.

b. reduce taxes.

c. ensure that everyone's standard of living is equal.

d. meet citizens' expectations for more goods and services per capita.

2. In measuring Gross Domestic Product, market value refers to:

a. the number of goods and services sold during a year.

b. the prices of goods produced but not services provided.

c. the price at which a good or service sells in the market place.

d. the value of sales at all shopping malls, grocery stores and retail outlets throughout the country.

3. Nominal GDP is:

a. the market value of all goods and services produced by U.S. firms, adjusted for price changes.

b. the sum of all environmentally harmful goods and services produced in the United States, adjusted for price changes.

c. the market value of all final goods and services produced within the borders of a country in a year, measured in today's prices.

d. the market value of all final goods and services produced within the borders of a country in a year adjusted for price changes.

4. The country of Duoland has a GDP of $400,000, and the country of Unoland has a GDP of $100,000. The standard of living in Duoland:

a. is higher than the standard of living in Unoland.

b. is lower than the standard of living in Unoland.

c. is the same as the standard of living in Unoland.

d. cannot be determined from the information provided.

5. A utility company builds a new nuclear reactor that is counted as part of the current year's GDP. The nuclear reactor would be counted as part of:

a. income spending.

b. investment spending.

c. government spending.

d. consumption spending.

6. Which of the following is a final good produced by a bakery?

a. cake

b. flour

c. sugar

d. eggs

7. Which of the following is an example of an automatic stabilizer?

a. Medicare

b. transportation funding

c. Social Security

d. unemployment insurance

8. If the growth of real GDP is sluggish—that is, below trend—in order to stimulate the economy, policymakers may choose to:

a. increase taxes.

b. increase the money supply.

c. decrease the money supply.

d. decrease government spending.

9. To maintain the current standard of living an economy must grow:

a. at its trend rate.

b. at least 10 percent per year.

c. at least as fast as its population is growing.

d. at a slower rate than its population is growing.

10. Per capita GDP:

a. measures the standard of living in a country.

b. is the GDP of a country divided by that country's population.

c. both a and b

d. none of the above

11. What are the components of GDP?

a. Consumption (C) Inflation (I) Government Spending (G) Exports (E)

b. Consumption (C) Income (I) Government Spending (G) Exports (E)

c. Consumption (C) Income (I) Government Spending (G) Net Exports (x-m)

d. Consumption (C) Investment Spending (I) Government Spending (G) Net Exports (x-m)

12. In the United States, the trend growth rate of real GDP is about:

a. 1.5 percent annually.

b. 3.0 percent annually.

c. 4.5 percent annually.

d. 6.0 percent annually.

13. Real GDP is:

a. the market value of all goods and services produced by U.S. firms, adjusted for price changes.

b. the sum of all environmentally harmful goods and services produced in the United States, adjusted for price changes.

c. the market value of all final goods and services produced within the borders of a country in a year measured in today's prices.

d. the market value of all final goods and services produced within the borders of a country in a year adjusted for price changes.

14. If the Real GDP of Duoland grew by 3 percent last year, and the population of Duoland grew by 1 percent, the standard of living in Duoland:

a. improved.

b. worsened.

c. remained the same.

d. cannot be determined from the information provided.

15. Automatic stabilizers are:

a. provisions by the Federal Reserve that change the money supply.

b. provisions by the Federal Reserve that change government spending or taxation.

c. provisions in a government's budget that cause government spending to rise (fall) or taxes to fall (rise) automatically—without legislation—when GDP falls (rises).

d. provisions in the government's budget that cause government spending to rise (fall) or taxes to fall (rise) and that occur as a result of legislation.

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Financial Management: A growing economy is important in order to which of the
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