ECN 211 EXAM 2 ASU LATEST ACTUAL EXAM 200 QUESTIONS
AND CORRECT DETAILED ANSWERS
Microeconomics - ANSWER: the study of how individual households and firms make
decisions and how they interact with one another in markets
Macroeconomics - ANSWER: the study of the economy as a whole
What is the goal of macroeconomics? - ANSWER: to explain changes that affect many
households, firms, and markets simultaneously
GDP deflator - ANSWER: a measure of the price level calculated as the ratio of
nominal GDP to real GDP times 100
GDP deflator formula - ANSWER: GDP deflator = (Nominal GPD / Real GDP) * 100
What is GDP? - ANSWER: GROSS DOMESTIC PRODUCT
the market value of all final goods and services produced within a country in a given
period of time
GDP formula - ANSWER: GDP = consumption + investment + gov purchases + net
exports
What is the specific interval of time usually when measuring GDP? - ANSWER: a year
or quarter (3 months)
How does the government usually present GDP? - ANSWER: "at an annual rate"
i.e. the amount of income and expenditure during the quarter (3 moths) * 4 = figure
recorded for quarterly GDP
What two things does GDP measure at once? - ANSWER: 1. the total income of
everyone in the economy
2. the total expenditure on the economy's output of goods and services
*For an economy as a whole, income must = expenditure
How does GDP measure the value of economic activity? - ANSWER: market prices
market prices - ANSWER: measure the amount people are willing to pay for different
goods
(i.e. if the price of an apple is twice the price of an orange, then the apple
contributes twice as much to GDP as does an orange)
, TRUE/FALSE:
Vegetables you grow in your garden are part of GDP - ANSWER: FALSE
*GDP excludes most items produced and sold illicitly, such as illegal drugs, as well as
most items that are produces and consumed at home (buying vegetables at the store
vs growing own garden)
TRUE/FALSE:
when international paper makes paper, which Hallmark then uses to make a greeting
card, the paper is called an intermediate good and the card is called a final good -
ANSWER: TRUE
intermediate good - ANSWER: *already assumed to be included in price of final good
unless "final" for the moment when added to firms inventory for later use
final good - ANSWER: *included in GDP
TRUE/FALSE:
GDP includes both tangible goods and intangible services - ANSWER: TRUE
tangible goods = food, clothing, cars
intangible services = haircuts, housecleaning, doctor visits
TRUE/FALSE:
GDP includes goods and services currently produced as well as transactions involving
items produced in the past - ANSWER: FALSE
* GDP includes goods and services currently produced, but does NOT include
transactions involving past items (i.e. value of new car sold included in GDP vs value
of used car sold NOT included)
TRUE/FALSE:
When an American citizen owns a factory in Haiti, the production at her factory is
not part of the U.S. GDP - ANSWER: TRUE
*It is a part of Haiti's GDP = items are included in a nation's GDP if they are produced
domestically regardless of the nationality of the producer
TRUE/FALSE:
AND CORRECT DETAILED ANSWERS
Microeconomics - ANSWER: the study of how individual households and firms make
decisions and how they interact with one another in markets
Macroeconomics - ANSWER: the study of the economy as a whole
What is the goal of macroeconomics? - ANSWER: to explain changes that affect many
households, firms, and markets simultaneously
GDP deflator - ANSWER: a measure of the price level calculated as the ratio of
nominal GDP to real GDP times 100
GDP deflator formula - ANSWER: GDP deflator = (Nominal GPD / Real GDP) * 100
What is GDP? - ANSWER: GROSS DOMESTIC PRODUCT
the market value of all final goods and services produced within a country in a given
period of time
GDP formula - ANSWER: GDP = consumption + investment + gov purchases + net
exports
What is the specific interval of time usually when measuring GDP? - ANSWER: a year
or quarter (3 months)
How does the government usually present GDP? - ANSWER: "at an annual rate"
i.e. the amount of income and expenditure during the quarter (3 moths) * 4 = figure
recorded for quarterly GDP
What two things does GDP measure at once? - ANSWER: 1. the total income of
everyone in the economy
2. the total expenditure on the economy's output of goods and services
*For an economy as a whole, income must = expenditure
How does GDP measure the value of economic activity? - ANSWER: market prices
market prices - ANSWER: measure the amount people are willing to pay for different
goods
(i.e. if the price of an apple is twice the price of an orange, then the apple
contributes twice as much to GDP as does an orange)
, TRUE/FALSE:
Vegetables you grow in your garden are part of GDP - ANSWER: FALSE
*GDP excludes most items produced and sold illicitly, such as illegal drugs, as well as
most items that are produces and consumed at home (buying vegetables at the store
vs growing own garden)
TRUE/FALSE:
when international paper makes paper, which Hallmark then uses to make a greeting
card, the paper is called an intermediate good and the card is called a final good -
ANSWER: TRUE
intermediate good - ANSWER: *already assumed to be included in price of final good
unless "final" for the moment when added to firms inventory for later use
final good - ANSWER: *included in GDP
TRUE/FALSE:
GDP includes both tangible goods and intangible services - ANSWER: TRUE
tangible goods = food, clothing, cars
intangible services = haircuts, housecleaning, doctor visits
TRUE/FALSE:
GDP includes goods and services currently produced as well as transactions involving
items produced in the past - ANSWER: FALSE
* GDP includes goods and services currently produced, but does NOT include
transactions involving past items (i.e. value of new car sold included in GDP vs value
of used car sold NOT included)
TRUE/FALSE:
When an American citizen owns a factory in Haiti, the production at her factory is
not part of the U.S. GDP - ANSWER: TRUE
*It is a part of Haiti's GDP = items are included in a nation's GDP if they are produced
domestically regardless of the nationality of the producer
TRUE/FALSE:
