1Exercise and answerNote: These are based on Principle of Macroeconomics, helping to understand basic concepts. Some contents such as those of Chap 7, 8, 10, may not be covered here. For your final review, please aid also with questions and problems of the Macroeconomics textbook. Multiple Choice Identify the choice that best completes the statement or answers the question._1.Suppose that an apartment complex converts to a condominium where the renters are now owners of their former apartments. Suppose that an estimate of the value of the condominium owners housing services is now the same as their former rent. a.GDP necessarily increases. b.GDP necessarily decreases. c.GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP. d.GDP is unaffected because previously rent was included in GDP, and now it is replaced by the estimate of the value of housing services. _2.GDP a.includes the value of intermediate goods so we can get a measure of sales. b.excludes the value of intermediate goods because they are too difficult to measure. c.excludes the value of intermediate goods because their value is already counted in the value of final goods. d.None of the above are correct. _3.Which of the following is included in U.S. GDP? a.goods produced by foreign citizens working in the United States b.the difference in the price of the sale of an existing home and its original purchase price c.known illegal activities d.None of the above are correct. _4.A firm produces consumer goods and adds some to inventory in the third quarter. In the fourth quarter the firm sells the goods at a retail outlet which leaves their inventory diminished. As a result of these actions, what component(s) of real GDP change in the fourth quarter? a.only investment and it decreases. b.only consumption and it increases. c.Investment decreases and consumption increases. d.None of the above is correct. _5.Which of the following is included in the investment component of GDP? a.purchases of newly constructed homes b.purchases of foreign capital goods such as industrial equipment c.changes in inventory d.All of the above are correct. _6.Which of these things would NOT be included in the components listed after them?2a.Ruth buys a motorcycle made in Japan to ride on her weekends off-U.S. consumption and U.S. import. b.Shirley owns her own home which has an estimated rental value-U.S. consumption. c.Beverly buys a newly issued stock in a U.S. corporation-U.S. investment. d.Samantha produces some art work but doesnt sell them all in the current quarter and so adds them to her inventory-investment. _7.If in a given year an economy has consumption of $3000, investment of $2000, government purchases of $1500, exports of $500, imports of $600, taxes of $1200, transfer payments of $400, and depreciation of $300, then GDP will equal a.$6400. b.$7000. c.$7600. d.$8900. e.$9500. _8.Which statement represents most correctly the relationship between nominal GDP and real GDP? a.Nominal GDP measures base-year production using base-year prices, while real GDP measures current production using current prices. b.Nominal GDP measures current production using base-year prices, while real GDP measures current production using current prices. c.Nominal GDP measures current production using current prices, while real GDP measures current production using base-year prices. d.Nominal GDP measures current production using current prices, while real GDP measures base-year production using base-year prices. _9.The GDP deflator can be used to identify the a.increase in nominal GDP that is due to an increase in prices rather than an increase in production. b.increase in real GDP that is due to an increase in prices rather than an increase in production. c.increase in the cost of living for typical U.S. consumers. d.reduction in government spending required to balance the federal budget. _10.The information below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?CountryNominal GDP 2000Population 200 Japan$4,800,000 million127 million Switzerland$240,000 million7.2 million United States$9,800,000 million280 milliona.Japan, Switzerland, United States b.Japan, United States, Switzerland c.United States, Switzerland, Japan d.United States, Japan, Switzerland _11.Suppose that over the last twenty-five years a countrys nominal GDP grew to three times its former size. In the meantime population grew 50 percent and prices rose 100 percent. What happened to real GDP per person? a.It more than doubled. b.It rose, but less than doubled. c.It was unchanged. d.It fell. _12.The inflation rate is defined as the3a.price level. b.change in the price level. c.price level divided by the price level in the previous period. d.percentage change in the price level from the previous peri