Exercise 1 Chapter 7 GDP: Measuring Total Production and Income 7.1 Gross Domestic Product Measures Total Production 1) In May 2009, Ford Motor Company's sales were down 20 percent from a year earlier. These events were caused by A) an economic recession. B) an economic expansion. C) a reduction in advertising. D) declining quality of service. Answer: A Diff: 2 Page Ref: 613/209 Topic: The Business Cycle Objective: LO1: Explain how total production is measured. Special Feature: Chapter Opener: Ford Motor Company Feels the Effects of the Recession

2) During a business cycle expansion, total production ________ and total employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases Answer: A Comment: Recurring Diff: 1 Page Ref: 617/213 Topic: The Business Cycle Objective: LO1: Explain how total production is measured. AACSB: Reflective Thinking Special Feature: None 3) Macroeconomics, as opposed to microeconomics, includes the study of what determines the A) average price levels of goods and services in the economy. B) price charged for laptop computers by Dell. C) wages paid to employees by Dell. D) quantity of Dell employees. Answer: A Comment: Recurring Diff: 1 Page Ref: 614/210 Topic: Macroeconomics vs. Microeconomics Objective: LO1: Explain how total production is measured. AACSB: Reflective Thinking Special Feature: None 4) Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study? A) Avocado prices rise due to a late frost in California. B) The United Auto Workers sign a contract raising wages and benefits 7% over the next 3 years. C) Real GDP grows by 2.3% in the second quarter. D)