Question 1

The gross domestic product of an economy is defined as the:

Accepted Answer

A)  total value of all industrial goods produced and sold during a given period. 
B)  total value of all final goods and services produced during a given period. 
C)  value of all noneconomic transactions made among consumers during a particular period. 
D)  value of all non-monetary transactions between consumers and firms during a given period. 
A)  total value of all industrial goods produced and sold during a given period. 
B)  total value of all final goods and services produced during a given period. 
C)  value of all noneconomic transactions made among consumers during a particular period. 
D)  value of all non-monetary transactions between consumers and firms during a given period. B

Question 2

Which of the following is NOT true of the circular model of the economy?

Accepted Answer

A)  Personal consumption spending flows from households to firms. 
B)  The production of goods and services generates income for households. 
C)  Consumers finance their personal consumption spending by supplying factors of production to firms. 
D)  Payments to factors of production flows from households to firms. 
A)  Personal consumption spending flows from households to firms. 
B)  The production of goods and services generates income for households. 
C)  Consumers finance their personal consumption spending by supplying factors of production to firms. 
D)  Payments to factors of production flows from households to firms. D

Question 3

In the circular flow model for an economy that produces only consumption goods:

Accepted Answer

A)  factor incomes flow from households to firms. 
B)  factors of production flow from households to firms. 
C)  factor incomes flow from households to firms and to the government. 
D)  factors of production flow from firms to households. 
A)  factor incomes flow from households to firms. 
B)  factors of production flow from households to firms. 
C)  factor incomes flow from households to firms and to the government. 
D)  factors of production flow from firms to households. B

Question 4

A nation records a trade surplus when:

Accepted Answer

A)  foreign remittances paid are more than foreign remittances received. 
B)  net exports are positive. 
C)  imports are greater than exports. 
D)  net exports equal zero. 
A)  foreign remittances paid are more than foreign remittances received. 
B)  net exports are positive. 
C)  imports are greater than exports. 
D)  net exports equal zero.

Question 5

If we sum up the value added at every stage of production of a good, we will get:

Accepted Answer

A)  the total cost of the labor used to produce the good. 
B)  the prices of the factors of production used to produce the good. 
C)  the final value of the good. 
D)  the capital-labor ratio. 
A)  the total cost of the labor used to produce the good. 
B)  the prices of the factors of production used to produce the good. 
C)  the final value of the good. 
D)  the capital-labor ratio.

Question 6

The cost of producing goods and services includes:

Accepted Answer

A)  only the cost of the factors of production used to produce output. 
B)  the cost of factors of production and depreciation but excludes sales tax. 
C)  the cost of factors of production, depreciation, and other production-related taxes. 
D)  the cost of the inputs used to produce the product, all production-related taxes, and profit. 
A)  only the cost of the factors of production used to produce output. 
B)  the cost of factors of production and depreciation but excludes sales tax. 
C)  the cost of factors of production, depreciation, and other production-related taxes. 
D)  the cost of the inputs used to produce the product, all production-related taxes, and profit.

Question 7

Which of the following statements about GNP is correct?

Accepted Answer

A)  It measures the market value of all goods and services, both final and intermediate, produced by resources located within a nation regardless of who owns those resources. 
B)  It measures the market value of all goods and services, both final and intermediate, produced by residents and firms regardless of the location of production. 
C)  It measures the market value of all final goods and services produced by residents and firms of a nation regardless of the location of production. 
D)  It measures the market value of all final goods and services produced by resources located within a nation regardless of who owns those resources. 
A)  It measures the market value of all goods and services, both final and intermediate, produced by resources located within a nation regardless of who owns those resources. 
B)  It measures the market value of all goods and services, both final and intermediate, produced by residents and firms regardless of the location of production. 
C)  It measures the market value of all final goods and services produced by residents and firms of a nation regardless of the location of production. 
D)  It measures the market value of all final goods and services produced by resources located within a nation regardless of who owns those resources.

Question 8

The income earned by those who supply entrepreneurial talent is/are called:

Accepted Answer

A)  wages and salaries. 
B)  profits. 
C)  stock options. 
D)  net interest. 
A)  wages and salaries. 
B)  profits. 
C)  stock options. 
D)  net interest.

Question 9

Which of the following is an expenditure component of GDP?

Accepted Answer

A)  Income from interest 
B)  Indirect business taxes 
C)  Capital consumption allowance 
D)  Personal consumption 
A)  Income from interest 
B)  Indirect business taxes 
C)  Capital consumption allowance 
D)  Personal consumption

Question 10

Table 6.1 provides data on the components of GDP for an economy.
Table 6-1
  
-Refer to Table 6-1. What is the value of exports?

Accepted Answer

A)  -$120 billion 
B)  $120 billion 
C) -$480 billion 
D)  $480 billion 
A)  -$120 billion 
B)  $120 billion 
C) -$480 billion 
D)  $480 billion

Question 11

Which of the following is counted as consumption expenditure?

Accepted Answer

A)  A person buying a government bond 
B)  A person buying a toaster from your neighbor in a garage sale 
C)  A firm renting a two-storied building 
D)  A person buying a new car 
A)  A person buying a government bond 
B)  A person buying a toaster from your neighbor in a garage sale 
C)  A firm renting a two-storied building 
D)  A person buying a new car

Question 12

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

Accepted Answer

A)  The value of the increased inventory will be counted as part of GDP in 2007, and the value of the 170 umbrellas sold in 2008 will not cause GDP in 2008 to increase. 
B)  The value of the increased inventory will not affect GDP in 2007, but the sale of the umbrellas will cause GDP in 2008 to increase. 
C)  The value of the increased inventory will be counted as part of GDP in 2007 and the value of the 170 umbrellas sold in 2008 will cause GDP in 2008 to increase. 
D)  Since the umbrellas were not sold in 2007, they will not be included as part of GDP in 2007, and since they were not produced in 2008, they will not be included as part of GDP in 2008. This is a shortcoming of GDP computations. 
A)  The value of the increased inventory will be counted as part of GDP in 2007, and the value of the 170 umbrellas sold in 2008 will not cause GDP in 2008 to increase. 
B)  The value of the increased inventory will not affect GDP in 2007, but the sale of the umbrellas will cause GDP in 2008 to increase. 
C)  The value of the increased inventory will be counted as part of GDP in 2007 and the value of the 170 umbrellas sold in 2008 will cause GDP in 2008 to increase. 
D)  Since the umbrellas were not sold in 2007, they will not be included as part of GDP in 2007, and since they were not produced in 2008, they will not be included as part of GDP in 2008. This is a shortcoming of GDP computations.

Question 13

When would an economist focus on GNP rather than GDP?

Accepted Answer

A)  When the economist wants a more accurate measure of production, since GNP data are typically much more precise than GDP data 
B)  When the economist wants to study consumption, since consumption expenditures are weighted more heavily in GNP than in GDP 
C)  When the economist wants to measure total income earned or total amount of factors of production supplied by the residents of a country 
D)  When the economist wants a measure of output that includes depreciation, because GDP omits depreciation in its calculations 
A)  When the economist wants a more accurate measure of production, since GNP data are typically much more precise than GDP data 
B)  When the economist wants to study consumption, since consumption expenditures are weighted more heavily in GNP than in GDP 
C)  When the economist wants to measure total income earned or total amount of factors of production supplied by the residents of a country 
D)  When the economist wants a measure of output that includes depreciation, because GDP omits depreciation in its calculations

Question 14

Government purchases are defined as:

Accepted Answer

A)  the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies. 
B)  the sum of purchases of goods and services from firms by the government and the value of transfer payments made to government to its citizens. 
C)  the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government. 
D)  the purchase of final goods and service from firms by government agencies excluding the value of output produced by government agencies. 
A)  the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies. 
B)  the sum of purchases of goods and services from firms by the government and the value of transfer payments made to government to its citizens. 
C)  the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government. 
D)  the purchase of final goods and service from firms by government agencies excluding the value of output produced by government agencies.

Question 15

GDP increases if you purchase General Motors stock.

Accepted Answer

A) True 
 B)False

Question 16

In GDP accounting, the value of the total final output in a given period equals the value of the:

Accepted Answer

A)  total income generated by the production of final goods and services in that period. 
B)  net revenue earned from the sales of intermediate goods and services during that period. 
C)  total profit earned by firms involved in the production of the output during that period. 
D)  total inputs used in the production of the final output in that period. 
A)  total income generated by the production of final goods and services in that period. 
B)  net revenue earned from the sales of intermediate goods and services during that period. 
C)  total profit earned by firms involved in the production of the output during that period. 
D)  total inputs used in the production of the final output in that period.

Question 17

China's gross national product can be calculated from China's GDP by:

Accepted Answer

A)  adding the value of output produced by China's residents and sold abroad. 
B)  adding the income earned by China's residents from the rest of the world and subtracting payments made by China's residents to the rest of the world. 
C)  subtracting the value of output produced by China's residents and sold abroad. 
D)  subtracting the income earned by China's residents from the rest of the world and adding payments made by China's residents to the rest of the world. 
A)  adding the value of output produced by China's residents and sold abroad. 
B)  adding the income earned by China's residents from the rest of the world and subtracting payments made by China's residents to the rest of the world. 
C)  subtracting the value of output produced by China's residents and sold abroad. 
D)  subtracting the income earned by China's residents from the rest of the world and adding payments made by China's residents to the rest of the world.

Question 18

Table 6-6 shows the different stages in the production of an office building. A mining firm extracts iron from the earth. A steel mill converts the iron to steel beams for use in construction. A construction company uses the steel beams to make a building. Assume that the total product of these firms represents the only components of the building and that they will have no other uses.
Table 6-6
  
-Refer to Table 6-6. What is the valued-added by Crane Construction?

Accepted Answer

A)  $725,000 
B)  $825,000 
C)  $950,000 
D)  $1,050,000 
A)  $725,000 
B)  $825,000 
C)  $950,000 
D)  $1,050,000

Question 19

For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called:

Accepted Answer

A)  personal investment expenditure. 
B)  a capital consumption allowance. 
C)  a transfer payment. 
D)  gross private domestic investment. 
A)  personal investment expenditure. 
B)  a capital consumption allowance. 
C)  a transfer payment. 
D)  gross private domestic investment.

Question 20

For a homeowner, the rental value of the home is estimated and included in GDP.

Accepted Answer

A) True 
 B)False

The gross domestic product of an economy is defined as the:

Which of the following is NOT true of the circular model of the economy?

In the circular flow model for an economy that produces only consumption goods:

A nation records a trade surplus when:

If we sum up the value added at every stage of production of a good, we will get:

The cost of producing goods and services includes:

Which of the following statements about GNP is correct?

The income earned by those who supply entrepreneurial talent is/are called:

Which of the following is an expenditure component of GDP?

Table 6.1 provides data on the components of GDP for an economy. Table 6-1 -Refer to Table 6-1. What is the value of exports?

Which of the following is counted as consumption expenditure?

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

When would an economist focus on GNP rather than GDP?

Government purchases are defined as:

GDP increases if you purchase General Motors stock.

In GDP accounting, the value of the total final output in a given period equals the value of the:

China's gross national product can be calculated from China's GDP by:

For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called:

For a homeowner, the rental value of the home is estimated and included in GDP.

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

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Exam 6: Measuring Total Output and Income

The gross domestic product of an economy is defined as the:

Which of the following is NOT true of the circular model of the economy?

In the circular flow model for an economy that produces only consumption goods:

A nation records a trade surplus when:

If we sum up the value added at every stage of production of a good, we will get:

The cost of producing goods and services includes:

Which of the following statements about GNP is correct?

The income earned by those who supply entrepreneurial talent is/are called:

Which of the following is an expenditure component of GDP?

Table 6.1 provides data on the components of GDP for an economy. Table 6-1 -Refer to Table 6-1. What is the value of exports?

Which of the following is counted as consumption expenditure?

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

When would an economist focus on GNP rather than GDP?

Government purchases are defined as:

GDP increases if you purchase General Motors stock.

In GDP accounting, the value of the total final output in a given period equals the value of the:

China's gross national product can be calculated from China's GDP by:

For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called:

For a homeowner, the rental value of the home is estimated and included in GDP.

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters